a potential fire hazard.

Government inspectors have ordered the hotel to install a $200,000 sprinkler system. But hotel chiefs have appealed the licence refusal.

And in the meantime the 60-room Paget hotel -- formerly the Inverurie -- has been granted a provisional licence.

Last night manageress Mrs. Bridget Marshall mounted a thinly veiled attack on the Tourism Department.

"I find the lack of flexibility exhibited by the department during these recessionary times difficult to understand,'' she said.

Mrs. Marshall stressed the Palm Reef was the only small hotel forced to put in a sprinkler system.

And she said more than $1 million had been spent on sprucing up the property over the last three years.

In 1991, the hotel spent $30,000 on a smoke alarm system.

Tourism Minister the Hon. C.V. (Jim) Woolridge said he was sympathetic to the hotel's problems.

"I understand that many hotels are suffering cashflow problems, and I sympathise, he said. But he stressed Government's first concern was for hotel guests.

"If there was a fire in the middle of the night it could be very serious without a sprinkler system,'' he said. "We have to make sure we protect the guests. That's our responsibility.'' Mr. Woolridge said the hotel had failed to meet certain requirements.

"It's a very amicable situation. We have a few minor concerns, and they are being addressed.'' Mr. Woolridge said three Department of Tourism officials carried out the annual hotel inspection.

The requirements were supported by the Bermuda Hotel Association.

Mr. Woolridge said the hotel would be granted a full licence once the requirements were met.

Tourism Director Mr. Gary Philips said Government had a duty under the Hotel Licensing and Control Act to ensure hotels came up to scratch in general appearance, health, and fire precautions.

Palm Reef failed to meet "certain aspects'' of the regulations but was operating normally under a provisional licence.

Mrs. Marshall said the Tourism Department had told her hotel to provide "working drawings'' on a sprinkler system by March 31, 1993.

"We have had an architect working on these drawings, but the job proved to be more complicated. We were not able to give the department the plans by March 31, 1993. The sprinkler system itself does not have to be completed until March 1995.''