The historic city's tourism industry is going "through its deepest crisis since national reunification" in 1990, said Johannes Lohmeyer, president of the tourism federation in the city dubbed the "Florence on the Elbe" river.
For more than a year, the city has made headlines as the birthplace and centre of the far-right populist movement "Patriotic Europeans Against the Islamisation of the Occident", whose flag-waving members rally every Monday against refugees.
To many Germans, Dresden -- the largest city in the former communist East, a region which still lags the west in prosperity and jobs -- has become a symbol for the ugly backlash against migrants, in stark contrast to the welcome seen in many other places.
Lohmeyer was quick to add that, despite a fall in bookings, "certainly, the situation is not catastrophic" for the tourism sector, which is worth about 1 billion euros ($1 billion) and generates around 20,000 jobs in the Dresden area.
"The tourists are still there, and conventions are being held -- but the decline in reservations worries us," said the Egyptian-German, who has beefed up the marketing team at his business hotel with two new hires.
- PEGIDA effect -
At first glance, all seems normal as tourists snap pictures outside the Frauenkirche, a baroque church in the capital of Saxony state -- a city that was devastated by Allied bombing in 1945 but was renovated at great expense after reunification.
Among the visitors were Birgit and Frank Rofalski, aged in their 40s and from the Dusseldorf area, who were in Dresden to celebrate their silver wedding anniversary on a recent Monday -- hours before another Pegida demonstration.
"For us Dresden is a romantic destination, we came without hesitation," said Birgit, a hairdresser, while her husband added: "We simply asked our hotel to tell us which streets to avoid."
Many others, however, have stayed away. In the year's first nine months, overnight stays in Dresden fell by 2.3 percent compared to the same period in 2014, while arrivals in other major cities rose.
The number of German tourists, who account for over three-quarters of the total, fell by 4.2 percent.
Lohmeyer said he blamed the Pegida effect and, above all, "the obsession of the German media with this movement", which he argued had unfairly tarnished the reputation of the city.
The beleaguered industry is now, however, getting a boost from its famous Christmas Market, which opened on the last November weekend with great fanfare for the 581st time.
"Hotels are fully booked for weekends in December," said Bettina Bunge, president of Dresden Marketing, which has launched a campaign to draw people to "a magical winter in Dresden".
- 'Restore image' -
But tourism is not the only sector with reason to worry -- also nervous are the city's universities and research institutes.
Professor Hans Mueller-Steinhagen, president of the Technical University of Dresden (TUD), one of Germany's 11 "universities of excellence", said he was concerned about the city's reputation and feared it might make the institutes less attractive for foreign scientists.
"Before, the image of Dresden was clearly an asset internationally, but now our colleagues are concerned for us as far away as Korea," he said.
Although his university has 18 percent foreign students in its bachelor and masters programmes, up from 16 percent last year, "a growing number of candidates now hesitate" before coming, he said.
He stressed that the "TUD took a stand against Pegida repeatedly" and that, of the city's half-million people, "99 percent do not demonstrate with Pegida".
Mexican biologist Tatiana Sandoval-Guzman, who has lived in Dresden for six years, also emphasised the positive aspects of life in the city.
"Actually, I am amazed by the reaction of the people of Dresden facing Pegida," she said, citing solidarity initiatives with refugees, which were "more meaningful than just counter-protests".
This is the message of a cosmopolitan and open city Dresden Marketing wants to get across.
"We will manage to restore our image," said its spokeswoman Karla Kallauch, "but it will take time".