The prediction follows a survey which shows a third of firms expect business to be down in the last three months of this year, compared to 2003.

South West Tourism said firms were also concerned about foreign competition.

Chief executive Malcolm Bell said: "We are predicting an increasingly competitive and potentially difficult trading year."

The survey revealed that 36% of firms reported a fall in business activity over the key July to September period, compared to the same three months last year.

Marketing campaign

Competition from overseas resorts and changeable weather in August were among reasons cited for the fall.

Of those interviewed, 33% reported an increase in business activity in the period.

Just over 30% said trade had remained at similar levels to 2003.

Concerns for the future include the prospect of an economic slowdown and the rising popularity of budget airlines, South West Tourism said.

It is planning a major marketing campaign in spring 2005 in a bid to halt any slowdown.

"Our message to the industry is that they need to invest in creative marketing campaigns in order to attract customers for the coming year," Mr Bell said.