The organising committee for the London 2012 Games, Locog, revealed yesterday that it had over-estimated by a quarter the number of rooms needed by officials, media and sponsors. It has now handed back 120,000 of the total 600,000 nights booked for the sporting event.

The large-scale reservation of rooms in early preparation for the Games has caused increased prices across the capital and has put many regular tourists off visiting this summer.

Tour operators warned last night that a sudden flood of vacant rooms would be too late to boost visitor numbers. Analysis for The Independent suggests up to one million beds will now go unsold over the Olympic period, hitting hoteliers and others working in the tourism industry. One trade association estimated income could slump by up to £3.5bn during July and August.