The sector is said to be “on its knees and fearing for survival” ahead of the possible introduction of new restrictions in Scotland to try to curb the spread of the new Omicron variant.
Some operators are said to have lost 100 per cent of their festive season business in the wake of warnings from Public Health Scotland and First Minister Nicola Sturgeon last week.
Organisations representing hotels, restaurants and pubs say they have effectively been closed down without any financial support at a time of year crucial sustaining businesses and more than 100,000 jobs.
Industry leaders said suppliers across the country will be left in a "perilous financial state" due to the knock-on impact of widespread cancellations since people were urged to put off planned celebrations.
The Scottish Conservatives have urged the Scottish Government to create a “short-term compensation fund” to help businesses hit by a sudden slump.
Public Health Scotland “strongly urged” people to pull the plug on their festive celebrations on Thursday, after Omicron outbreaks were linked to a number of Christmas parties.
On Friday, Ms Sturgeon said: “It is incumbent on public health experts to set out very clearly and frankly the risks we face, and it is incumbent on me and government to pay attention to that advice.
“There is a significant risk with Omicron - and we are already seeing the reality of it - of Christmas parties or events with lots of people becoming super-spreaders.”
Marc Crothall, chief executive of the Scottish Tourism Alliance, said the advice had sent “a shockwave of anxiety and turbulence through Scotland’s tourism community.”
He said: “Within hours, we had received numerous messages, emails and calls from hotels, accommodation providers, restaurants and events venues with notification of mass cancellation of bookings representing a colossal loss of revenue, not just solely attributed to Christmas party night cancellations.
“One hotelier today who told me that business to the value of £250,000 for the remainder of this month has been wiped out. A restaurant in Edinburgh said that within 24 hours of the Public Health Scotland announcement they had received 500 cancellations.
“A hotel in Dunfermline asked what they can do about the 400 cancellations they’d received within 12 hours. A hotel in Aberdeen received 22 supplier deliveries the day before the announcement. They received 1000 cancellations and project a fall-off of £100,000, but still have the supplier bills to pay.
“This isn’t unusual, it's widespread. It’s happening to every tourism business. There’s little opportunity for them to recover losses at that level. “This also extends to the supply chain. The ripples of the impact of announcements and subsequent speculation reach far and wide within our industry and those who depend on it. Many are now worried about the future certainty of employment.
"If an announcement of immediate financial support is not forthcoming within days, the industry is staring straight into the face of a dangerously bleak few weeks and months.”
Leon Thompson, executive director of industry body UKHospitality Scotland, which has estimated losses of up to £1 billion, said: “I have members quoting rates of cancellation of 30 to 100 per cent.
“The messaging has taken away the ability of businesses to make any money as this important time of the year, when they look to make around a third of their income. It’s devastating for them.
“As well as lost revenue, businesses have already paid for food and drink and entertainment which they will need to cover. Even if hospitality businesses are not liable, suppliers will be left in a perilous financial state, unable to sell to the sector.
“Without financial support from our governments, businesses are staring into the abyss. And with a further announcement coming from the Scottish Government, possibly on further restrictions, a sector already on its knees is fearing for survival.”
The Night Time Industries Association in Scotland said that many of its members were currently considering whether they can keep trading given the volume of cancellations in recent days.
A statement from the group said: “We estimate a direct result of more than £1 billion of additional economic damage to our sector and its supply chain is already baked in for December alone.
“We’re calling on Scottish Government to provide immediate support on a pound-for-pound basis to compensate businesses, protect their survival and preserve jobs.
“It is both morally and economically untenable for the costs of this new policy to be borne by small businesses without any additional support.”
Vice-chair Gavin Stevenson, director of the Mor-Rioghain group, which operates across Scotland, said: “It’s now clear the Scottish Government has left the sector open in name only.
“It’s now seen a critical decline in festive season trade, resulting in a threat to the very survival of small businesses and 100,000 jobs.
“If the new variant threatens the NHS then of course our sector will again step up and play our part – but government must also now step up and commit to replace lost festive season income.”
Scottish licensed Trade Association Colin Wilkinson said: “It's been an absolute disaster for the whole sector. It’s basically shutting us down.
"Some businesses have lost 100 per cent of their Christmas party bookings. It’s now going to the point where it may not be viable for some of them to stay open.
"The biggest issue is that there’s absolutely no support for anyone.”
Emma McClarkin, chief executive of the Scottish Beer and Pub Association. said: “Scotland’s hospitality sector desperately needs targeted and immediate economic support.
"Any further restrictions, such as an extension to Covid certification, would be entirely unworkable and completely unviable. We are pushing both Holyrood and Westminster governments to step up and save jobs this Christmas.”