A top committee formed to restore the viability of Bermuda's hotels will be hard-pressed to meet hoteliers' demands for hefty tax breaks.

Government does not appear to have the dollars to grant hoteliers' push for $8 million in tax relief.

The gulf between the two groups went public on Thursday when Mr. John Marriott threatened closure of the Marriott Castle Harbour Resort.

His outburst came after Government put forward a proposal for $100,000 in tax relief -- well short of hotel expectations.

"Unless we get some help, some support from Government, my recommendation would be to close after the season is over,'' Mr. Marriott said.

"This hotel by itself pays the Government $3 million a year in duties and taxes. We asked for about $1 million of that back. We got about $25,000.'' The hotels' push for $8 million in tax relief includes removal of all duties on imported products such as meat, liquor, vegetables, toilet paper.

They have also proposed the reduction or abolition of land tax.

They want more favourable telephone rates and big breaks on the electricity duties. One proposal would grant hotels bulk discount rates for purchases of electricity.

Against this range of demands, Government's response on Thursday struck one hotelier as "peanuts, so insignificant it wasn't worth noting.'' But Mr. Marriott and hoteliers may have jumped the gun in their condemnations.

The Royal Gazette has learned that Thursday's meeting in effect was aborted as the Bermuda Industrial Union's decision to strike became known to participants.

"During the meeting, all these problems started to stream in so people had to leave,'' one hotelier said.

Government, at the very least, was unable to explain its still-developing position as ministers such as Deputy Premier the Hon. Irving Pearman were drawn away.

Last night, Government spokesmen agreed that Thursday's meeting was the first of many in which participants will bargain for an acceptable formula for hotel tax relief.

"There's a lot more that will come out in due course,'' he said.

Part of Government's problem is political. Reducing hotel tax bills means either increasing someone else's bill or cutting back existing services. There is also concern that relief for hotels will prompt cries for the same from other sectors, particularly from the Island's struggling retailers.

Another problem is that the hotels do not present a uniform tale of woe. A Finance Ministry review of the balance sheets of the Island's seven largest hotels has shown wild fluctuations in performance.

"Some are doing reasonably well, some are doing not so well, but even the best are not doing well by international standards,'' one source said.

The findings do not lend themselves to a single across-the-board agreement with the hotels' $8-million tax cut.

But they do support Government's understanding that something needs to be done to help the hotels.

"The industry needs help,'' one Minister said.

A consolidated hotels report earlier this year showed that in 1993, the eight largest properties lost more than $5 million and more than $40 million in recent years.

"Thursday was not the final meeting by any stretch,'' one Government spokesman said yesterday.