It is a tradition that the country's leaders - party, government and military - gather each summer at Beidaihe to escape the heat of northern China and plan the annual party plenum held in autumn in Beijing.

But the leadership decided that instead of combining vacation and business, this year they would carry on official duties in Beijing, the report said.

The leadership also reminded ministerial-level cadres that they must strictly follow party regulations on travelling and stop going on expense-paid junkets to Beidaihe.

The cancellation reflected the new leadership's stand on spending public money, said Joseph Cheng, professor of political science at the City University of Hong Kong.

President Hu Jintao and Premier Wen Jiabao wanted to minimise 'conspicuous expenditure', he said, predicting they would call off future retreats. 'The bulk of Beijing will stay in Beijing and work in the heat, so the leadership will stay in Beijing and share the hardship,' he said.

A member of the State Assets Management Commission in Beijing said his commission would skip Beidaihe to save money.

'This year's suspension is part of a series of reforms aimed at changing the extravagant image of the government,' said Hong Kong-based political commentator Johnny Lau.

'The new leadership hopes to build up a prudent and down-to-earth image, in order to win support from a more open-minded population.'

Mao Zedong started the tradition of letting leaders discuss political strategy in a relaxed environment.

People from Beijing and Tianjin also enjoy Beidaihe for its proximity - two to five hours by train - and its respite from the heat. From May until September it is hard to find space on the public beaches on the Bohai Sea. Eight million people went to Beidaihe last year, up 10 per cent more than the 2001 total.

This year, Beidaihe's 30 hotels and guesthouses reported a drop in vacancy, in part from the absence of state leaders. But hotels normally used by leaders are filling rooms, said Frank Zheng of the online travel service elong.com in Beijing.

'Usually the hotels are contracted out [to leaders], so business was thrown off course,' Mr Zheng said. 'This year there is no lack of space.'

Consequently, he said, 'the number of tourists is no fewer - Beidaihe is very popular'.

Two major Beidaihe hotels reported reductions in bookings. A manager of the Friendship Hotel said the aftermath of Sars was a bigger factor than the absence of leaders. Increased workloads following the business slowdown during the Sars crisis had hurt the travel industry, he said.

But at the 267-room Jinshan Hotel, weekends were fully booked, said the sales manager, adding that her hotel had not suffered from the lack of government business.

Additional reporting by Yi Hu