The Irish Hotel Federation (IHF) has called for a pay freeze among hotel workers until 2009.
Trade union Siptu immediately rejected the call and said it would do everything it could to defend the living standards of the 97,000 workers in the industry.
The IHF warned that the "one size fits all" approach to pay strategy is no longer sustainable in an industry which it said has been unable to recover the cost of previous pay increases in the past two years through extra sales or price increases.
IHF president Matthew Ryan said: "A prudent short-to-medium term strategy for improved competitiveness based on curtailing all costs over which we have control and maintaining our level of customer satisfaction will allow the hotel sector to emerge as a stronger, more sustainable industry."
The federation said that the call for the pay freeze, which comes as the social partners resume the latest pay talks, is based on a significant downturn in consumer demand in the domestic market. It said that with domestic customers making up over 61 per cent of room-nights in hotels nationwide and over 70 per cent in hotels outside of the Dublin area, it was predicting the current year would be "the most challenging in the last decade".
Mr Ryan said that though national wage rates are currently being discussed and that national understandings and social partnership have served the country well over the last two decades, labour-intensive sectors such as the hospitality industry sector could not cannot afford any further wage increases until there is a return to a solid and sustainable cost basis coupled with a substantial increase in domestic demand.
He said the approach to national pay bargaining must take “fully into account the competitive challenges in sectors of high labour intensity such as hospitality, where the net profit margins are low.
"Many of the issues facing us are outside of our control, such as the strength of the euro in international markets, the high price of oil and the slowdown in private housing construction,” he added.
“This year, the absence of strong domestic demand will probably result in increased pressure on hotel prices. This places an onus on hotel managers to reduce costs in areas over which they have some control."
Mr Ryan said that wage costs in hotels now amount to 41-42 per cent of turnover which he said is unsustainable level, and he said that every effort will have to be made to increase productivity and to generate new business in the face of a difficult economic climate.
The hotel body's call was immediately rejected by the trade union Siptu, which represents workers in the industry.
Dublin regional secretary Patricia King said the indutry generates profits for "some of the wealthiest businessmen in the country", yet most of the 97,500 workers it employs were earning only slightly more than the national minimum wage.
"Are hoteliers seriously suggesting that these workers must tighten their belts when the soaring price of essentials eats up a disproportionate percentage of their wages already?
“Many of them are in a very vulnerable position because they are migrant workers on short term contracts and, or part-time workers such as mothers with young families and students. In some hotels over 60 per cent of the workforce is composed of non-nationals," she said.
“The hotels industry has undergone massive expansion in recent years on the backs of these workers and successfully lobbied for lucrative tax incentives to build new hotels. While they put on the poor mouth some of our leading brands have been quietly making acquisitions in the UK and Europe.
“As usual in any economic downturn, the employers target the lowest paid and most vulnerable sections of the workforce. As the union representing hotel workers Siptu will do everything in its power to defend their living standards."