LARGE hotels won't be allowed as national parks are freed up for private development in a bid to cash in on ecotourism, the Victorian government has pledged.

But green groups warn allowing private investors into national parks could allow developers to destroy some of the state's most precious natural jewels.

Responding to a report into Victoria's tourism industry, Treasurer Kim Wells said the government would strike the right balance between boosting tourism and protecting the environment.

Every other state and the Northern Territory, as well as countries such as New Zealand and Canada, allowed private investors to develop in national parks, he said.

Developments will need to be sensitive to the environment, and about one third of national parks considered wilderness areas will not be open for development.

Ninety-nine-year leases will be available to the private sector.

Environment Minister Ryan Smith will develop approval guidelines and be responsible for giving projects the green light.

Tourism Minister Louise Asher said more than one quarter of international visitors to Victoria went to a national park.

An estimated $481 million of annual economic benefit to the state comes from tourism at Wilsons Promontory, Port Campbell and the Grampians alone.

The challenge was to get international visitors to stay in regional Victoria and spend money rather than head there for a day and return to Melbourne.

"We need those high-spending, international visitors to go into regional Victoria for economic development purposes," Ms Asher told reporters.

"Nature-based tourism is huge. It's growing worldwide and Victoria needs to keep up."

Ms Asher said interstate experience indicated there was only likely to be a limited number of developments, which would be low-rise.

"I don't think it's going to be a stampede into these places," she said.

"A hotel like the Sofitel is clearly not going to be allowed in a national park.

"Other states and the Northern Territory allow it and pandemonium hasn't broken out."

Victorian National Parks Association executive director Matt Ruchel said the government was putting some of the state's most precious areas at risk of irreversible damage.

"Our parks were not created to end up as building sites for hotels and large-scale infrastructure that can only be used by a privileged few who can afford it," he said.

"There is a danger of killing the goose that lays the golden egg.

"People visit national parks for experiences they can't get elsewhere. They want the opportunity to see the natural world at its best, not hotels and a shopping mall."

Victoria Tourism Industry Council chief executive Dianne Smith said the government should not have taken 14 months to respond to the Victorian Competition and Efficiency Commission report.

"It doesn't send a positive message, however, as an industry, we want it to work for us," she told AAP.