Not a drop of oil from the Gulf spill washed ashore at Tradewinds Island Resorts on Florida's St. Pete Beach, yet the company is seeking as much as $1 million in compensation for lost profits from the $20 billion fund set up by BP PLC.

The sprawling resort's proprietors say fear of soiled beaches scared away vacationers.

Elizabeth VanDyke and her brother Joshua at Innerlight surf shop, Pensacola, Fla., in June. Residue from the Gulf of Mexico oil spill washed up on Pensacola Beach. But some businesses located where no oil came ashore say fear of soiled beaches kept tourists away and hurt revenue.

A fierce debate over the value of bad publicity is now roiling political and legal circles in Florida. Hoteliers and state officials say jitters over the spill have cost them billions of dollars in tourism revenue, even though the bulk of the state's Gulf Coast beaches haven't suffered direct hits from the Gulf oil spill.

Statewide revenue from hotel and motel bed taxes were up in June over the same month last year, according to Florida Department of Revenue records. Officials counter that 2009 was one of the state's worst years ever for tourism spending.

The tourist board in Pinellas County, where Tradewinds is located, reported that more tourists visited the county in the two months after the spill than in the same period last year, though numbers were down about 8% from pre-2009 levels.

Keith Overton, chief operating officer of the 800-room Tradewinds, the biggest resort on Florida's Gulf Coast, said the number of visitors isn't the whole story. "We had to heavily, heavily discount our rates," he said.

Spill-claims administrator Kenneth Feinberg has sent mixed signals in public testimony about the debate over negative publicity. But written policies for the fund state that what matters is proximate damage from the spill, not the impact of gloomy news reports.

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