Recovery in the tourism sector is conditional on a significant easing in inflation and continued global stability, Tourism Ireland, the 32-county agency charged with promoting the sector, warned yesterday.

Unveiling the organisation's marketing campaign for the coming year, chief executive Mr Paul O'Toole admitted the sector would be hard pushed to meet its targets of a 5 per cent increase in international tourist numbers to 7.5 million and a 10 per cent rise in US visitors.

It was essential that the industry moved to check inflation and counter the widening perception that the Republic, in particular, represented mediocre value for money, he said.

But an equally serious threat was posed by the possibility of conflict in the Gulf and a consequent dip in the numbers of US citizens holidaying overseas.

Tourism Ireland, along with representatives from Bord Fáilte, which is responsible for marketing the Republic to domestic holidaymakers, will highlight the impact on competitiveness of escalating prices in a series of addresses to regional tourism authorities this week.

The quality of the experience offered to visitors should not, however, be diluted in a drive to reduce costs, cautioned Mr O'Toole. Otherwise Ireland risked becoming a "cheap and cheerful" destination, hobbled by low visitor expectations and lower margins.

"We must strike a balance between providing value for money and offering a high-quality product," he said.

The agency is to focus its 2003 promotional campaign on eight key markets: Britain, the US, Germany, France, the Netherlands, Italy, Australia and Canada. The campaign will promote Ireland as a high-quality destination offering unparalleled levels of service. Value for money will not be emphasised.

Research commissioned by the agency reveals Ireland is highly regarded as a potential holiday destination among target markets. "Our task is to convert that interest into a holiday purchase," said Mr O'Toole.

Ireland is being promoted with renewed vigour following one of the most disappointing years for tourism in the past decade.

Visitor numbers rose by just 2 per cent with American tourists deserting the Irish market amid continued unrest in the Middle East.

As part of a far-reaching overhaul of the sector, Bord Fáilte will merge with training agency CERT to form a new body, Fáilte Ireland.