It has been a tough year for many Siem Reap business owners, and the highly publicised arrest earlier this week of 10 Western tourists over a purportedly indecent pool party felt like salt in the wound.

“We have already seen a bad impact on our business,” said Sam Pho, the general manager of Private Siem Reap Tour Guide.

“We have had a lot of cancellations in the last couple of days, especially with five or six groups cancelling,” he added, noting that the number was unusually high.

The arrests came after police raided a stop on a popular “pool crawl”, and the party’s organisers were charged with “producing pornography”, which carries a maximum penalty of one year in prison. News of their arrests was quickly picked up by international media outlets across Europe and North America, often prominently featuring the suspects’ distraught family members calling for their release.

Since the group’s arrest, interviews with more than a dozen Siem Reap business owners who largely cater to Western tourists have revealed a similar concern: business was already struggling due to the rise of Chinese tourism, and the arrests were only going to make things worse.

“More and more people are scared of travelling, and the market here is changing as more and more Chinese come,” said Douglas Moe, general manager of the FCC Angkor Boutique Hotel and Bar. “I believe this will affect us, because the story is going around and people are afraid.”

Jeff Vivol, owner of the travel agency Green Era Travel, said his business was also suffering, with bookings down by 50 percent this week compared to last week and an unusually high number of people cancelling tours.

“This is bad – I am sure [the recent news] is affecting my business and the tourism in Siem Reap,” he said. “I can see a real decrease in Westerners too, for several months, but this week has been very bad.”

Even before the recent arrests, businesses catering to non-Chinese tourists in Siem Reap were suffering from the same problems that are afflicting businesses in Sihanoukville, which has also seen a massive influx in Chinese investment and tourism.

Chinese tourists, business owners in both destinations have said, are largely operating in a “closed loop” economy that benefits only Chinese-owned businesses, with local operators excluded from the benefits of the boom.

“There are more and more Chinese tourists, but they’re not coming to our bars – they’re going to Chinese restaurants, Chinese hotels and Chinese guides,” said Rachel Prins, who along with her Cambodian boyfriend co-owns the popular backpacker haunt Soul Train Reggae Bar.

“[Prime Minister] Hun Sen is shaking hands with the Chinese, saying ‘America, we don’t need you’, but businesses here need Westerners,” she said.

Read more: Big trouble in little China

Khiev Thy, president of the Siem Reap Tourism Guide Association, acknowledged the arrests might deter Western backpackers from coming to Cambodia in the future, but suggested that visitors looking to engage in activities similar to the arrested tourists should go elsewhere – despite the fact that Siem Reap’s raucous nightlife has been tolerated for years.

“We’re not so open here, sexually – maybe these tourists would be happier going to Thailand instead,” he said yesterday. “I think sometimes parents are happy to see their children come to Cambodia, because they care about the security.”

Yoshi Hiko Nishiwaza, who owns the popular Onederz Hostel, said the arrests could have the opposite effect.

“Maybe parents will advise their children against going to Cambodia” after the arrests, he said, noting that political instability in the region also served as a potential cause for concern.

But whether or not the arrests hurt his business in the short term, Nishiwaza said he was worried about the long-term prospects of the industry.

“If [the government] lets the backpackers go, then there will be no impact,” he said, of the 10 arrested at the pool party. “If [it] doesn’t, there will be some impact. But if backpackers stop choosing to come to Cambodia, this is not the only reason.”