Thomas Whitehead, owner of Blue Water Lodge, a backpacker hostel at the southern end of Marine Parade, said freedom camping was "negatively impacting the budget accommodation industry".
He said up to 200 campers a night sometimes stayed at the Ocean Spa reserve, meaning the available toilet and washing facilities were woefully inadequate.
"They are turning many of these pristine places into open toilets and they don't care about the mess they make as they don't usually return to the spots," he said.
"The carparks around Ocean Spa are a peak family area just out of Napier's town centre, where you used to be able to take your kids to the beach for fish and chips and a swim. But now it isn't a desirable place to go with all the freedom campers there."
Napier City Council adopted its new bylaw last year to comply with the Freedom Camping Act which changed the law in 2011 to allow freedom camping in all council areas, except places where it was specifically banned or restricted through a bylaw.
Napier Mayor Bill Dalton said while users of self-contained motorhomes were not a problem, Napier's bylaw would be reviewed because it was being taken advantage of by a small element of campers in non-self-contained vehicles.
"In our view it's not working. We're really quite concerned about it. It's undermined the campgrounds and the backpacker lodges and resulted in people in cars and small vans sleeping all around in our public areas and that's unacceptable," he said.
"It's one thing having a nice campervan parked on your foreshore. It's another thing having people cooking on primus stoves with their washing hanging out between two vans and urinating in the bushes."
Staff were preparing a report for councillors to consider on how to address the issue. Once the report was completed it would be considered by councillors.
Mr Dalton said that while one solution would be to further restrict where non-self-contained vehicles could park overnight "that comes at a cost because then you have to monitor and police it".