The latest casualty from the war in Lebanon is Israel's multimillion-dollar tourism industry.

According to government and industry officials, the number of visiting foreigners has dropped by more than 20 percent since June, when Israel invaded Lebanon. The loss to the Israeli economy from such a decline, projected over a year, could be $300 million, the government's Ministry of Tourism estimates.

Tourism has declined during every war Israel has fought in its 34-year history, but following the fighting it has generally rebounded strongly. By early last month, with the dramatic siege of Beirut no longer on the front pages of the world's newspapers, officials here said they had hoped the expected post-war recovery was about to begin.

But then came the massacre of Palestinian civilians by Lebanese Christian militias in the West Beirut refugee camps, plunging Israel into new controversy and further clouding the country's image.

"The turning point was the massacre," said Zvi Rimon, the spokesman for the ministry. Within days of the massacre, Israeli travel offices around the world, but particularly in Europe, began receiving "significant cancellations" from groups that had decided not to visit Israel after all. The sharpest dropoffs were in the number of tourists from West Germany -- Rimon noted that bombs were found in three Frankfurt travel agencies that deal heavily with Israel -- and from Scandinavian countries.

As a result, the Red Sea resort city of Eilat, which during the peak winter season last year received 11 weekly charter flights from Europe, has gone some weeks this fall with no charter flights.

Harold Richman, area manager for Sheraton Hotels in Israel, was in the United States at the time of the Beirut massacre. "There is no question that Israel's image was hurt," he said. "What happened in the camps was totally perceived as Israel's fault."

Rudi Golan, a 20-year veteran of the tourism industry in Israel, added: "In general, post-war periods suffer from stagnation, but there has always been the expectation that a boom will follow. This time the situation is more gloomy. There is a sense of animosity toward Israel and in general Israel is not seen as a favorable tourist spot."

Compounding this "image problem," all involved agree, is the continuing saga of El Al, the Israeli national airline, which has been grounded for more than a month by a labor dispute that threatens its existence.

The Israeli Cabinet is to discuss Sunday a request by El Al's board of directors to liquidate the airline if workers do not agree to a series of management demands. El Al, which lost $47 million last year, traditionally carries about half of Israel's tourist traffic.

More than private profit is at stake in the number of visitors to Israel. It is a small country, and tourism is an important element in its economy. Last year, according to Rimon, the total spending here of more than a million foreign tourists was close to $1 billion.

To revive the tourist trade, the government has removed all restrictions on airline travel packages and reversed a year-old policy that prevented tourists who enter Israel from Jordan across the Allenby Bridge from returning the same way. The policy had been designed to protect El Al, which had charged it was being undercut by the Jordanian national airline's tour packages that included side trips to Israel across the bridge.

Rimon said the government is encouraging hotels and tour operators to cut prices and has offered guarantees against losses to European charter airlines to maintain the regular flow of winter flights to Eilat.