CIÉ Tours International's revenues rose by 12 per cent to €5 million in 2004, compared to the previous year, the State transport group's subsidiary said yesterday.

CIÉ Tours managing director Mr Brian Dowling said he was "reluctant" to be drawn on an overall profit figure but said it would be "substantially up" on the 2003 figure of €700,000 in post-tax terms.

He said that, despite the fall in the dollar, business generated in the US last year had exceeded their expectations.

"Up to now, Americans haven't shown a dislike to Irish prices," he said. "They still regard Ireland as good value but the exchange rate is a concern."

Mr Dowling noted that, in 2002, the exchange rate was around 92 US cent to the euro, while it is now running at levels in excess of $1.30 to the euro.

"We will have to see how this affects the US psyche."

Mr Dowling said tourism prospects from the United States could be greatly enhanced if transatlantic air routes were opened up by finalising agreements on air access from the US.

A significant proportion of CIÉ Tours' business (almost 80 per cent) comes from the US, where around 55 of its 100 staff are employed.

He said the tour operators' business was a very tight one, but that the company was more than holding its own. Margins were running at 2-4 per cent and it was aiming ultimately to reach 5 per cent.

"Most operators are making around 1 per cent," he said.

The preliminary figures, which were released yesterday, indicated that the British and Irish markets showed a 12 per cent drop in CIÉ Tours revenues last year. This was due mainly to the perception that the Republic is a high-cost destination, according to Mr Dowling.

He said that, in general, Europeans had less spending money in their pockets.

"They pay higher direct taxes (PAYE and so forth) and lower indirect taxes, such as VAT, than we do. This, combined with a decade of higher inflation levels in Ireland, has meant that Europeans travelling around Ireland find our general prices expensive."

Mr Dowling said this year was likely to be extremely challenging. He said that, despite the dollar issue, the company believed it could grow its revenues by a further 5 per cent.

The preliminary figures from CIÉ Tours - which does not get a State subsidy - are the latest in a string of results from elements of the State transport group.

It emerged at the weekend that the parent group is expected to post operating profits of €17.4 million for 2004. This compares with a deficit of €4 million in 2003. There were improved financial performances in all its operating subsidiaries.