The tourists chatting in multiple languages in the piazzas, bars and shops of Rome belie a more somber mood at the ancient city's hotels.
Luigi Rinaldi, concierge of the Hotel de la Minerve next to the Pantheon, said American tourists have disappeared, although demand among German, Spanish and Russian tourists is solid.
The hotel is trying to lure guests by keeping prices steady — even during the high season at Christmas and New Year's — and by adding weekend promotions.
"But we are a five-star hotel," Rinaldi said. "We can't be too daring."
Rome is among many major cities around the world seeing dramatic declines in hotel occupancy this fall as consumers and businesses cut travel spending: Occupancy in Rome fell 17.5 percent in October compared with the same month last year.
Global air travel also has fallen off as the financial crisis that has hit economies around the world takes its toll. Executives from major airlines speaking at a conference in New York on Tuesday may reveal further erosion of demand for seats and discuss capacity reductions they'll make in response.
The International Air Transport Association says international passenger traffic declined 1.3 percent in October compared with 2007, following a 2.9 percent drop in September.
"I think it's going to be a very cold winter, and I'm not a weatherman," said Calyon Securities airline analyst Ray Neidl.
Airlines, which already made dramatic cuts to their fall schedules as oil prices soared over the summer, have cited the economic slowdown as reason enough for them to continue to be cautious, even though oil prices have dropped significantly the last few months.
Several U.S. airlines have promised or hinted they will cut domestic and international capacity further in 2009.
Atlanta-based Delta Air Lines Inc. said in a recent regulatory filing that demand has slowed during the fourth quarter, which began Oct. 1. Its domestic advance booking rates are running two percentage points higher year-over-year, reflecting capacity reductions in the domestic system. International bookings are down 4 to 5 points, Delta said.
According to the IATA, the number of passengers traveling on premium airline tickets — who tend to be business travelers — dropped 8 percent in September, reflecting the severity of the global financial crisis and a slump in the confidence of manufacturers in the U.S., Japan and Europe. Premium traffic slumped in North Atlantic markets, between the U.S. and Asia across the Pacific and within the Middle East. That's a bad sign because business travel helps drive airline profitability.
An "open skies" agreement between the U.S. and the European Union, which took effect in March, allows airlines to fly to and from any point in the U.S. and any point in the EU.
"There's more capacity now with Open Skies at the same time you're having a severe downturn in potential demand," Neidl said. "But once we get through this financial crisis, and hopefully it will happen by next spring, people will start traveling. People have to travel for airlines to make money."
In Rome, meanwhile, business is down sharply at the five-star Grand Hotel Plaza, one of the city's most prestigious hotels just a few steps from the Spanish Steps, according to sales manager Paola Ucciarello.
Other cities are being hit hard, as well.
STR Global Managing Director James Chappell said he was surprised by the extent of the downturn in the United Kingdom, where London's five-star hotel market has been hit particularly hard because guests are trading down to less pricey accommodations. September and October also brought hotel business declines in Hong Kong, Los Angeles, Madrid, New York, Paris, Toronto and Sydney.
Hotel occupancy across Europe fell 4.9 percent in September from a year ago, and 6.3 percent in October, according to STR. In Italy, revenue per available room — a key gauge of a hotelier's performance — has been on the wane since May and plummeted about 20 percent in October. In London, hotel occupancy fell 5.2 percent in September and 4.2 percent in October compared with the same months last year, according to STR.
In the hotel industry, the current downturn is exacerbated by increases in supply over the past several years from a flurry of hotel development that continued into 2008. In Beijing, for instance, occupancy dropped 20 percent in October compared with 2007, which Chappell largely attributed to an excess of rooms at hotels built for the Olympics.
Markets in the Middle East and Africa, where hotel supply is still catching up with rising demand, are bucking the trend. Occupancy in both Dubai and Cairo gained during October.
President and Chief Executive Ted Teng of The Leading Hotels of the World Ltd. — an organization that represents more than 450 luxury hotels, resorts and spas — said member hotels in financial centers like London, New York and Frankfurt are being hit hardest. The organization's hotels in emerging markets such as Moscow and major cities in Latin America continue to experience strong demand, he said.
The hotel industry is anticipating a dismal fourth quarter and a very uncertain 2009.
"Hoteliers are going to be much more nervous than they were previously," Chappell said. To lure guests without slashing room rates, many are offering freebies and special packages, including perks like free meals, upgrades and parking.
Bozhidar Bachvarov, the general manager of The Wall Street Inn in New York City's financial district, said bookings have suffered within the past month, which he attributed to the delayed impact of a strengthening U.S. dollar and the escalating financial crisis.
International traffic was stronger as recently as October. Roughly 60 percent of the hotel's weekend guests were international tourists, many from Germany and Great Britain, taking advantage of the weak U.S. dollar to stock up on clothes and luxuries.
"They were coming here with empty suitcases and going out with an extra one," Bachvarov said with a chuckle.
But recently, he said the hotel has started to get cancellation requests, which are "highly unusual" this time of year.
Like other hotels, The Wall Street Inn is offering steep discounts to help fill rooms. Rates Thanksgiving week started at $120, roughly 50 percent below normal.
Bachvarov said the decline in corporate, weekday guests has not been as dramatic as the drop in weekend business.
"Companies still need to do business and they still need to travel," Bachvarov said, though he said corporate clients are trying to negotiate lower rates.
But the weakness in global air travel isn't expected to ease anytime soon.
Barclays Capital analyst Gary Chase said in a research note last week that his firm is now modeling a much deeper decline in domestic revenue that in past recessions.
"In the international markets, we are also assuming both a deeper downturn and a slower recovery than in past downturns," Chase wrote.
Standard & Poor's analyst Philip Baggaley said he couldn't be sure when the global travel slowdown will reverse itself.
"These days it's hard to predict next week much less two years in advance," Baggaley said. "So, clearly any predictions about a travel turnaround are highly uncertain at this point."