Hoteliers in Weymouth have accused the council of trying to cash-in on the Olympics by raising rents by up to 48%.
Rates are reviewed every five years with the latest assessment taking in the period when the town will host the 2012 sailing events with Portland.
Hotelier Dave Price said his rent was up 35% and claimed the borough council implied room rates should be raised.
But the authority said it was trying to equalise hotel rates in the town and denied the rises were Olympics-related.
The council said it was against the event's ethos to raise prices during the Games and strenuously denied telling hotels to do this.
It also said some rents, which apply to hoteliers whose land is leased from the council, had only gone up by 4% under the review.
Hotelier Mr Price, chairman of the Weymouth Hotel and Guesthouse Leaseholders Association, said: "I asked the council if they could reason the rent hikes.
"I had it in black and white... saying that because the review now covers the summer Olympics of 2012 it will obviously affect tariffs and that should be taken into consideration when they are doing rent reviews.
"It is a very short-sighted approach - is it suggested that shops charge 50% more for their goods?
"We don't want to put people off by raising room rates, we want to see the people that come here for one or two days over the Olympics coming back the year after for a week or longer."
However, Geoff Petherick, from Weymouth and Portland Borough Council, said: "What we are trying to do as a council is equalise the rents across all of hoteliers, which is obviously a fair way to operate.
"If we catch anyone putting prices up over the Olympics they will be in serious trouble.
"The ethos of the Games is that everyone will be able to come in to the country or from the UK to attend it and the last thing we would expect is inflated room rates."
He said hoteliers should appreciate the £400m worth of investment the event is bringing to the area and a new £16m road scheme.
Some hoteliers are calling for a public meeting to discuss the issue.