A Jewish couple with five children had tried to make a reservation by email at the Haus Sonnenhof hotel in the Tyrolean village of Serfaus, in western Austria.
But the owner, Irmgard Monz, reportedly emailed them back to say that while rooms were available she was "no longer willing to take in Jewish guests because of bad experiences in the past".
The family, from Vienna, told the Austrian daily Tiroler Tageszeitung that they planned to tell as many friends and relations as possible about the incident.
They will be taking their summer holiday elsewhere, the unidentified man said.
"I don't want to spend my holiday in such a racist nest, and I will inform all my friends about what is going on in Tyrol," he told the newspaper.
The affair caused shock and dismay in the region, which in recent years has become popular with orthodox Jewish tourists, who are welcomed at hotels offering kosher food.
Hotel owners in the area said the apparent display of anti-Semitism was "bad for the image" of Serfaus.
The mayor of Serfaus condemned the hotelier's response as "unacceptable" and the head of the local Jewish community, Esther Fritsch, said: "It's terrible."
Staff at the Haus Sonnenhof hotel were unavailable for comment.
The story emerged as masked neo-Nazis disrupted a memorial ceremony marking the anniversary of the liberation of the Mauthausen concentration camp on Sunday.
A group of men dressed in black shouted "Heil Hitler" and performed Nazi salutes at the ceremony in Ebensee, in central Austria, before running off.
Survivors of the concentration camp had come to mark the 64th anniversary of their liberation from the camp.source