Citizens here also had access for the first time to rental cars, which until midnight on Sunday had been available only to foreign customers bearing foreign currency.

The moves are the latest reforms by Castro, who last month succeeded his brother, revolutionary icon Fidel Castro, as president promising to modernise the Marxist state.

No official mention was made in state-owned media about the policy shift, although various hoteliers queried by AFP said they had been briefed about the change.

"Yes, we received an orientation and (the new policy) now is in effect," an employee at the Hotel Copacabana told AFP late on Sunday.

Meanwhile, an official at the Cubacar auto rental company also confirmed the newly liberalised policy which now allows payment in Cuban pesos at his establishment.

"Any Cuban who arrives at the hotel with their Cuban currency can rent a car," said Cubacar's Manuel Suarez.

Raul Castro has vowed to end "excessive" restrictions that long have been a despised feature of life here among Cubans, who often have felt as if they were second class citizens in their own country.

Human rights critics abroad often labeled the ban on Cubans' staying in hotels a form of what they called "tourism apartheid."

Cuba watchers hope the reforms are a prelude to the government's ending much more onerous travel restrictions preventing all but a lucky few, relatively speaking, from leaving the island each year.

But can Cubans afford the hotels?

But critics pointed out that the reform is mostly symbolic, since most Cubans don't have access to the foreign currency to put Cuban hotels and car rentals within reach.

"It's a positive move, but the negative aspect is that the majority of Cubans don't have the money to spend the night in a hotel," Dariel Avila (17) told AFP.

Raul Castro said when he took power that he would focus on addressing "basic needs," and said any changes would take place gradually, as he tried to "perfect socialism." Since then, however, there has been a surprising flurry of reforms.

On Friday, the government announced changes to the farming industry intended to increase production in Cuba, which imports 80 percent of its food, in the face of rising global food prices.

Ban on computers, mobile phones also lifted

Also on Friday, the government lifted a ban on the use by ordinary Cubans of mobile phones, which were a luxury mainly reserved for foreigners and government staff.

And last week, Havana also lifted a ban on the sale of computers, televisions and video recorders.

Meanwhile, on Sunday, the government announced that it would boost domestic national investment to six billion pesos or $250-million — four times what it spent 10 years ago.

"We've put into effect a much bigger investment process than previous years and of greater importance to the economy and people's lives," Vice President Carlos Lage told the Juventud Rebelde newspaper, without indicating which sectors would most benefit from the increase.

AFP