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This famed seaside resort has lost some of its luster.

Americans first learned of the natural charm of Acapulco when it captivated Hollywood’s beautiful people in the 1940s and 1950s. Back then, Acapulco was a sleepy fishing village nestled in verdant hills that overlooked the Pacific Ocean.

Today, Mexico’s oldest resort brims with American fast-food restaurants, 18-hole golf courses, all manner of water sports and more than 1 million residents. It counts luminaries such as Sylvester Stallone, Julio Iglesias and Placido Domingo as homeowners.

Yet Acapulco is losing millions of tourism dollars to competing Mexican resorts less than half its size that promise what it offered 40 years ago–a quiet place to relax and be pampered.

“We relied too much on our reputation,” said David Abarca, owner of a local travel agency and past vice president of the Mexican Association of Travel Agencies. “We thought that the tourist, mainly the foreign visitor, would always return because this is Acapulco.”

But Acapulco’s tourist trade has suffered one setback after another: a devastating economic recession sparked by the peso devaluation in 1994, rebel insurgency in the hills above the resort in 1996, publicity surrounding Hurricane Pauline in 1997 and now a nationwide crime wave that has resulted in the deaths of several foreign tourists.

Once a playground for the rich and famous, Mexico’s first resort was born as average Americans discovered that its inexpensive prices put paradise and glamor within their grasp.

Along its shores, they could hobnob with stars in a setting straight out of a blockbuster film.

Here in the “Hollywood of Mexico,” they would spy Humphrey Bogart, John Ford and Tyrone Power yachting in crystal-clear waters. A bronzed, broad-chested Johnny Weissmuller basked in its sun, as did the cleft-chinned Kirk Douglas and many more. Its exotic appeal even proved irresistible to newlyweds John and Jacqueline Kennedy, who honeymooned here in 1953.

But the glory days of Acapulco’s past have faded as other Mexican seaside villages attempt to repeat its success. Most of these resorts were unknown to Americans just 25 years ago. Cozumel, Cabo San Lucas, Ixtapa-Zihuatanejo and Cancun receive far more foreign visitors now than Acapulco did even in its heyday.

Once unrivaled, Acapulco now ranks seventh among the top 48 tourist attractions south of the border based upon hotel occupancy.

It yielded only $269 million of the $7.6 billion in foreign tourism revenue that the country grossed in 1997. The much smaller Puerto Vallarta, on the other hand, earned $393 million, and Cancun, the top foreign revenue grosser, earned $1.5 billion.

“We just didn’t keep up with the rest of Mexico and with the rest of the world,” says Javier Saldivar, a hotel owner and president of the local branch of the Mexican Association of Hotels and Motels, an organization that represents the 380 lodgings in the city.

Tourism is Mexico’s third-largest source of foreign revenue after the oil and manufacturing industries. Its tremendous growth has come largely from planned beach resorts such as Cancun and Los Cabos. Their development, however, has coincided with Acapulco’s decline, lamented Abarca.

Rundown facilities were the chief complaint from Antonio Guzman and Elena Valdez, who recently visited Acapulco from Mexico City.

“The hotel in which we are staying sent us a glossy brochure before we made our reservations,” said Guzman, a 27-year-old engineer. “We thought that for 575 pesos a night ($68) it was a very good deal.

“But when we checked in our room, we were quite disappointed because the floor smelled bad, the bedsheets were stained and the furniture looked at least 20 years old.”

If Acapulco’s businesses want to draw more visitors, Valdez said, they must stress service to the average visitor. Taxi drivers gouge tourists, she said, and beach peddlers interrupt quiet time to hawk goods.

Acapulco’s business leaders are meeting to formulate an aggressive promotional campaign and to draw up a plan that will overcome problems such as the proliferation of peddlers and beggars.

“If we want to regain our past glory, we will need to advertise as aggressively as the other cities do,” Abarca said.

Three years ago, amid the monetary crisis that devastated local tourism, Acapulco launched a campaign aimed at wooing U.S. visitors. The city fought pollution by employing a fleet of special machines to clean the surf and by hiring dozens of workers to sweep the beaches each morning. Acapulco was just beginning to see increased cruise ship business in early 1996 when two events set back the resort.

Peasants began arming themselves in the hills, just an hour by car from Acapulco. An estimated 3,000 federal troops were deployed to look for them. News reports surfaced about armed men numbering up to 200 training in the mountains and about the capture of as many as 3,700 military assault weapons.

On Aug. 28, 1996, 13 people were killed after members of a group calling itself the Popular Revolutionary Army attacked police stations and government offices in seven states.

Acapulco had somewhat recovered from this blow when Hurricane Pauline hit Mexico’s Pacific Coast in October 1997 and killed more than 200 people. The two-day storm also left thousands of people homeless, mainly in the poorest neighborhoods. Images in the international media detailed the devastation, but one fact was scarcely reported.

“Most hotels and other major tourist infrastructure hardly suffered any damage,” said Luis Peimbert, owner of the local Hard Rock Cafe and president of the Association of Restaurants, Bars and Discotheques of Acapulco. “Yet, people got scared because of what they saw on the TV news and decided to stay away.”