AT first, it feels like you are in a high-security enclave. High barricades bookend the infamous Herbertstrasse, sometimes called the "street of shame". Then, you notice women perched comfortably on swivel chairs, dressed in nothing but stockings and suspenders, looking out from narrow shop windows. Some stick their necks out, to lure passers-by to come in or to hurl invective at tourists trying to cheekily snap a picture.

Known for its tacky sex shops, strip joints, bordellos and casinos, the Reeperbahn in Hamburg's St Pauli area is one of the oldest and most famous red-light districts of the world. Once a favorite hangout for fatigued sailors from ships that anchored at Hamburg's famous port, it slowly began drawing hordes of tourists from all over the world.

But now prostitution is slowly dying in the Reeperbahn. The sex industry here is in terminal decline as prostitution flourishes through more modern ways, mainly through the internet, a medium that is considered both discreet and safe.

On April 1, Hotel Luxor, the Reeperbahn's oldest brothel, shut shop forever. Waltraud Mehrer, a blonde-haired petite woman, who was Luxor's madam for more than two decades, says: "You just can't make enough money in the Reeperbahn anymore. Private call girl services and internet sex ate into our business."

In the 1970s, when Luxor did brisk business, it remained open 24 hours, all week. But in the months leading up to its closure, it barely stayed open for four nights a week.

Many other brothels in the area are in a similar predicament. Reeperbahn's multi-storey Eros centre brothel was once one of the biggest in Europe. An Aids scare forced it to close in 1988, only to resume a few years later in a much smaller building. Today, its dank, neon-lit corridors invite customers to a host of eastern European and Russian girls.

The Reeperbahn is considered by many of Hamburg's denizens as an inseparable part of city's rich cultural identity. In its heyday in the 1980s, St Pauli was home to more than 1000 prostitutes. Today, there are fewer than half that number. And lately there's been a surge in teenage binge drinkers, and an alarming rise in street crimes due to pimp rivalries. There are more than 200 such incidents reported every month in David Wache, the local police station.

To curb violence, local authorities set up a host of surveillance cameras in the area in 2005, and last year, the authorities imposed a comprehensive ban on weapons - including knives, and, after 8pm, beer bottles - in the area. They are also mulling over a blanket ban on alcohol being consumed in the area.

The Hamburg police this month set up a commission called "Rotlicht" to tackle the growing crime in the area. Just last week, 80 policemen reportedly raided three brothels. Some 51 prostitutes operating without local authorisation were seized in the operation.

Local sex touts privately complain that the massive police presence is hindering the already-slack business even further. One of them, Edward, says: "You shouldn't forget, if the brothels don't survive, no other business in the area will survive."

It's a view that resonates well with Cornelius Littmann, a middle-aged businessman, who owns a football club in Hamburg named after the area - FC St Pauli and the Schmidt Theatre group located in the Reeperbahn. Littmann's businesses capitalise on the tourist crowds and he believes that every attempt should be made to staunch the decline of the Reeperbahn.

"I don't think the Reeperbahn can ever totally die or disappear," he says, "largely because of its unique identity. Its stature might diminish, but it can't completely go away."

Campbell Jeffereys, an Australian author, says: "Tourists visit Hamburg not just for its seagulls but also for its bawdy red light district."

Jeffereys has lived in the heart of the Reeperbahn, on a street called Hopfenstrasse, for the last four years. Visitors to the district often leave lewd graffiti on the walls of his apartment block and he encounters shady visitors shooting up heroin just outside his apartment block, not to mention the noisy 4am brawls among pimps and drunken teenagers. But he doesn't wish for the authorities to do away with the red light district, which gives St Pauli a distinct character.

But this view doesn't resonate with all. Andreas Fraatz, a real estate magnate who owns the Empire State hotel, a tall, swanky glass building overlooking Hopfenstrasse and the man behind a 400 million project that includes apartments for high income earners would probably disagree.

Many in the area, including café owner Malina Morsdorf, blame Fraatz for the decline of the Reeperbahn.

"His vicious attempts to gentrify the place will ruin St Pauli," she warns. "He obviously thinks of the prostitute houses as an eyesore. He wants to convert this cultural hub into an upmarket place for the rich."

"If you take the sex out of the Reeperbahn," says Jefferys, "you will take away the soul of the Reeperbahn."