The balloon has been grounded. Last year at Art Basel Miami Beach, Krug Champagne invited clients to soar over the Everglades in a hot-air balloon, but the high-flying corporate symbol won’t be at the fair that kicks off on December 4.

With the new economy constraining the luxury brands and banking firms that underwrite Miami Basel, its sister fairs, and dozens of other events that week, the sponsors are facing a tough challenge: how to make the same impact with less money—without appearing chintzy to their high-net-worth clients.

Yes, the bean counters are coming to the bacchanal. BMW, which has ferried V.I.P. cardholders around Miami for years, pulled out of its sponsorship for 2008. A couple of spinoff fairs have been canceled amid softening sales of contemporary art. Fashion companies, in particular, are backing away from big events. Pucci, which last year celebrated its 60th birthday with a high-profile bash, won’t be hosting a followup party. Even music producer Russell Simmons is feeling the pinch. To defray the cost of some of the charity events he is throwing during Miami Basel, Simmons says he is seeking in-kind donations of works and services.

More significantly, some art dealers who have done well in Miami in the past foresee a sober mood. They predict sales of better-quality works by established artists and some spot-a-star shopping for cheaper works but expect sparse activity in the all-important middle market. Robert Goff, co-owner of Goff & Rosenthal, a New York gallery, is bypassing showing in Miami altogether, citing “art-fair fatigue.”

This is quite a change for an extravaganza that has made a name for itself as a Woodstock for the wealthy, a four-day-long affair of partying, wooing, and spending. Over the years, corporate sponsors including HSBC, Krug, NetJets, and Cartier have flocked to Miami (and will be there this year too) to target the rich clientele who attend the fair and its handful of piggybacking satellite functions. Last year, the single week of parties generated nearly $500 million, including revenue from art sales, hotels, and restaurants, according to Miami tourism experts.

The sponsors’ thinking was simple: Go big or go home. With a dozen or more parties vying for attendees each night, events were competitive in their luxuriousness. Sponsorship costs ranged from $50,000 to the high six figures, and gift bags were stuffed with pieces of Louis Vuitton jewelry or Roberto Cavalli ties. Adidas sponsored a gifting suite at André Balazs’ Standard Hotel, Dellis Cay real estate developer Cem Kinay flew guests to Turks and Caicos for cocktails with the islands’ premier, and Sotheby’s brought French chef Pierre Gagnaire to Miami to cook for guests at the Mandarin Oriental.

But with the turmoil in the markets, such extravagance is considered either too pricey or simply in bad taste. Swiss bank UBS, for example, has been the principal sponsor of Art Basel Miami Beach for the past seven years and will be again this year. In October, it announced it would cut 2,000 jobs following a series of write­-downs related to the credit crisis that have totaled more than $40 billion. To make matters worse, the company’s offshore private-banking division is under investigation by the Department of Justice for facilitating tax evasion by U.S. clients, some of whom were wined and dined at Miami Basel. In light of these developments, Peter Dillon, head of UBS’s sponsorship for the Americas, says the bank will make sure it’s “not being frivolous.” However, he points out that UBS won’t downscale too much. “Art Basel is in our DNA,” he says.

Likewise, Krug is recalibrating its sponsorship to fit the times. The company says that in place of offering hot-air-balloon rides, it will co-sponsor a party with Visionaire as a way to reach more clients while spending the same amount of money. The balloon trips were too “intimate, targeted,” says Krug brand manager Hervé Larren.

The sponsors who host flush events argue that they are good for establishing connections, and Marc Spiegler, co-director of Art Basel Miami Beach, says spending by his sponsors will be “of the same order” as last year’s. There are even some new entrants, including BlackRock, which is backing Miami Basel’s rival fair Art Miami. And HSBC Private Bank is again sponsoring Design Miami, another fair, as well as Design Miami’s V.I.P. lounge. Last year, the lounge attracted guests like actor Brad Pitt and Russian billionaire Roman Abramovich. In a down economy, sponsors are reluctant to walk away from such clients, says András Szántó, a professor at Sotheby’s Institute of Art. The only caveat: There might be a little less caviar to go around this year, Szántó says.

Market Watch Miami Basel artists whose sales could survive the downturn.

William Eggleston
Auction range: $3,750 to $156,000
Known for: Fine-art color photography.
Why he’s safe: His documentary-like scenes are in many major museums.

Christian Marclay
Auction range: $1,500 to $32,200
Known for: Multimedia art.
Why he’s safe: Influential collector Peter Norton is a fan, and he once gave out editions of a Marclay work as Christmas gifts. 

Gabriel Orozco
Auction range: $750 to $308,000
Known for: Conceptual art, including a piece made from Ping-Pong tables.
Why he’s safe: His solo show at MOMA is planned for 2009.

Kehinde Wiley
Auction range: $5,000 to $97,000
Known for: Historical paintings meet hip-hop portraits.
Why he’s safe: His ­collectors include LL Cool J and Russell Simmons.