LAST month's street violence in Northern Ireland has caused a dramatic loss of confidence in the hotel industry, according to a report by the accountants, BDO Stoy Hayward.

In a survey carried out in the immediate aftermath of the disturbances surrounding the July 12th Orange parades, over half those questioned said they were pessimistic about the prospects for the next three months. In March this year, when hopes were high that visitor numbers would exceed last year's record, over 70 per cent said they were optimistic about the prospects for the summer.

According to the study, it has been the "pure tourist market" which has suffered most in the unstable political climate. Group bookings have been cancelled, and the number of individual tourists seeking accommodation has continued to fall.

Mr Shaun Kelly, from BDO Stoy Hayward, said the tourist industry was finding the trend most worrying. Hotels which depend more on the business market have not been affected to the same degree, the survey found.

The future of the industry lies in the pure tourist sector. This is the area most affected, by the recent disturbances. Hoteliers believe that business will return, but that it will take time to generate confidence overseas.

Mr Kelly said that the priority was to regain the confidence of visitors from the key UK and Irish markets.

However, although most hoteliers expect staff numbers to fall over the next three months, the survey found, that almost all expect to maintain or increase their expenditure on training.

Meanwhile, Mr Peter Eakin, the deputy managing director of the Belfast office of insurance brokers, Willis Corroon, which employs around 120 people, said the current political uncertainty could damage its position as one of the company's most profitable European offices. He said there was a danger that the continuing instability, which was affecting confidence in the Northern Ireland economy, would also threaten its positions as one of the leading performers in the group.

In addition, the Royal Institution of Chartered Surveyors (RICS) has warned that the violence was also affecting activity in the construction industry. An RICS spokesman said the signs of recovery which had been evident last year had not been maintained. A recent survey of the industry showed that workload was down by almost 12 per cent, the biggest fall of any UK, region.