The chief executive of VisitBritain has criticised London hotels for holding out for high prices during the Olympics.

Sandie Dawe conceded that bookings have been affected by the spike in room rates across the capital.

In yesterday's Independent, senior figures in inbound tourism warned that the perception that hotel rooms are either unavailable or extremely expensive has severely dented the business prospects for the Games.

Locog, the organising committee for the London 2012 Games, this week handed back 120,000 room-nights that are surplus to its requirements: it reserved one-quarter more than are needed for officials, media and sponsors during the Olympics, which run from 27 July to 12 August.

The over-bidding has been blamed for artificially suppressing supply and raising hoteliers' expectations about the prices they can command.

Ms Dawe told The Independent that hoteliers had to be more realistic. "Some hotels are waiting to get the price that they want. There have been tour operators wanting to contract their rooms – it's like 'who-blinks-first'. It doesn't seem entirely sensible," she said.

Many hotels have trebled their normal rates for the Games, as well as stipulating minimum stays and insisting on payment in advance.

VisitBritain has predicted tourist numbers this year will be the same as 2011. But last year, the Tourism minister, John Penrose, said: "The principal trap is that potential domestic and foreign visitors who aren't avid sporting fans can be put off visiting an entire country for the whole of an Olympic year."

Experience from the two most comparable recent Olympiads, in Sydney (2000) and Athens (2004), suggests a strong displacement effect, with many prospective visitors postponing trips to avoid a city they perceive will be congested and overpriced.