FOR decades, the remote Florida town of Key West has been a refuge for gay tourists, a kind of Southern bookend to Provincetown, Mass. - a place where drag shows, all-male guest houses (complete with communal hot tubs) and a spirit of unbridled hedonism attracted everyone from closeted Midwest accountants to Tennessee Williams.

But recently, soaring real estate prices and the popularity of events like Fantasy Fest - an annual bacchanal of parades, masquerade balls and celebrity look-alike contests that began as a tourism promotion in 1979 and has since evolved into a drunken open-air party that would be right at home on fraternity row - have begun to attract a more heterogenous crowd, one that can at times make Key West look like any other tourist town getting ready for Spring Break.

You can feel the change at the Lighthouse Court, a popular - some would say notorious - gay-only Whitehead Street guesthouse that recently went "all welcome," the local euphemism for accepting heterosexual guests as well as gays. And it's obvious clear across Old Town at the Heron House Court, formerly known as the Fleur de Key and long one of the premier gay-only guesthouses on the island. It started welcoming straight visitors to its 16 rooms in August.

Meanwhile Duval Street, the main commercial street of Old Town, continues to evolve into a strip of Hard Rock Cafes and Margaritavilles. On a sultry evening in late September, a cover band at Sloppy Joe's plowed through Tommy Tutone's lone hit, "Jenny (867-5309)." At Irish Kevin's, a troubadour was convincing his audience of fraternity brothers to sing along to Bon Jovi.

Could Key West, the place that Readers of OutTraveler magazine named the second best resort town in the world (behind Provincetown), be going straight?

Of course, Key West retains a gay sensibility. There are gay tourist charters to the Dry Tortugas and gay sunset cruises into the Florida Straits. Rainbow flags flutter across Old Town. It's nothing to see a pair of men or pair of women walking on Duval Street hand in hand. A sign posted on a house on Frances Street states: "That 'love thy neighbor' thing, I meant it. - God."

Key West was the first American city to openly recruit gay tourists, and current ads are specifically aimed at gay travelers. A gay and lesbian trolley tour rolls down gay guesthouse row on Fleming Street, passing the Equator, Coconut Grove, Oasis and the Coral Tree Inn. The Island House on Fleming not only remains gay-only, it also features a clothing-optional gym.

On Duval, the La Te Da cabaret continues to offer drag queen reviews. More drag queens work the sidewalk outside the 801 Bourbon Bar, beckoning passing tourists. At the Bourbon Street Pub, a man in a tight pink tank-top still looks right at home.

But for many longtime gay visitors to this 5.9-square-mile island, located about 150 miles southwest of Miami, there is a growing sense that Key West is no longer the gay destination it once was. Some of it is a generational shift, as younger gay travelers can take their choice of gay-friendly destinations like South Beach, Palm Springs, Puerto Vallarta and even - unlikely as it seems - Orlando.

But the shifts are a reflection of more significant changes in Key West itself. Once a low-cost retreat for those who wanted to get away from it all - both gay and straight - it is now one of the most expensive real estate markets in the country. While transplants once could buy up attractive but dilapidated houses in Old Town, those "Carpenter Gothic" houses have now been restored with pastel paint and shiny tin roofs to a standard that would make Martha Stewart applaud. Today, a tiny bungalow in Old Town can sell for $600,000 or more.

At the Atlantic Shores pool one sunny day this fall, what caught the eye first were the women, many of whom were topless. And then the men reclining on plastic lounge chairs padded with blue cushions. Several of the men were completely naked, soaking up sun as naturally as iguanas. In the pool, men in fluorescent bikinis stood submerged almost to their nostrils, motionless like Everglades alligators stalking deer.

In a survey of gay tourists conducted by the Key West Business Guild, several respondents specifically mentioned the Atlantic Shores as their favorite thing about Key West. "It was a simple business decision," Mr. Browning said of the condo conversion. "A lot of people love the Atlantic Shores, but they weren't necessarily booking rooms at the hotel."

Mr. Browning is not alone in blaming simple economics for many of the changes. The Lighthouse Court, for example, was bought in January by a group of investors who own four other hotels on the island. "They are all all-welcome, so we just folded it into our operation," said Julie Fondriest, the new managing owner of the Lighthouse Court. "It wasn't a slight against the gay community at all."

At Pearl's Rainbow, a former cigar factory that is the island's only women-only guesthouse, Loraine Quigley remained optimistic about the island's gay-friendly identity. "I wouldn't say there's a trend to eliminate gay guesthouses," she said. "One or two properties have switched owners, but that's about it."

Still, at one of the Atlantic Shores regular Sunday night tea parties earlier this fall, a sense of mourning hung in the humid and salty air. There was worry that condos like the ones to be built on this property will change the character of the city. There was talk of moving to Wilton Manors, a growing gay enclave outside Fort Lauderdale. Or perhaps Costa Rica.

On the dance deck, a drag queen, Miss Angelica Duval, lip-synced her way through a set of disco hits. She redefined Amazonian, with muscular legs and buttocks showcased by a thong. Remove the makeup, the wig and the glitter and she could be a defensive lineman for the Washington Redskins.

Another drag queen, Gina Maseratti, lamented the closing of the Atlantic Shores. "I've been coming here for many years," she said. She wore stiletto heels, a platinum wig and a full face of makeup. "Eventually the condos will be bought up by people who don't live here year-round. The real heart of Key West will sell and move on."

But, in many ways, Gina Maseratti's situation is as complicated and nuanced as Key West's future. Miss Maseratti's given name is Kerry Torr Cressman. He works in construction. He's involved in a committed relationship with a woman, whose shoulder he caressed while he spoke to a reporter. "I don't think people come to Key West for the typical stuff you get in Miami or Fort Lauderdale," he said. "They come to see people like me, a drag queen in a beautiful relationship with a beautiful woman who is a schoolteacher."

Miss Maseratti was about to step into the spotlight to lip sync a disco version of "Boogie Woogie Bugle Boy" during which she would strip off her khaki skirt to reveal a blue maillot spangled with white stars. As she headed over to the stage, she insisted she was not about to leave the island, even if the Atlantic Shores did.

"I still love Key West," she said. "I love it. I'll be here until they drag me out screaming and kicking."

Thanks to the New York Times.