The European Tour Operators Association (ETOA) has warned of a drop in the number of inbound visitors to the UK after highlighting three "major" issues facing the sector.

High taxation; an "arrogant and racist" visa regime; and the impact of the Olympic Games have all been identified as challenges for the UK tourism industry. ETOA has claimed that UK-based companies working to sell the country as a tourist destination overseas currently face a "huge" disadvantage due to tax regulations.

Under the Tour Operators' Margin Scheme, domestic firms incur a levy on the investment made in the sale and delivery of visitors to the UK. The UK's visa regime also came under fire from ETOA, which said that more than 300,000 long-haul visitors had been put off visiting Britain due to bureaucracy.

ETOA executive director Tom Jenkins said: "The new Tourism Strategy, launched ten days ago, acknowledges that there are difficulties. But the scale of the problem is such that it is not addressed by issuing guidance notes for applicants in their own language. "The cost to the UK in foreign exports is between a half and three quarters of £1bn per year. Thousands of jobs are being lost though this surly and alienating stance towards our customers."

ETOA also claimed that hotel operators were "wrong" to expect benefits from London hosting the 2012 Olympic Games. The association said that the Games would "deter" normal tourists, while Olympic organisers had eaten up to 22,000 rooms at below market rates for the duration of the event.