The crisis in Myanmar's Rakhine State is taking a toll on the country's once-booming tourism business. Dave Grunebaum has the story.

"There are two different kinds of lacquerware made of bamboo and made of wood. This is made of wood."

Tour Guide Tun Win takes an Italian couple around one of Yangon's most popular markets. For years, Tun Win has shown visitors the citys' Buddhist pagodas, colonial architecture and restaurants. Demand for his tours was growing annually until this season when business has been cut in half.

TUN WIN TOUR GUIDE "Well I feel nervous about this business."

Tourism has emerged as a key industry to lift Myanmar's economy following decades of diplomatic isolation and military rule. The Myanmar Tourism Federation says since 2011 tourist arrivals were growing 20 to 25-percent year-on-year. Tourism now accounts for about 6.6 percent of the country's GDP and 800-thousand jobs. But hopes for another season of booming business are now getting battered.

MAY MYAT MON WIN MYANMAR TOURISM FEDERATION "We are seeing that especially arrivals from European countries drop 10 to 20-percent"

Last August, attacks by Rohingya Muslim militants on security outposts in Myanmar's Rakhine State were followed by a military crackdown. The counter-insurgency campaign has driven almost 700-thousand minority Rohingyas to neighboring Bangladesh. Human rights groups accuse Myanmar's army of gang rapes, mass murder of civilians and burning down scores of Rohingya villages. The UN has called the army's operation ethnic cleansing, accusations it denies.

DAVE GRUNEBAUM YANGON "The violence is not happening in tourist areas but many potential visitors particularly from Western countries are now spurning Myanmar because they don’t want to pump money into this country's economy."

Vacant rooms at this hotel in Yangon mean fewer guests eat and drink in their restaurants and bar.

OUNG MYO PARK ROYAL YANGON "Business is down by 30-percent from UK and German market compared to 2017."

Myanmar's tourism industry is trying to make up for the loss of Western tourists by luring more visitors from Asia.

MAY MYAT MON WIN MYANMAR TOURISM FEDERATION "Asian travelers when they make travel decisions we found they are less likely to be influenced by other Asian countries' internal conflicts or internal challenges or internal issues compared to the Western travelers."

The drop in Western tourists is impacting the bottom line of many Myanmar businesses, but analysts say it's unlikely to lead to changes in government policies on Rakhine. Dave Grunebaum, CGTN, Yangon, Myanmar.