Call it the Olympic effect. From the smartest of hotels to sought-after theatre tickets to the best restaurants, the London 2012 Games are providing summer bookers with some unexpected bargains in one of the world's most expensive cities.

Hotels in London are paying the price for pushing up their room rates for the Games: bookings are down by 35% after long-haul travel operators advised international visitors to go elsewhere this summer.

Visitors can now secure great bargains as hotels and theatres slash prices to compensate for a slump in bookings caused by the Olympics. Rooms in central hotels can be obtained for as much as 30% below the usual rates and tickets for some West End hits are being offered at half price.

Many hotels inflated the price of rooms for the summer, with some setting rates at up to three times the normal level in anticipation of demand from Olympic visitors. These inflated prices have had a devastating effect on advance bookings by long-haul tour operators, which bring visitors from countries such as the United States, Australia and Japan, who have spurned London in favour of other European capitals. A survey by the European Tour Operators' Association last November showed that advance bookings for the Olympics period were down 90% compared with last year.

"When the Olympics are on, normal tourists are scared away because cities are perceived as expensive and too difficult to deal with," said Tom Jenkins, executive director of the tour operators' association. "This presents consumers with a big opportunity."

Hotel bookings in the capital are down 35% in July and 30% in August, according to the latest published figures from hotel room wholesaler JacTravel, which books half a million London bed nights a year. This fall in demand is translating into bargain prices. "Rates during the Games [27 July to 12 August] have recently been falling from very inflated levels," says JacTravel's director of online, Angela Skelly. "Rates after the Games are currently 15%-20% down on the same period last year."

Visitors who shop around can find even bigger reductions. The three-star Tudor Court hotel in Paddington has cut the price of its 38 rooms by an average of 33% between 12 August and 9 September. A double ensuite room for two, including breakfast, is available in this period for just £81 a night.

Even during the Olympics, the Tudor Court is charging only a 20% premium on top of its standard rates. "We originally increased our prices by an average of 80% for the Games," says Conan Gupta, one of the hotel's directors. "But we've had to cut them because our bookings for the Olympics period are down 50% on last year, and in August, when we'd expect to be full, it's completely dead."

Hotels in even the most central locations are cutting their prices. You can stay in the four-star Hilton Metropole, a stone's throw from Madame Tussauds and Regent's Park, on a Friday and Saturday in August for £160.08 a night. In September, the identical room will cost you £238.80.

The cost of seeing a London show in July and August has also fallen, as theatre seat bookings have slumped by 20% or more, according to Chris Ryan, director of marketing for Encore Tickets, which sells two million West End theatre tickets a year. Blockbuster shows such as Billy Elliot and Shrek The Musical are being heavily discounted.

"These shows would not normally offer any reductions during the summer, but 700 to 800 tickets to Billy Elliot are being offered each night Monday to Friday until 9 September at discounts of between 32% and 35%," Ryan says.

The cheapest seats for Shrek the Musical are being discounted by 16%, while the most expensive tickets are available at a third off normal prices.

However, the biggest reductions are for shows that would attract some discount over the summer in any event. Tickets for The 39 Steps, for instance, are being offered from just £12.50, half the usual price, and the long-running Chicago is offering discounts throughout the summer of up to 40%.

"There is more availability because people are avoiding the Olympics," says Francis Hellyer, managing director of Londontheatredirect.com, another booking agency, which also reports sales down by about a fifth. "We have around a third more offers than last year."

Meanwhile, some of London's most exclusive restaurants, which are frequently booked up way in advance, have plenty of availability during and after the games. Celebrity hangout Le Caprice has tables for dinner available on Thursday and Friday evenings throughout late July and all of August, while Gordon Ramsay's Claridge's restaurant is available for most sittings any day of the week. There are even tables to be had at Heston Blumenthal's hugely popular Dinner.

"Bookings are definitely quieter for Le Caprice for August compared with last year," says Jesus Adorno, a director of Caprice Holdings. "A lot of our customers go away during August and road closures around us for the Olympics are putting some regulars off as well."