Tourists are staying away in droves, hotel bookings and airline reservations are plummetting and fewer people are showing up on the sidelines of international sporting events and at trade exhibitions.

Key regional airline stocks have nosedived on weaker earnings prospects as capacities are reduced because fewer travellers wish to fly. Other flights are being re-routed to avoid the conflict area.

Rock icons the Rolling Stones and guitarist Carlos Santana join techno-pop superstar Moby in cancelling long-awaited concerts in Asia, which is further harming the region's image.

"It sounds like a bad story from a novel called War and Health," said Song Seng Wun, a regional economist at G.K. Goh brokerage in Singapore.

The initial euphoria in global markets after US and British forces launched an attack on Iraq has yielded to caution as indications of a longer and riskier war emerge.

In a second blow, the deadly Severe Acute Respiratory Syndrome (SARS), believed to have originated in southern China, has spread rapidly to Hong Kong, Singapore and Hanoi, with some cases appearing as far North America and Europe.

With a worldwide death toll of 56 people, at least 1,400 infections and no known cure, the illness is scaring travellers away from East Asia, where tourism is a major foreign exchange earner.

"This is a growing problem and the number of cases is going up rather than being contained. There will be a double whammy in the second quarter," Song told AFP.

John Koldowski, managing director at the Pacific Asia Travel Association, said after the 1991 Gulf War, it took up to two years for the travel industry to recover.

The travel industry is also watching the "kick-on effect" of war, he said, noting widespread and angry anti-American rallies and heightened fears of terrorist attacks worldwide

One analyst compared the current turmoil to the "annus horribilis" in 1997 when a regional currency crisis and hazy skies from forest fires in Indonesia dealt a one-two punch to East Asian economies.

Azrul Azwar, an economist with MIDF Sisma Securities in Malaysia, said the SARS outbreak could be "even deadlier than the war in Iraq" as the conflict is confined to a specific area, while the rapidly spreading virus is a global threat.

Hong Kong, where 12 people have died of the disease and another 470 are infected, has seen the rug pulled out from under some of its highly-lucrative tourism draws, including several high-profile concerts. Tour groups have cancelled trips to the former British territory and new bookings have plunged more than 80 percent.

Jun Ma, senior economist at Deutsche Bank, said the impact of SARS could cut Hong Kong's gross domestic product by 0.4 percentage points this year. Retail sales and hotel revenues could fall two percent and five percent, respectively.

Suparek Soorangura, president of the Association of Thai Travel Agents, said tourist arrivals to Thailand dropped 15 percent in March.

Singapore saw incoming travel from March 1-23 falling nearly nine percent on the year.

"Businessmen are teleconferencing rather than travelling, while hotel occupancies and forward bookings have dropped sharply," said Deputy Prime Minister Lee Hsien Loong.

In Taiwan, the SARS scare has prompted cancellations of at least 500 group tours, mainly to China, said Reget Hsu, secretary general of the Travel Agents Association of Taiwan.

Arrivals to China, where more than 30 people have died from the mystery pneumonia, have also fallen, a spokesman for Kang Hui International Travel Service said -- especially from Taiwan and Japan.

The Beijing leg of the International Rugby Board's Sevens Series was also cancelled.

"If this lasts for a long time, it will have serious affect on international tourists coming to China," the spokesman said.

Shares last week in Asia's largest carrier Japan Airlines (JAL) dropped 5.6 percent and All Nippon Airways stocks fell 5.8 percent to lead similar declines by Singapore Airlines, Cathay Pacific and Qantas.

JAL spokeswoman Yoshie Otaka said the airline expects passenger volume in March to fall between five to 10 percent on the year, with a further decline in April.

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WAR.WIRE