After several years of dramatic growth there are signs that the expansion of the Irish hotel sector may be slowing down, particularly in Dublin. According to Tourism Quality Services Ireland, which is responsible for the registration of new hotels, the number of applications has levelled off, although competition remains fierce in the upper end of the market.

By the end of the year, Dublin will have several more four-star and five-star hotels, but there are fewer planned for next year, according to Bord Failte.

While international brand names seem to be appearing over the doors of many hotels, it is mainly local business people who are putting up the money. According to property firms, many of which are responsible for securing sites for international hotel chains, a short-term supply problem may soon occur as office developers outbid hotel promoters for the best-located sites.

The massive reduction over recent Budgets in capital allowances for hotel developments makes the economics behind office schemes more lucrative. Paul Collins, an associate director with Hamilton Osborne King, says there could be a "short-term levelling off period" in the sector. However, he adds that the planned National Conference Centre, which is to include two large hotels, one to be leased by the Hyatt Group, should help demand to return on a similar scale to recent years.

With the annual number of tourists rising to 5.7 million, that sector of the business looks as strong as the corporate side, which is directly related to the general strength of the economy.

The stakes are highest at the top end of the market where the capital investment in a hotel located in a prime site is huge. At the upper end of the market in Dublin, the Four Seasons five-star hotel near the RDS will be one of the most serious players. It will be sitting on the doorstep of the Herbert Park Hotel and is aiming to steal significant corporate and tourist business from the more established hotels in the city.

The RDS is leasing the 3.3-acre site, at the corner of Merrion Road and Simmonscourt Road, to a Dublin-based syndicate, controlled by 30 to 40 wealthy investors, which paid £59 million to Simmonscourt Holdings, the original owners of the lease. The RDS has refused to disclose the rent, but sources say it is likely to be between £400,000 and £500,000 a year, with a rent review every five years. "The Four Seasons brand is a strong one and should be able to pull in large numbers of corporate customers from the US who are used to staying in their hotels there," said one industry source. The Four Seasons will also have the advantage of every other international hotel chain - a worldwide reservations network accessible anywhere in the world.

The deal involving Four Seasons, which only manages the hotel, illustrates that international groups would rather have locals (albeit very wealthy ones) bear the financial risk, which in this case seems low. Another example of this is the recently opened five-star Radisson St Helen's in Booterstown, Co Dublin. The site is owned by Irish property group Cosgraves, which is leasing it to Radisson SAS Hotels, a wholly-owned subsidiary of Scandinavian Airlines Systems. The rent on the 20-year lease has not been disclosed, but rates slightly lower than the Four Seasons project are likely, say sources. Under the deal, Radisson SAS is guaranteed a certain level of return.

Another serious addition to the market will be the Westin hotel, now being built on the edge of College Green in the centre of Dublin. A 25-year lease from Treasury Holdings has been taken on the site by US group Starwood Hotels & Resorts.

The 163-bedroom hotel will have a health club, a 100-seat restaurant and a banqueting hall to seat about 240 people. The rent for Treasury is described as "generous" and figures of about £1.5 million are mentioned in the industry. While in the case of the Four Seasons and the Westin hotels there is a leasing arrangement, other international hotel groups have come into the market on a franchise basis. Among these are the Granada Group and the Holiday Inn group. The latter is seeking to develop a site on Pearse Street at present, involving an arrangement where the franchisee pays the Holiday Inn group a percentage of hotel sales.

The Quality and Clarion hotel brands, while not in the five-star bracket, are also offering a franchise package at present to anyone with sufficient funds and experience at their disposal.

Another hotel seeking to carve out a niche is the Morrison, situated on Ormond Quay near trendy bars like Pravda and Zanzibar. It is owned by Hugh O'Reagan, who is closely associated with the bar business. He has enlisted designer John Rocha to give the hotel a fashionable image which will appeal to younger, affluent customers.

However, it is uncertain whether corporate customers will be prepared to leave their normal stomping ground around St Stephen's Green for a new establishment. The U2-owned Clarence Hotel, in Temple Bar, has suffered from this problem. The general manager of the Merrion Hotel, Peter McCann, says there is now enough business for all the major hotels in Dublin, including the Four Seasons project. However, he says, the few "quick buck merchants" without roots in the industry may find it difficult if the market takes a downward plunge.

The Merrion and the Four Seasons offer "very different products", he says, adding that the former had a traditional Georgian image in the centre of town, whereas the Four Seasons would probably go for something different.

Marnie Course Caden, operations director of Tourism Quality Services, says there is enough room for everyone, once the hotels maintain a mixture of customers - balancing corporates, families and tourists equally.

Like Mr Collins, she strongly emphasises the importance of the National Conference Centre for future demand. "There is no doubt we need the centre to keep the demand flowing, but hotels will also need to aggressively market themselves," she says.

While activity in the five-star market is strong, she says the number of four-star hotels applying for certification is growing. John Power, chief executive of the Irish Hotels Federation, says there is growth across all sectors. "The three-star property is now a very fine product. The quality of the bedroom is excellent by any standard," he says.

Two other developments in the last few months have changed the sector radically - the planned sale of the Great Southern chain and the merger between the Doyle and Jurys groups.

The two events are connected in that the remaining large hotel groups - Ryans and Fitzpatricks - will now have to assess their future. The sale of the Great Southern hotels is now a possible expansion route for either of these groups.

The likely purchase price of between £40 million and £50 million may be behind them, but they could certainly consider buying some of the hotels individually.