Holidaymakers on the beaches around Sri Lanka's southern port of Galle seemed unconcerned about last week's Tamil Tiger suicide attack here, but industry professionals are shaking their heads.
One day after five Tiger rebel boats tried to shoot their way into a key naval base in Galle, carefree foreigners frolicked in resort swimming pools or sunbathed on the area's pristine white sands.
"We've had British, American guests who said this was just a small terror attack compared to the ones their countries have suffered," said one hotel manager, adding he had only 20 cancellations, all by Sri Lankans from Colombo.
While the deadly attack on Galle, the first in Sri Lanka's tourist south in almost a decade, had little immediate impact, the tourism industry fears the cumulative effect of continued violence as the high season kicks into gear.
"It was not much of a military strike, but it did send a ripple through the tour industry," said one hotelier, who said three decades of separatist conflict in Sri Lanka had arrived "on our doorstep".
"All the hotels are greatly concerned. After a year of tsunami and another quiet year because of the situation (in the north), we were all hoping for a good year," said the woman, who asked not to be named.
In the wake of the attack on Galle, which came during a week of deadly suicide bombings and other violence that killed hundreds, Sri Lanka lowered its estimated tourist arrivals this year by 20 percent to just over 500,000.
"Tourism will definitely be affected after these two attacks, as they were outside of the north and east," said Seenivasagam Kalaiselvam, director general of Sri Lanka's tourist board, citing the Galle attack and the country's worst-ever suicide bombing Monday that killed at least 115 people.
Several foreign governments, including the United States and Britain, have warned their citizens of the possibility of more terror attacks in Sri Lanka, saying they could inadvertently be caught up in the violence.
Citing the "deteriorating security situation and the high risk of further terrorist attacks", Australia issued the toughest travel warning, urging its citizens not to come to the tropical south Asian island.
"Attacks are not confined to the north and east of Sri Lanka and Australians could inadvertently become victims of violence directed at others, in particular the Sri Lankan government and military targets," the advisory said.
"If you are already in Sri Lanka and concerned for your safety, you should consider departing, if it is safe to do so."
Sri Lanka has been convulsed by a surge in violence between the government and the Liberation Tigers of Tamil Eelam (LTTE) that has killed more than 2,300 people since December and left a 2002 ceasefire in tatters.
"If the country's security situation further deteriorates, we expect the economy to take a beating," said financial analysts HNB Stockbrokers.
"Whilst a full scale war would have a negative impact on almost all the sectors in the economy, a direct impact would be felt by sectors such as tourism and transportation," HNB said.
The three decades of ethnic bloodshed in the island nation have claimed more than 60,000 lives.