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Europe tourism hit hard by attacks

Paratroopers guard the Eiffel Tower; as the top destination for tourists, France is vulnerable to a downturn in travel

By CNN's Sonia Sequeira

LONDON, England (CNN) -- The airline industry is in turmoil. And if people aren't flying, they aren't staying in hotels, renting cars or spending holiday cash at restaurants, theatres and tourist attractions.

The downturn has been sharpest in transatlantic travel, with Europe the destination for about a third of U.S. travellers.

"The United States exports more tourists than any other country, but astonishingly enough France is the top destination for tourists across the world. France is No. 1 and Spain is No. 2. So you can imagine that Europe as a whole is very vulnerable to a downturn in tourism," says Sharda Dean of Merrill Lynch.

Britain has already struggled this year, as fears over foot and mouth disease kept many tourists away.

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Bookings were slowly starting to rise again. But the September 11 attacks have now prompted the British Tourist Authority to almost double its estimate of losses for the industry, with London the worst hit.

"We're seeing hotels with occupancies that have dropped maybe 20 or 30 percentage points," says David Quarmby of the British Tourist Authority.

"We've seen at least three theatres in difficulties and it looks as if they're closed, West End theatres. We've seen restaurants and pubs and all sort of visitor attractions 20 or 30 percent down."

Hilton Group was one of the first to admit that bookings were down after the attacks. But like its rivals, Hilton will say little about how it plans to deal with the drop-off in business.

The reason: No one really knows. "The immediate impact will be there for all to see in statistical terms quite soon, but we don't know how long it will last. We don't know what comes next in terms of the overall world fight against terrorism that's been announced," says hotel consultant Melvin Gold of PKF.

Many of those planning to travel seem reluctant to make firm bookings while the uncertainty over military action continues.

One small hope for the industry: Businesses will eventually find they can no longer hold off dealing with their overseas customers and will start to bring the bookings back in.