HATA chairman Edmund Tsang said as the city became more expensive, tourists either skipped the city or stayed for a shorter period of time in order to save money.
By last year, most tour operators left the city out of their packages.
''Shanghai is not a place to visit for holidays. It has few tourists sites and facilities,'' said Mr Tsang.
''The city has not upgraded its tourists facilities and it is a little bit too late to do that now in order to attract tourists as they are already giving the city a miss.'' He said that tourists facilities could not be constructed overnight.
Now, Shanghai relies almost fully on business travellers for its tourism industry.
This heavy balance of business travellers as a whole was not healthy, Mr Tsang said.
Also, the number of business travellers to the city had taken a slight dip from the arrivals of the past two years, a consequence of the government's austerity measures.
''Also, two years ago, there were lots of business travellers into the city as businessmen negotiated to set up offices and plants.
''As a lot of those offices and plants have now been established, you do not get as many business travellers flying up to the city as there is no need for them to do so,'' he said.
The increase in international flights as well as flights from Hong Kong to the city is also believed to have shortened the stay of visitors in the city.
Since May this year, Dragonair increased its flights from twice daily to 16 flights a week.
International carriers like Lufthansa, Japan Airlines, British Airways and United Airlines started flying into the city this year.
These airlines fly at least once or twice a week.
A spokesman from Shangri-La Asia said that with more flights available in the city, businessmen were cutting short their stay in Shanghai.
Instead of staying overnight in Shanghai, business travellers made use of afternoon or evening flights to fly out of the city, thus reducing the length of stay.
According to statistics compiled by the Portman Shangri-La, the average length of stay in the city fell from 3.1 days to 2.7 days.
While official figures are hard to come by, the statistics from the hotel is a good general indicator of the situation.
However, despite the softening of visitor arrivals, the top-end hotels have been able to maintain their high rates.
But when it comes down to the four-star and middle-tariff hotels, a reduction in room rates can be found.
Mr Tsang said that most visitors did not realise that room rates had become cheaper in that range of hotels and that had contributed to visitors staying away.
''On average, four-star hotels have now come down from an average room rate of US$150 in 1993 to about $100,'' he said.
He said that while the prices had come down, it did not make Shanghai compellingly cheaper than other cities.
''It may be cheaper but it is not cheap like Xian.
''People are still under the impression that Shanghai is very expensive.'' Shangri-La Hotels and Resorts International regional marketing director for China Esther Chan said that the increase in spending power of Shanghainese was largely responsible for driving up prices.
Inflation has increased by about 16 per cent in the city and is expected to grow within the range of 10 to 15 per cent.
Ms Chan said that Shanghainese were becoming more conscious of eating well and buying expensive retail goods.
''They want to eat in fancy restaurants and buy good clothes,'' she said.
The spending power of Shanghainese increased substantially following the influx of foreign investors and joint ventures which brought a rise in wages.
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