Occupancy of the county's hotel rooms dropped 8.1% for the first half of the year, says the report by Ernst & Young, which cites Los Angeles city economists who forecast that the local economy will lose approximately $2 billion in tourism revenue and approximately $71 million in travel-related taxes until tourism recovers.

But the number of new hotel rooms built in L.A. during 2001 was limited by the difficulty in obtaining financing, according to the report, which says the lack of new rooms "softened the effects of the slowdown."

Among other factors cited in the report: Passenger traffic remains down at Los Angeles International Airport, trailing last year's totals by 17.5% for domestic and 15.8% for international travelers. As the top U.S. destination for Japanese tourists, L.A. has lost approximately $108 million in Japanese visitor spending because of the post-Sept. 11 slowdown in international travel, the report says.