PETER O’TOOLE once had a champagne bath in one of its suites, and John F Kennedy, Grace Kelly and Elizabeth Taylor all enjoyed its grandeur.

Now, Ireland’s most historic hotel is giving away rooms for free.

When the Shelbourne in Dublin reopened last year to show off its €83m facelift, including an oyster bar and Louis le Brocquy paintings, room started at €315 a night.

Just 20 months later, the five-star establishment, where in more recent years guests have included the actors Julia Roberts and Daniel Day-Lewis, is one of several luxury hotels across the country offering guests free nights as it attempts to ride out the recession.

Other high-profile getaways are offering free facials and massages in an attempt to fill empty beds, industry experts say.

Customers who spend two weekend nights at the Shelbourne — which posted a loss in 2007 — earn a free third night, with rates starting at €229 a night per person sharing.

The Irish Tourist Industry Confederation (Itic) told an Oireachtas tourism committee this month that as many as 20,000 of the country’s 50,000 hotel beds are now vacant at any one time. Hoteliers are increasingly giving guests the chance to stay an extra night in the hope that they spend money on dinner or at the bar rather than leave bedrooms empty.

“You can’t make money with empty bedrooms so, since the end of the summer season in September, some hotels are getting creative to get people to stay,” said Eamonn McKeon, chief executive of the Itic. “We will see a lot more offers of free nights.”

The Four Seasons in Dublin is also offering a third night free for any two consecutive nights stayed at the celebrity haunt between December and April, starting at €225.

At the five-star Ritz-Carlton in Powerscourt, Co Wicklow, which opened to much fanfare a year ago, American Express cardholders who stay three nights in a row get the fourth night for free.

In the run-up to the opening of the €250m hotel, home to Ireland’s first Gordon Ramsay restaurant, the Ritz-Carlton was advertising rooms at between €450 and €500 a night. The price is now running at €275 for a weekend night and €215 midweek.

“There will be occasions when we sell rooms for €500, and it would be great if it were like that all the time,” said Jill O’Hare, the Ritz-Carlton’s marketing manager. “But it’s a difficult environment out there, so we have to have a variety of packages that demonstrate value for money because that’s what customers want now.”

These packages include one night with breakfast and dinner at Ramsay’s restaurant for €177.50 per person sharing. Guests who stay at a €325-a-night suite are given “credit” of €75 to spend at the hotel’s spa, restaurant or bar.

Hoteliers have cut prices by as much as a third, on average, since last year and room rates are now at a six-year low — even at peak times such as bank holiday weekends, according to Aiden Murphy, partner at Horwath Bastow Charleton (HBC), a hospitality industry consulting firm. He believes that resort hotels should send staff on holidays this January and February and shut down temporarily.

“We’re seeing significant discounting at hotels because the domestic market is cutting back on, or even omitting, short breaks because they’ve been warned so widely to curb expenditure,” Murphy said.

“Many hotels hadn’t built up enough cash reserves over the summer to carry them through the winter. They are not paying things like commercial rates and tax bills and when they go to the banks for an increase in their overdraft, the banks won’t give it them. Over the past six months, more and more hotels are asking us to support them in negotiations with banks.”

Hotel occupancy will likely fall about 10% this year to a percentage in the 50s, according to McKeon. That’s because the global recession, combined with the euro’s strength against the dollar and the pound, and the credit crunch, will likely push the number of overseas visitors to Ireland down in 2008 for the first time since the terrorist attacks on America in 2001.

Some 10,000 jobs may be lost in the Irish tourism industry this year as a result, McKeon predicted. The industry employers about 250,000 full-time, part-time and seasonal workers.

Global financial meltdown came just as the conclusion of Ireland’s hotel building boom added at least 8,000 new rooms to the hotel stock in 2007, the biggest jump in Irish history, HBC figures show.

“Just before the downturn, hotels also underwent major expenditure programmes and are now carrying the debt from those,” Murphy said. “I would predict temporary closures in the industry and more will go into examinership.”

The hotel industry has suffered a string of casualties in the past few months, including the Dunne Group, which operated five hotels, including the Woodstock hotel and golf club, near Ennis, Co Clare.

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