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The tax, introduced by the New South Wales government, and due to come into effect from September 1, has been described by Tourism Council Australia as a major backwards step in the development of the tourism industry in both NSW and Australia."What's more, it will be a deterrent to international visitors and will have a dampening effect on the 2000 Olympics," said John McKernan, Hotel Motel & Accommodation Association's chief executive.

The tax, officially described as a levy, will be raised on Sydney CBD and North Sydney hotels.

McKernan said the tax was selective and discriminatory. "It's one thing to implement such a selective tax as this but quite another to also insist, as this apparently does, that all the money collected must go into internal revenue rather than be earmarked for marketing and other activities than can directly benefit the industry."

McKernan said the tax had come like a bolt out of the blue. "It will slug hotels, motels and guest houses just as they are beginning to get in front.

"This puts the city at a decided disadvantage alongside its competitors in Queensland and Victoria, and is going to make it 10 per cent harder to win international business."

TCA called a crisis meeting of the tourism industry in Sydney to develop an industry campaign to fight the bed tax.

TCA managing director Bruce Baird said other international cities where a bed tax had been introduced had not been successful.

"In New York, the result of a bed tax was disastrous for tourism and the city, and was eventually reversed," he said.