* Tourist arrivals crash 45 percent after army cracks down
* Thousands of hotel rooms empty, travel warnings remain
* Fears grow that militant attacks will spread
* But winter sun-seekers start returning to beaches
* Egyptian tourism bounced back from 1997 massacre
By Maggie Fick
CAIRO, Oct 14 (Reuters) - Morale in Egypt's tourism industry is at rock bottom; a summer of bloodshed has frightened away all but the bravest foreign visitors from Cairo and the pyramids, and things are little better in the Red Sea beach resorts.
Yet if the business could survive the 1997 bloodbath at Luxor, when Islamist militants killed dozens of tourists at a pharaoh's temple, it can probably recover from its current convulsions.
Already visitors are gradually returning after the worst civil violence in Egypt's modern history, offering hope to an industry that has been brought to its knees, depriving millions of their livelihood and the economy of badly needed dollars.
However, Egyptians know that numbers can never climb back to anywhere near their 2010 peak as long as security crackdowns, street protests and militant attacks on the government persist.
Like other countries in trouble, Egypt could try an advertising campaign to lure back the Europeans, Asians, Americans and Gulf Arabs who are now largely holidaying elsewhere. But for now it won't even bother.
"There is really no point in trying to embark on a PR campaign," said Karim Helal, an adviser to Egypt's tourism minister. "If you cannot convey the feeling that it is safe, nobody will come," said Helal, a dive company owner turned investment banker.
Egypt has endured almost constant upheaval since a 2011 popular uprising toppled autocrat Hosni Mubarak, but things have got much worse since the army's removal of Islamist President Mohamed Mursi in July and the bloodshed that followed.
As international media broadcast scenes of mosques and morgues filled with bodies, governments in the main tourist markets issued warnings on travelling to Egypt.
Visitors are a rare sight in Cairo these days, even though October had always marked the start of the peak season when a gentle breeze from the Nile eases the stifling heat. In July, only about one in six of the capital's hotel beds were occupied, according to research firm STR Global.
Even in the Red Sea resorts, largely shielded from the violence in the big cities, occupancy rates are drastically down. In Hurghada, a destination usually popular with Russians fleeing their bitter winters, only 11,000 of 50,000 hotel rooms are occupied, provincial governor Ahmed Abdullah told Reuters.
A LONELY FIGURE
Nobody has felt the consequences more than the many Egyptians - from hotel workers to guides and gift shopowners - who rely for their living on tourism, traditionally a pillar of the economy and the second biggest foreign currency earner.
Horse carriage driver Ramadan Iraqi has lost hope that he will soon see tourists return to the five-star Cairo hotel which once gave him work. He cuts a lonely figure late at night in Zamalek, an upscale district on an island in the Nile, searching for a customer so he can feed his family of six.
"I am an old man," said Iraqi, 55. "What am I supposed to do?" It's been 20 days since anyone rode in his carriage along the Nile embankment. Iraqi can scarcely feed his gaunt horse and can no longer afford medicine to ease severe pain in his knee.
Such individual misery is reflected at a national level. Tourism earned Egypt $9.75 billion in the 2012-2013 financial year which ended in June, before the worst violence erupted. Even so, that was down from $11.6 billion in 2009-10, the peak before the overthrow of Mubarak.
In July and August, tourist arrivals crashed by 45 percent, Tourism Minister Hisham Zaazou said. He estimated losses since the army takeover at $1 billion per month.
There are no signs Egypt's divisions will soon heal. People continue to die in protests in cities and towns. Adding to foreigners' anxiety, police and soldiers are coming under almost daily attack from Islamist militants in the Sinai Peninsula, site of the Sharm el-Sheikh resort.
A Sinai-based group said it tried to kill the interior minister in September in Cairo in a suicide bombing, and earlier this month two rocket-propelled grenades were fired at a satellite station in a suburb of the capital.
Anyone who wants to visit Cairo's Tahrir Square, the rallying point for Egyptians during the 18-day revolt that toppled Mubarak, may think twice about going.
Soldiers manning armoured personnel carriers and riot police keep a close eye on it and try to keep members of Mursi's Muslim Brotherhood from protesting. Only a few hundred metres away stands the Egyptian Museum, which houses some of the greatest pharaonic treasures including King Tutankhamen's burial mask.
Nevertheless, Egypt has been here before. On Nov. 17, 1997 gunmen descended on Queen Hatshepsut's temple near the Nile town of Luxor. In a short time they shot or hacked to death 58 tourists and four Egyptians in their campaign for what they regarded as a pure Islamic state.
The following January and February, visitor numbers were down almost 60 percent from the previous year. Hotel occupancy rates collapsed from 70 percent just before the massacre to just 18 percent.
Yet the indus1try staged a remarkable comeback. In 1999 almost 4.5 million visitors came to Egypt, well up on the 3.7 million in 1997.
At that time Mubarak's security apparatus was able to keep the streets much quieter than they are now. Nevertheless, hope remains that the industry can again recover, if more slowly.
Holidaymakers from Germany, one of Egypt's biggest markets, have been starting to return since last month, when the Berlin government relaxed a travel advisory that had said tourists should stay away from Egypt entirely.
Tour agents and operators said many clients were still opting for quieter destinations. "Bookings to Egypt are coming back but they have not caught up to levels seen a year ago," said a spokeswoman for the Lastminute.de booking website. "Customer interest is there, but it's cautious. Bookings to the Spanish islands or the Turkish Riviera have increased instead."
But some were surprisingly upbeat. "Weekly bookings are above those seen one year ago," said a spokesman for DER Touristik, one of Germany's biggest tour operators.
"We have cut capacity but can react quickly to demand. We expect a swift recovery for tourism to Egypt and expect a wave of demand for March and April."
Most Germans seeking Egyptian winter sun are heading for the beach. TUI Germany, along with its rivals, has not resumed trips to Luxor or Nile river cruises in accordance with German foreign ministry advice to avoid overland travel in those areas.
But the company, which is part of Europe's largest tour operator TUI Travel, can fly guests directly to Cairo.
The United States, Britain and Russia still have strict travel warnings. However, Maya Lomidze, executive director of the Association of Tourism Operators of Russia, told Reuters that tens of thousands are ready to visit their favourite destination, Hurghada, immediately if Moscow eases its warning.
BELIEVING IN EGYPT
Some hotel operators, like Alexander Suski of Kempinski Hotels, expect Egypt to bounce back one day. "We really still believe in Egypt as a destination," said Suski, who thinks a recovery would be possible in two to three years and has no plans for the hotel group to leave Egypt.
Austrian-based Kempinski already runs an upmarket hotel in Cairo which opened shortly before the 2011 uprising, and another on the Red Sea near Hurghada. A third on the outskirts of Cairo is due to open next year.
However, much depends on whether Egypt can regain some degree of stability following the long period of turmoil.
Capital Economics estimated the industry's losses ranged from $250 million to $650 million a month. William Jackson, an economist at the London-based group, said a rebound is possible, but that "the events over the past two and a half years give us every reason to be cautious about thinking that will happen".
There are bright spots; unlike in 1997 Islamist militants have not targeted tourists. Cairo visitors are probably at much greater risk crossing the road through the capital's anarchic traffic than they are of getting caught up in the street violence, which affects only small areas of a huge city.
In the meantime some tourists are enjoying a once-in-a-lifetime opportunity to see the riches of the Egyptian Museum or the Sphinx up close, without being jostled by tour groups.
"It's paradise: the pyramids, the museum, everywhere is empty because of the situation," said Alvero Rocca from Argentina, a country which has endured its own upheavals in recent decades.
"For Westerners, perhaps it's more problematic ... We in Argentina are more used to the chaos," Rocca said at Cairo's Khan al-Khalili bazaar which was nearly empty of tourists. "For us it's better. I know for Egypt's economy it's a catastrophe."