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BELFAST (Reuters) - Businesses in Belfast are counting the cost of a wave of riots they fear could undermine a fledgling tourist boom and scare foreign investors away from a city desperate top shake off its reputation for violence.
The unrest has been some of the most sustained in the British-controlled province of Northern Ireland since a 1998 peace deal ended 30 years of conflict between Catholics seeking union with Ireland and Protestant loyalists determined to remain part of the United Kingdom.
Loyalists have held nightly protests since Irish nationalist councillors voted last month to end a century-old tradition of flying the British union flag every day over Belfast City Hall, exposing a deep vein of discontent with the peace deal.
Police responded to petrol bombs with water cannon and plastic baton rounds, with some clashes within a couple of kilometres of the city centre.
"People are just very afraid to come to Belfast," said Lynsey Carroll an employee at the landmark Europa Hotel in the city centre, which has seen its occupancy figures for January fall 75 percent compared with last year.
In the surrounding streets, retailers have reported drops in turnover of over 30 percent in the five weeks since the protests began, with Christmas shoppers fleeing as young male protesters draped in union flags flooded the city centre.
Known as the most bombed hotel in Europe during three decades of tit-for-tat killings between pro-British loyalists and Irish Republicans, the Europa has been transformed by 14 years of relative peace.
The current wave of violence, involving loosely organised groups of young men, has injured dozens of policemen, but is on a far smaller scale to the paramilitary violence that killed over 3,000 in the three decades to 1998.
But like many businesses, the hotel is struggling to convince outsiders that the pictures of masked youths and burning cars broadcast by television stations around the world are isolated to a few small pockets of the city.
"People who have made bookings are ringing first off to see if it's OK to come to Belfast even though rioting hasn't come near us at all," Carroll said.
The Confederation of British Industry said disruptions caused by the protests, which included the closing of the city's Christmas Market, had cost businesses in Belfast up to 15 million pounds.
"This has been a tough time for all businesses in the city and there's no help coming," said John O'Reilly, manager of the Apartment bar and restaurant in Belfast city centre.
"We have to find ways around this because it looks like these protests could be here for some time."
While business leaders are confident that local shoppers will inevitably return, they fear foreign tourists may be harder to lure back.
Belfast has capitalised on the peace to become an unlikely tourist destination, with taxi tours of the city's paramilitary murals and the sites of notorious militant attacks.
Foreign visitors to Northern Ireland jumped to 1.6 million in 2011 from 400,000 in 1998 when the Good Friday peace accord was signed.
"If the violence continues or gets worse tourists might start to think twice before coming here, which would be a real shame," said Philippines resident Charmagne Casimero after taking a tour of the city's traditional Protestant and Catholic strongholds.
Last year saw the launch of a 97 million pound museum at the shipyard that built the Titanic, which has since attracted 650,000 visitors, and the opening of a large new arts centre.
The province's second city Londonderry is the 2013 UK City of Culture, and world leaders are due to descend on the town of Enniskillen in June for a Group of Eight meeting.
"This was supposed to be a key year for Northern Ireland and retailers were geared up for a boost in January sales, but the riots have turned it into a really difficult time," said Glyn Roberts, CEO of the Northern Ireland Independent Retail Trade Association.
Foreign investment, a mainstay of the economy of the Republic of Ireland and a priority in Northern Irish efforts to reduce its dependence on a 10 billion pound grant from London, is also under fire.
About 12,000 new jobs were created through foreign direct investment between 2007 and 2011, according to state agency Invest Northern Ireland, as images of the so-called "Troubles" faded from memory.
Recent victories included the filming of global television hit Game of Thrones in a studio in the city's docklands and a series of orders for the Bombardier Aerospace plant in the city.
But officials have said the latest outbreak of violence has caused some to have cold feet.
"We are already aware of investors who have lost interest in Northern Ireland because of these disruptions," said Nigel Smyth, director of leading business organisation CBI Northern Ireland, in a statement earlier this week.
"There is now a very real risk of job losses."
Editing by Conor Humphries and Pravin Char