THE number of hotel bedrooms in Dublin is on course to more than double by the end of 1998 as the new hotel building boom comes to fruition on the back of a strong tourism and general economic performance.

According to Frank Magee, chief executive of Dublin Tourism, the number of bedrooms will grow by 114 per cent between 1995 and 1998 as supply seeks to catch up with the demand created by the growth in tourism.

"This growth is based on the realisation that Dublin is a cultural capital and one of the fastest growing urban tourism centres in Europe," he says. "It's a phenomenon."

The growth in hotels is also a phenomenon based directly on market forces: there are no grants or incentives for building new hotels in the city outside of designated areas like Temple Bar (which accounts for a minority of the new hotel developments). The number of hotels in Dublin has gone from 65 in 1984 to 76 in 1992 to 87 last year. Some 17 hotels have opened in the capital in the past year, another 13 are due to open over the next 12 months and a further 26 are planned.

Colm Deignan, who carries out an annual hotel survey for accountants Horwath Bastow Charleton, has no doubt that most of these planned hotels will be built. "Hotel development is driven everywhere by economic conditions and they have been on an upswing for the last two years and they look settled for the next two to three years," he says.

"The present situation is playing catch up with demand and arises to a large extent from the achievement of the targets set in the Operational Programme for Tourism. If visitor numbers continue to increase, hotel developments will only be keeping pace with demand.

The continuing tourism boom is based on a combination of factors, including effective marketing, extending the tourist season throughout the year and the effects of the Northern ceasefires after 1994.

The end of the IRA ceasefire has not caused a dramatic change so far, with tourism numbers still rising by 11 per cent in the first nine months of this year but the future course of the Northern conflict is something on which the tourism industry keeps a wary eye.

For hotels at the top of the market, however, the general economic boom is of equal importance to the rise in tourist numbers. Almost half of luxury hotels' guests are business travellers, usually on expense accounts. Their dependence on business travellers and the level of general economic activity is evident from figures which show the off-season for many four-star and five-star hotels is August, the traditional holiday month that sees a decline in commercial activity, according to Mr Magee.

The latest Horwath Bastow Charleton survey shows that luxury hotels are the most-profitable with a pre-tax profit of almost 24 per cent on a room occupancy rate of 70 per cent in 1995. On an average daily room rate of £86.60, they made an average profit of £10,782 a room compared with an average pre-tax profit of £1,766 per room in economy hotels.

The higher profit levels in luxury hotels go hand in hand with a much greater development cost, of course: the cost of developing a luxury hotel room is about £130,000 compared to about £30,000 for an economy-class room.

"Five-star hotels are very profitable when times are good but they are the hardest hit when times are bad," says Mr Deignan.

With the growth in tourism, the rise in economic activity and the supply of bedrooms lagging behind the demand, hotels across the board are having little difficulty at present in achieving profitable rates of occupancy. Dublin has the highest hotel occupancy rate in the country - 71 per cent against 62 per cent along the western seaboard.

There are few worries yet about the supply of new hotels out-pacing demand. Hotels have halted a slide in their proportion of tourism accommodation in recent years but the Irish Hotels Federation fears occupancy rates may not be as high this year as in previous years, in spite of the continuing rise in visitor numbers.

Its chief executive, John Power, says this may be because of a growth in unapproved bed-and-breakfast accommodation, which the federation wants addressed.

One of the changes in the hotel industry is a growing division between the property development and the operational sides of hotels. That is a common practice in other countries but unusual in Ireland, where even the biggest hotels chains have grown out of family businesses.

However, it is the basic arrangement for several of Dublin's new hotels like the luxury Hotel Merrion opposite Government Buildings, the proposed Hilton in College Green and the four-star Stakis Hotel at Charlemont Street.

Mr Deignan expects this practice will be more common in future and foresees a time when pension funds will own hotels, operated by hoteliers in the same way as they now own office blocks.

"It might even be better for existing hoteliers to wear two hats, one owning the property and the other operating the hotel and requiring both parts of the business to pay their way," he says.

He points out that the most successful hoteliers are those who are hoteliers first and businessmen second. "The businessman who gets into the hotel sector because it looks like a good investment at present may not have the experience to achieve the level of profitability that will get him through the hard times," he says.

There are no signs yet, however, of hard times, on the horizon, although the hotel building boom, is likely to take a breather once the current crop of plans become reality.