Hotels and restaurants will need an extra 105,000 staff over the next five years, according to a report commissioned by CERT, the State tourism training agency.
It says meeting this demand will be a major challenge as Irish people seek better opportunities elsewhere and the labour market contracts.
The Minister for Tourism, Dr McDaid, said it was unacceptable that staff turnover in the sector was 25 per cent. The industry would urgently have to introduce measures to stop people leaving.
The report says the tourist industry is probably entering the most difficult period of its development. It is faced with skills shortages in a tightening market. Of the 105,000 people needed over the next five years, 40,000 will be required to fill new positions. The remainder will replace those who leave.
CERT's chief executive Mr Shaun Quinn, said yesterday that simply keeping people in the sector, and not just recruiting new people, was the real challenge for tourism.
The Irish Hotels' Federation, representing the largest single group of employers in the sector, said it was facing intense competition for staff as jobs available far exceeding the number of people available.
The report says the investment in physical infrastructure has been impressive and the tourist product is now excellent.
However, the investment must now be directed towards human resource management, which aims to develop the people who work in the sector.
The chairman of CERT, Mr Eamonn McKeon, said the report "is telling us that we are faced with a skills shortage which is likely to become more acute".
He said the problem was partly caused by the success of the tourist industry in the past decade but new strategies must now be considered. These included encouraging immigration.
Dr McDaid said despite the recent pace of development, the tourist sector was highly fragmented, with many small and medium-sized businesses, many with a low level of marketing and human resources skills.
He said tourism had considerable employment potential for socially excluded groups, such as the long-term unemployed, early school-leavers, women wishing to return to work, non-nationals and older age groups.
The report says the success of the hotel and restaurant sector will continue, though at a more moderate pace. The growing pains coming with success include labour shortages for many skills, from qualified chefs to restaurant staff. The industry is even having difficulty recruiting untrained staff.
The report accepts that job mobility is necessary in building careers, but the level of turnover in the tourist industry is too high.
"High turnover can provide a pool of trained workers to draw from. In the case of this industry, however, this situation does not apply. Some 50 per cent of all workers who leave the sector, exit the industry."
It identifies a "catch-22" problem where because the industry traditionally has a high staff turnover, employers are reluctance to make a significant investment in training.