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Foreign visitors turn their backs on the Olympics

Overpriced hotels and threats of disruption deter tourists from what was supposed to be a money-spinning showpiece

Until last year, politicians were jostling to talk up the tourism dividend expected from the 2012 London Games.

Five years ago, the then Olympics minister, Tessa Jowell, said: "The estimate for London is that tourism will receive a £2bn boost." In 2009, the London Mayor, Boris Johnson, said: "When hundreds of thousands of people come, as they will, to London in 2012, it will inevitably be good for this city and for the tourist economy".

But now the official tune has changed to vague talk about the perceived long-term benefits. Just as Olympics organisers traditionally underestimate the final cost, hoteliers in Games cities are prone to overestimate the money they will make. And the fact that, for London 2012, Locog overbid by one-quarter has fuelled room-rate inflation.

JacTravel, a leading wholesaler of hotel rooms, reports that enquiries for rooms in London are below normal both for the Games and the "shoulder periods" on either side. The chief operating officer, Terry Williamson, said "Tourists are turning their back on London. We have for some time been fielding questions from overseas trade buyers about pricing and availability during both the Olympic and Paralympic games period. They are not happy about the hike in rates for everything."

If tourist numbers fall, attraction numbers dwindle. Merlin, the biggest attraction operator in London, is "not particularly positive about the Olympic period". Glenn Earlam, the managing director whose portfolio includes the London Eye and Madame Tussauds, said "We are expecting less visitors than normal to our attractions." In a bid to lure spectators after evening events, the Eye will remain open to midnight.

Because most foreign visitors include London in their visits, the slump will spread beyond the capital. Tauck Travel, the oldest tour operator in the US, has cancelled all its British tours for two weeks before and after the Games, blaming the expected disruption in London and inflated room rates.

The company's president, Jennifer Tombaugh, told The Independent: "There's always this expectation that, if you build it they will come. This bubble of held inventory grows and grows and grows, with the price going up and up. That bubble will be deflated, if not burst. Hoteliers can be short-term in their thinking – penny-wise, pound- foolish in the longer term."

Official estimates of numbers continue to be optimistic. On 26 July, the day before the Opening Ceremony, Heathrow is anticipating 10 per cent more passengers than the busiest day in its history. But the airport's assumptions – that every seat on every inbound flight will be occupied, and that departures will be at near-record numbers – have been questioned.

If the £3.5bn shortfall proves correct, it will cause the Chancellor a problem. Most tourism expenditure is taxed at 20 per cent, which means that expected VAT receipts could fall by £600m.

Neil Wootton of Premium Tours says: "Next year can't come soon enough. We are all just hoping that a very successful Olympics will help offset the damage that poorly managed hotel pricing has done to inbound tourism in 2012."

The predictions: what the politicians said

"When hundreds of thousands of people come, it will inevitably be good for this city" - BORIS JOHNSON, 2009

"I want the message to go out loud and clear, from tourism to business, we are determined to maximise the benefits of 2012 for the whole country" DAVID CAMERON, 2012

"The estimate is that tourism will receive a £2bn boost" TESSA JOWELL, EX-OLYMPICS MINISTER, 2007

"A golden opportunity for the tourism industry" HUGH ROBERTSON, OLYMPICS MINISTER, 2011

"A once in an era opportunity for British tourism – the biggest visitor event in UK history" TONY BLAIR, 2005

"The Olympics provide the biggest opportunity for British tourism in a generation" SHAUN WOODWARD, EX-TOURISM MINISTER, 2008