Strategically positioned outside the revolving door of the venerable Carlton hotel, Elaine Fernandez has just sighted her first Famous Person.

"It's Prince Rainier of Monaco," she shouts excitedly as she runs off -- Instamatic camera in one hand, notebook for collecting autographs in the other -- in pursuit of a balding, elderly man with a white mustache emerging from the hotel lobby.

The elderly gentleman shakes his head vigorously and waves his hands about in the air. This sends Fernandez, a middle-aged Spanish matron who has timed her holiday to coincide with the annual Cannes Film Festival, into shrieks of laughter. She returns red-faced to her fellow stargazers, explaining to anyone who will listen: "It was someone else."

Two floors up, in the hotel's $500-a-day corner suite, Israeli-born film tycoon Menahem Golan is trying to sell Cannon Group Inc.'s latest movie -- "King Solomon's Mines" -- to a group of Spanish distributors. Just along the corridor, in Room 221, Tony Curtis is completing his 20th television interview in two days to promote his new film, "Insignificance," in which he plays a U.S. senator vaguely resembling Joseph McCarthy.

"The Cannes Film Festival is one huge social pyramid -- like Montezuma and the Aztec civilization," says Curtis. "You can see it all here in this hotel: from the small independent director who takes a room at the back to the big-time producer who takes a suite overlooking the sea and wanders through the lobby as if he owned the place, nodding to his left and his right."

A waiter knocks at the door with afternoon tea and leaves with a promise of an autographed photograph. Warming to his theme, Curtis searches for a new metaphor to describe the fascination of Cannes.

"It's a self-contained social system that feeds into a bigger system, a mother system, which is the film industry itself. The Academy Awards are not the film business. This is the film business. Right here. All its little tributaries seem to flow in and out of this hotel, the Carlton," he says.

The Carlton hotel has presided over La Croisette, the beach-front promenade at Cannes, for the past 75 years. Built at the height of "La Belle Epoque," its white facade has provided the backdrop for a glittering procession of actresses, film directors and movie moguls.

Grace Kelly stayed here before she was swept off her feet by Monaco's Prince Rainier. Sam Spiegel arrived at the pier from his yacht and had a outsize limousine drive him the 30 yards up to the hotel. It was here that an unknown starlet named Brigitte Bardot launched her film career.

Like a genteel noblewoman aging gracefully, the Carlton has mirrored the social changes that have overtaken the festival itself. The extravagance of the '50s and '60s -- when the hotel was the scene of fantastic gala parties for hundreds of guests in evening dress -- has disappeared for good. In its place has come a hard-nosed preoccupation with profit margins and targeting potential customers.

Sandy Kenyon of Cable News Network is doing a standup in front of the hotel. "Take five," shouts a weary producer, standing next to a giant billboard advertising the latest James Bond film, "A View to Kill," featuring a deadly looking Grace Jones blown up to three times her normal size.

"There is one journalist for every 10 people here," says Kenyon, emphasizing every word separately as if viewers might have trouble understanding what he is going on about. "That makes Cannes as much an international media event as it is a prestigious international film festival."

"Cut," shouts the producer. "Take six."

At festival time, the Carlton becomes a kind of microcosm of Cannes itself. Film fans and paparazzi crowd into the lobby, hoping for a glimpse of someone famous. Part-time actors dressed up as bears and Father Christmas wander around handing out publicity material for this year's batch of films.

Upstairs, in rooms that have been turned into offices for the two weeks of the festival, everybody seems to pair off with his opposite number: producers and directors, sellers and buyers, journalists and public relations agents.

"For two weeks, this is an almost closed society," says Robert Favre Le Bret, the French cinema enthusiast who started the Cannes Film Festival in 1946 and regards the Carlton as his second home. "If you are here, you don't think about anything else."

The rhythmic sound of waves breaking against the beach wafts in through the open windows of Le Bret's fourth-floor suite. A single-engine plane tugging a poster marked "Atlas Corporation Studios" is making lazy circles in the sky.

Jogging along La Croisette two American distributors discuss whether "The Coca-Cola Kid," a tongue-in-cheek look at U.S. cultural imperialism by the maverick Yugoslav director Dusan Makavejev, is sellable in the States.

It is a rainy afternoon and the corner bar of the Carlton is more than usually crowded. An unlikely couple is seated at one of the tables: Cannon's Golan -- by common agreement one of the most successful hustlers in the business -- and the intensely intellectual French New Wave film director Jean-Luc Godard. Golan is sipping a Campari and soda, Godard a Pimm's.

Godard, whose latest movie, "Detective," has just been met with a chorus of whistles and boos from journalists unable to figure out what on earth it is all about, is eager to produce a film for the American market. Golan is interested in boosting the artistic reputation of Cannon, a company known largely for highly commercial films like "Breakin' " and "Bolero," featuring Bo Derek.

Godard suggests a film adaptation of Shakespeare's King Lear. The idea appeals to Golan -- a story about a father and his three daughters -- but he wants to popularize it somehow. Suddenly, he has a brainstorm. "Let's get Norman Mailer to do the screenplay and Marlon Brando to play Lear," Golan exclaims excitedly.

The deal is done. Golan takes out his pen and draws up the contract on the linen tablecloth. "RE FILM: King Lear," he writes. "To be written by American writer chosen by Cannon and J.L.G. (intention Norman Mailer). Shot in Virgin Islands in American language and American cast."

Both men sign the bottom of the tablecloth. Golan puts a call through to Room 263, where an Englishman named Terry Ilot is putting together the next day's edition of Screen International, one of three trade magazines distributed free every morning to 7,000 hotel rooms in Cannes during the festival. "Get a photographer down here," he says quickly and hangs up.

In the Carlton's kitchens, executive chef Henri Varaud is scrambling to find 40 magrets de canard ordered by the president of the festival for a private dinner, with only four hours' notice. Outside in the lobby, the hotel's concierge, Bernard Rousseau, is busy trying to meet a guest's request for a Mexican sombrero and a false mustache.

"I like the stars. You look at the stars and you think that tomorrow you can do anything. Kiss that girl, walk on the grass. The stars won't think any the worse of you." -- A line from "Insignificance," by British filmmaker Nicolas Roeg, which is competing for the festival's Golden Palm award

The starlets -- budding young actresses who dream of making a career in the movies -- are a Cannes institution. In the '50s and early '60s, they swarmed down La Croisette, willing to do practically anything to attract a filmmaker's attention. As Cannes became more work and less fun in the '70s, they seemed to migrate elsewhere. Today they are flocking back but they seem somehow less exuberant, more prim.

At the end of the Carlton's private pier, a well-endowed 23-year-old Frenchwoman who will give her name only as "Peri" strikes a lascivious pose for photographers. Asked if she is a starlet, she replies, unconvincingly: "No, I am an architect."

"In the old days, Cannes was wilder. It's become much more business-orientated these days," says Regis Balliol, a toothless 50-year-old tramp who makes a point of attending the festival every year.

Balliol sits on the pavement outside the Carlton with his mongrel dog, Sam. By pushing his battered trilby under the gaze of the festival-goers, he manages to earn about $15 a day before being moved on by the police. His proudest moment was when Michele Morgan, dripping with diamonds and wearing a glittering evening dress, gave him the equivalent of $100.

The revolving doors of the Carlton are continuing to spew forth people who look as if they should be celebrities even if they aren't. "It makes you giddy just watching them," sighs Suzanne Rybecki, who has come to Cannes to watch the stars.

Apart from the false alarm over Prince Rainier, the major excitement of the day has been the sight of singer Charles Aznavour, arriving at the Carlton at the wheel of his own Mercedes. "Le petit Charles," as he is known to his fans, obliges with autographs all round. Clint Eastwood and Harrison Ford are rumored to be in town, but no one in this crowd has spotted them yet.

News filters through from the festival hall, half a mile down the beach, of a custard pie attack on Godard. Responsibility for the outrage has been claimed by a mysterious "association of terrorist bakers" dedicated to the "deflation of artistic egos."

Opinion among the stargazers about the incident is divided. Rybecki feels it was a pity to spoil the film director's clothes. Her friend, Alfreda Dacaudin, thinks it was a waste of a perfectly good pie.

As a child in New York, Tony Curtis liked to watch the celebrities come and go outside the big hotels. "There's a kind of magic about famous people," he recalls. "It's as if they've somehow managed to beat the system."

Louis Doblian is reminiscing about old times. In 40 years at the Carlton, he worked his way up the hotel hierarchy from errand boy to lift boy to mail sorter to night doorman to assistant night concierge to day concierge.

"In the old days, guests would arrive with piles of luggage and stay for six months, bringing a retinue of their own personal servants with them. Now they just come for two or three days." he said.

Like Cannes itself, the Carlton has become much more business-oriented. Two years ago, it was taken over by the Intercontinental hotel chain. "The Americans" -- as the new management seems to be universally known -- introduced computers and desperately needed improvements. In the process, say many of the hotel's longtime habitue's, some of the aura of the old Carlton has been irretrievably lost.

Service has become standardized rather than personal. Individual bell pushes -- at the end of which were valets waiting to be summoned -- have been replaced by an anonymous number on a telephone dial that rings somewhere in Room Service. The magnificent old room keys have given way to metal cards.

"The hotel business is no longer about managers in striped pants and coattails welcoming guests in the lobby," says Charles E. Guffroy, who was transferred by Intercontinental last year from Hong Kong to become the Carlton's new general manager.

Guffroy, who is regarded as one of "the Americans" even though he is actually French, insists he is all in favor of nostalgia as long as it is "functional." "We like nostalgia, we even did some research into it," he says, whipping out a book containing lavish photographs of the Carlton in its grand old days that will be presented to important guests.

Putting the best face possible on the changes wrought by the "Americans," Genevieve Labedan, the housekeeper, describes the Carlton as a "beautiful old lady with wrinkles." "The new management are trying to take out some of the wrinkles, that's all," she said.

Over the next few years, Intercontinental plans to spend about $14 million ripping apart the servants' quarters on the seventh floor and transforming them into 13 luxury suites. Conference rooms and sports facilities will also be added in the hope of tapping the convention market -- and boosting occupancy rates during the slack winter period.

About 3,500 journalists are accredited to Cannes -- making the festival the biggest international media event except for the Olympics. Like everybody else, the journalists are slotted into an elaborate social hierarchy, according to which of half a dozen differently colored press passes they receive.

At the bottom of the pile is the free-lance photographer hoping to sell his pictures to anyone who will buy them. At the top are a handful of big-time film critics who mingle with the stars in evening dress and are invited to drinks on Clint Eastwood's yacht.

"We use Cannes as a platform," says Anne Bennett, who promotes films for MGM, Paramount and Universal out of the Carlton's Salon de Bridge. "It's a business. We want publicity and the journalists want stories."

In scheduling interviews with stars, Bennett targets newspapers from the countries where her films are about to appear. After the festival is over, she and her assistants leaf through press cuttings to see how valuable the publicity has been. If they feel that their client has been shortchanged, the journalist concerned is likely to find himself frozen out of the publicity circuit the next year.

At a press lunch for "Insignificance" in the Carlton restaurant, British director Nicolas Roeg explains to a group of carefully selected journalists that he has tried to explore the myths that surround the notion of celebrity. "The cinema creates its own myths," he says, "The first myth of all filmmaking is that the camera doesn't lie. Anybody who has anything to do with this business knows that it does."

In Screen International's offices in Room 263, columnist Peter Noble -- himself a Cannes institution -- is laughing about the way the festival has managed to adapt to all the changes in the film industry.

"We've being going downhill for the past 30 years. We're like Molie re's 'malade imaginaire' imaginary invalid . We always think we're about to die, but we always come back the next year."