A leading restaurant shuts down; passengers complain because they can't take hand baggage on to a flight; bookings for overseas holidays slow down; but the phones ring at last at British hotels. Travellers and travel companies alike were holding their breath last week, waiting to see how the next phase in the war against terrorism would affect their plans.

The early victim was Lettonie, a two-star Michelin restaurant-with-rooms in Bath, which closed five days after the terror attack in New York. Owner/chef Martin Blunos blamed the cumulative effects of foot-and-mouth followed by fears of a recession. "The first thing that goes out the window in a recession is luxuries," he said.

Blunos is now working as a consultant at Duke's Hotel, whose owner, Philippa Hughes, said that her three hotels in Devon had lost as much as a third of their business during the foot-and-mouth crisis but had quickly picked up in July. "September was a busy and bookings are now up by 35%."

Raymond Blanc, of Le Manoir aux Quat'Saisons in Oxfordshire, disagrees with Blunos about the effects of the recession. "People will still want to spoil themselves," he said. He added that hotels which were over-reliant on Americans and other overseas visitors would suffer during the crisis. "We have always tried to balance our market. We rode out the 1990s recession and we will encourage guests with added value this time."

Christopher Kirker of short-break specialists Kirker Holidays said that bookings had dropped by about 10% in the immediate aftermath of the New York attack. "But the British are resilient and will bounce back."

European hoteliers are ready to offer deals. "There will never be a better time to travel than this winter," Kirker said. "We will be offering three nights for the price of two and upgrades as well as attractive prices. It will be a fantastic time to visit cities: you won't have to queue for museums or to book the best restaurants."

Sales of package holidays to the popular European destinations have dried up; some tour operators admit that they are down 50% or more. But the crisis has fallen at the end of a successful season and probably amounts to 5% of total sales. Because of this, some are happy to limit their discounts to the normal levels of late sales. But some "ridiculous" prices, like a week in Greece for £69 can be found.

Sales for winter holidays have been badly hit, especially from the October half-term to Christmas. The travel companies and airlines are likely soon to "consolidate" flights and reduce the number of holidays for sale. This will mean less flexibility on flight times and higher prices. Book soon for a winter bargain.