LATE last year, ICC Bank held a breakfast debate on the slightly sensitive topic "Dublin is attracting the wrong type of tourist". At the debate, Conor McCarthy, executive chairman of Ryan Groups plc, said he was concerned by the current emphasis on budget accommodation in Dublin given the fact that Bord Failte was targeting the higher-spending tourist.

On that occasion, Frank Magee, the chief executive of Dublin Tourism, defended the current approach to tourism; but the somewhat differing opinions of the two men were notable in the context of an industry which is developing at an extraordinary rate in Dublin in 1996, 17 new hotels opened in Dublin - almost half the total number of hotels built in the country as a whole in the preceding 12 months in 1984, there were only 65 hotels in Dublin. In 1996, there were 104 and by the lend of this year, this figure will have increased to at least 117, with a further 26 hotels in the pipeline.

This development has been greatly helped by the availability of capital allowances which can be availed of over a seven-year period.

At the end of 1996, there were 6,770 hotel rooms in Dublin. John Power, chief executive of the Irish Hotels Federation, says the current level of development will increase this figure by 2,200. "The key is the number of rooms," says Mr Power. "Even at 6,800 rooms, that's not an enormous amount for a capital city. Brussels, for example, has about 20,000 rooms."

He believes there is enough business available to support the rapidly expanding hotel industry, but he attaches one caveat. "The quality of the business plan is the determining factor. The people who have been in the hotel industry for a long time and who know the business would have done their sensitivity analysis and would have a feel of how to deal with any sensitive movement in the market."

A proper business plan, combined with a knowledge of the market and a strong financial base, is crucial. As Mr Power puts it, one of the questions that any prospective hotelier should ask is: "Am I going to be the vulnerable one at the first downturn?"

At 71-72 per cent, Dublin has the highest hotel occupancy rate in the country. According to the latest survey by accountants Howarth Bastow Charleton, which caries out a survey of the hotel industry each year, luxury hotels are the most profitable sector with a pre-tax profit of 24 per cent, even at 70 per cent occupancy. Economy rooms had the lowest occupancy rate - about 57 per cent in 1995.

Luxury hotels have to be more profitable due to the increased costs incurred in their development: the cost of developing a luxury hotel room is £130,000; the cost of an economy class room £30,000.

Maintaining a balance between corporate and tourist business is important: last year, about 75 per cent of Jury's business came from the corporate market.

Meanwhile, the Gresham Hotel part of the Ryan Group, is undergoing a £5.45 million development programme which will increase its capacity by 100 bedrooms - a 50 per cent increase in bed-spaces - and also includes a multi-storey car-park.

"In our experience, what we are doing in the Gresham is we are going more and more for quality," says Conor McCarthy. "Quality sells. I believe that the type of person that we are attracting does not want to be sitting out in the suburbs in a budget hotel. I don't think `budget' necessarily means lack of quality but it does mean lack of services."

Quality is not only a concern for the overseas visitor: with rising living standards at home, the focus of the domestic market has also changed. It's no longer value for money, it's value for time.

People have money but their time is limited. It's time that's valuable."

The development of the hotel industry is an indication not only of its current profitability but the expectation that this level of business will continue and probably increase.

"If you take the expansion to date, it has only just kept pace with the economy," says Mr McCarthy. "The hotel industry is business-led in Dublin. in the rest of the country, it's tourist-led. If the economy keeps growing, then there won't be an oversupply."

He believes there may be an oversupply in a particular location or in a particular type of hotel but, in the end, the quality of location is essential. "There are three crucial things in the hotel business: location, location and location" says Mr McCarthy.

As to this year's prospects, stockbroker NCB predicts 5.56 million bed-nights nationwide from overseas visitors, an increase of 7 per cent on 1996 levels. Domestic occupancy is expected to rise by about 6.5 per cent, in line with GDP.

Amid the current optimism, are some warning signs for NCB criticised the focus of hotel developments in the area of Dublin Airport and the Naas Road - 527 new rooms are proposed for the area around Dublin Airport, including the £8 million, 147-bedroom Great Southern Hotel at Dublin Airport; 721 rooms are planned for the Naas Road area.

NCB says developments in these areas might lack the convenience of Dublin's city centre while simultaneously failing to appeal to those who want to distance themselves from that same city centre.

Peter Malone, managing director of the Jury's hotel group, takes a cautious view of the new developments in the city's hotel trade. He believes there will be casualties if there is a downturn. The question for developers is where those casualties will arise.

"I think Dublin has reached its maximum at the moment," says Mr Malone. "It's very important that the economy is going well - when the economy is going well, Dublin is going well. if the economy, has any kind of downturn, hotels will suffer."

The hotel industry is heavily dependent on the business customer rather than the tourist market. Tourists account for about 25 per cent of Jury's customer base with business accounting for 50 per cent and special events taking up the remaining 25 per cent.

Mr Malone believes that, in the event of a downturn, Jury's is particularly well-positioned through its chain of economy hotels. The opening of the Belfast Inn on April 7th and the Limerick Inn on May 1st will bring to six the number of Jury's Inns and the concept is now being exported to the UK, where the £12.5 million, 220-room Inn at Pentonville Road, London, is scheduled to open in 1998. The success of the inns has certainly confounded critics who felt Jury's had succumbed to some form of madness when it decided to build at Christchurch, Dublin.

"Our research showed us that there is a niche in the market for economy three-star hotels," he says. "We built the Christchurch Inn, we built the Custom House Inn and they have performed exceptionally well for us. We are well-positioned. Our three-star economy inns are bang on right for the downturn. People are going to have to travel more and more and, when the downturn comes, they will be looking at price."

If Mr Malone is right about the economy end of the sector, then it may be the more expensive four and five-star hotel developments that will suffer in the event of a recession. Their development costs are higher, staff costs are higher and, consequently, the room rates they must charge to survive are higher.

Perhaps the question that must be asked is not how many new hotels will be built in Dublin this year, but how many of them will still be there in 20 years time?