London's fashionable Metropolitan Hotel in Park Lane was to have been the setting for a British Airways worldwide sales conference with 500 delegates a week ago.

It is one of many conferences which have been cancelled or postponed after last week's attacks on the US.

The sharp fall-off in international travel has already had a big impact on hotel occupancy rates at the top end of the London market. They have dropped by about 50 per cent over the past week.

Upmarket hotels are highly exposed to US business and high-spending corporate travel.

"In September, normally the top hotels have occupancy rates of 85-95 per cent," said Ramon Pajares, president of the British Hospitality Association and former managing director of the Savoy group of hotels.

"Now top-end hotels are doing 45-55 per cent - a few are at 60 per cent - and it looks like the month will finish with average occupancy rates of 55 per cent for this section of the market, which is a dramatic fall."

London hotels were still busy accommodating stranded travellers until transatlantic flights were resumed last Sunday but, since then, there have been few guests to replace them.

Luxury hotels take 40 per cent of their business from the US but some, such as the Savoy, take up to 75 per cent.

US travel was already down sharply due to fears about foot-and-mouth disease and the US economic slowdown which contributed to London hotel occupancy rates falling this year by about 7 per cent. Average room prices last month were down 5 per cent.

Many hoteliers fear that US retaliation will tip the economy into recession as it did in 1991. It took the industry four years to recover former room prices.

"The only historical precedent is the 1991 Gulf War when US outbound traffic into Europe dropped by 20-25 per cent," said Nick van Marken, partner at Andersen, the professional services firm.

"What happens to room prices and occupancy rates is highly dependent on recovery of confidence in people's willingness to fly."

The Gulf War broke out in January - traditionally a quiet month - but September marks the beginning of the hotel business season.

Six Continents, the UK hotel group formerly known as Bass, which owns Holiday Inn and Inter-Continental, said that the short-term effects on its business could be "substantial" given that 20 per cent of its hotel profits were generated in September and October.

Mr van Marken says, however, that hotels are better able to withstand a downturn this time. "They are far more profitable, have stronger balance sheets and more variable costs," he said.

Bob Cotton, chief executive of the British Hospitality Association, said hotels should switch their marketing campaigns to domestic guests. "Britons will be reluctant to travel abroad. So there is an opportunity to replace some of the lost in-bound business with domestic business."