Tour operators organising trips to Britain are seeing an average 90 percent downturn in bookings during the London 2012 Olympics, a survey by an industry group said, with sports fans failing to compensate for those wanting to avoid a packed city.
The warning has sparked a debate about the immediate impact on tourism of the July 27-August 12 2012 Games and its longer-term effects.
The European Tour Operators Association (ETOA) surveyed 28 of its members, responsible for two million tourists per year, and estimates that approximately 3.5 billion pounds could be lost to the UK economy during this time for both satellite venues and the capital city.
The expectations of visitor numbers currently circulating within the hotel industry are hugely inflated, said Tom Jenkins, executive director of ETOA.
If UK businesses are basing their plans on data in some prominent visitor forecasts, London will suffer financially, as has been experienced by previous host cities.
The British Hospitality Association (BHA) told Reuters that the ETOA forecast was alarmist.
We believe demand will be strong and prices will thus find their own level, it said in a statement.
There will be some displacement but the Games will attract a new market and they will raise the profile of Britain to such an extent that they will leave a very long-term legacy.
Culture Secretary Jeremy Hunt told Reuters that he thinks it is wrong to look at one set of numbers at this point.
We are in the middle of a euro zone crisis... and I don't think it's particularly surprising to see these numbers at this stage.
The minister underlined that Britain has launched its biggest-ever marketing campaign, going well beyond Europe.
Every Olympic Games displaces tourists - that is not new, argues London & Partners spokeswoman Martine Ainsworth-Wells.
The city's official promotional organisation has been working with the travel trade to quell their fears about visiting London and launched in September Limited Edition London to showcase events between now and the Games including celebrations of the Queen's Diamond Jubilee next June.
Ainsworth-Wells told Reuters that travel patterns have changed dramatically in the last few years. Five or six years ago, people would plan three to six months in advance; now travel plans can be made with just a week or two weeks' notice. We've still got plenty of time to persuade people.
Corporate travellers may not be so easily lured.
American Express Global Business Travel spokeswoman Tracy J Paurowski confirms that, We are seeing clients holding back on travel during unless it is business-critical. The drivers behind this are that some hotels are putting blackout days during the Games which is causing uncertainty around the rates that will be charged.
Alarmist or not, the ETOA's figures can be seen as the latest travel industry gripe about the UK's financial barriers to entry: High visa costs; not being a part of Europe's borderless Schengen Area; and expensive taxes.
Hunt told assembled delegates at London's World Travel Market on Monday that he was working to curb bureaucracy.
We're now getting our teeth into more than 60 regulations holding back the hospitality sector - from simplifying licensing, to scrapping rules on where you need to place No Smoking signs.
Rather than focussing on visitor numbers during the Olympics itself, the government is hoping the event will act as a catalyst for future growth.
Hunt said that he is aware that host cities in recent years have been initially greeted by a decline in arrivals.
We've learnt that you need to have a sustained tourism marketing campaign that isn't just about what happens in the Olympic year, but what happens in 2013, 2014, 2015...
In a speech to the conference, Hunt said that Visit Britain's campaign now has 127 million pounds behind it, and is expected to generate 4.6 million extra visitors, more than two billion pounds in visitor spend and nearly 60,000 jobs over the next four years.
Euromonitor International has forecast 29.4 million overseas arrivals to the UK on the back of the Games, a four percent rise, though says a dip can be expected in 2013.
If, as the ETOA worries, overseas visitors who come to watch the Olympic sport do just that, rather than sightseeing, shopping or going to the theatre, there's always the domestic market to keep numbers up.
Then there's also the London 2012 Festival, a 12-week programme of concerts, exhibitions, films and live events which Bmarks the culmination of the four-year Cultural Olympiad. Famous landmarks including Stonehenge and Arthur's Seat in Edinburgh will become giant art installations for the festival.
UK domestic tourism in 2012 will be boosted too by the Queen's Diamond Jubilee on 2-5 June, which incorporates the Epsom Derby, a BBC concert in Buckingham Palace, a service at St Paul's Cathedral and up to 1,000 boats in a flotilla down the River Thames.
There is simply nowhere else to be next year than in London, whether you've got tickets or not, Hunt told Reuters.
(Editing by Keith Weir)