As holidaymakers fold up the sunloungers and head back to Milan and Rome , they are rolling out the red carpet on the Venice Lido and dusting off the gold leaf lion statues that line the processionary route.

The Venice film festival not only extends the travel industry's summer season, it kickstarts the film industry's awards season frenzy. For some, that first red carpet of the season may stretch from Italy all the way to the Oscars in Los Angeles next February.

Three days from now, the Lido will be graced by George Clooney, Madonna, Keira Knightley, Kate Winslet and Monica Bellucci. Such glamour is, of course, just the shiny surface – also attending will be some of the biggest directing talents in film: Roman Polanski, David Cronenberg, Steven Soderbergh, Andrea Arnold, Steve McQueen, Lou Ye. And, I guess, Madonna.

For its 68th manifestation, Venice has wrested back some much-needed stardust and artistic heft. However long-established the eleven-day event has been (it is the world's oldest film festival, founded at the behest of Benito Mussolini – understandably, they don't make too much of this connection any more), it has been in danger of losing lustre to the upstart Toronto festival, which begins only nine days after Venice starts.

Venice is often accused of "front loading" its programmes, with all the big-name movies screening over the first four or five days. You can feel the life being sucked out of the Lido when Toronto begins. Like the last men out of Saigon, stars are whisked off for appearances in Canada, from where Oscar campaigns are launched and mighty box-office receipts can be calculated.

What point does all this deal-making and fanfare serve? "Venice and Toronto represent the first opportunity for producers to gauge audience reaction," says Sandra Hebron, director of the London film festival. "Until they play out on big screens in front of the world's press and an admittedly cinephile yet still public audience, they can't get a firm idea of the direction the film will go. A positive reaction naturally kicks an awards campaign into gear."

Black Swan is a prime example. The ballet psychodrama opened Venice last year and critics drooled over the sight of Natalie Portman in a tutu. The wave of acclaim carried her to an Oscar and the film to a best picture nomination.

"Without doubt, festivals are make-or-break," says Jeremy Thomas, the Oscar-winning producer of The Last Emperor, who is involved in three films premiering at Venice: Andrea Arnold's Wuthering Heights, Steve McQueen's Shame and David Cronenberg's A Dangerous Method. "The first vibe on a film is so influential and Venice has a lovely vibe. It's decadent and beautiful, but understanding the makeup of each festival's character and audiences is a vital skill for a producer. It's something I look at even before the film goes into pre-production – I've known since last February that these three would launch in Venice next week, and I'm very excited."

Thomas has experienced triumph and disaster at festivals. Crash, his controversial film with Cronenberg, received a boost from its reception at Cannes (if calls for its banning by the Daily Mail can be termed a boost); Stealing Beauty, his film with Bernardo Bertolucci, was booed at Cannes. "The critical antennae at Cannes are sharper and more judgmental, looking for a certain type of film from a certain type of film-maker, and they didn't want to see Bernardo make Stealing Beauty. I still think it's a lovely film, but Cannes nearly killed its reputation in one night."

There is a hierarchy in the world's film festivals. Cannes, with its combination of sunshine, lunches, huge film market and impeccable artistic history, has long been seen as king. Venice and Berlin are its persistent rivals, though in film-maker top trumps the Golden Palm (Cannes) still beats a Golden Lion (Venice) or a Golden Bear (Berlin).

But the landscape has been shifting recently. Toronto's timing and location has skewed the whole picture. Oscar winners now begin their journey in Canada – Slumdog Millionaire and The King's Speech both won the audience award at Toronto. While both are British films, their sensibilities were judged to be better served by North American audiences than by snooty critics at Cannes or Venice.

The strategy clearly proved correct, so much so that last year, the UK Film Council (remember it?) took all 13 of its "products" to Toronto and avoided the expense of hotels, boats and the euro at Venice. Never Let Me Go, 127 Hours, The King's Speech, Brighton Rock, Made in Dagenham, Neds – it was deemed more important for these titles to gain exposure on the North American scene than in Venice, and in Canada they might grab that lifeline of a US distribution deal.

So has Toronto become the most important film festival in the world, thus cementing the American factor as more important than winning a prize at some arty, old European shindig?

"Since the Baftas and the Oscars have become so important to studios, I've definitely noticed that awards campaigns have intensified and ratcheted up around Toronto," says Hebron. "Of course, the Oscars are an American concept, so it's natural that American films will dominate during that awards season." However, with actresses such as Marion Cotillard winning best actress for the French film La Vie en Rose, even the traditionally inward-looking Oscars have gained a more global outlook.

Timing, says Hebron, is everything. When the Baftas moved dates to come before the Oscars, they received an injection of Hollywood glamour and interest and Hebron's London festival immediately felt the knock-on effect. "There has been a tangible difference in the last five or so years," she says. "Films such as Frost/Nixon, The Constant Gardener and Good Night And Good Luck suddenly proved London was rich ground for Baftas and Oscars. When I began curating the festival, we had to beg studios for their films – now they come to us, fighting for gala slots."

Mark Adams, the chief critic for the trade bible Screen International, visits 20 film festivals a year, often ensuring he can file the first reviews of a film that might be expected to go on to awards success. "Hollywood studios are wary of festivals," he admits. "Often their big films will be there, with stars in tow, but screening out of competition. A Hollywood film worth millions cannot be seen to not win."

It will be interesting to see how the Cannes-winner The Tree of Life, a non-mainstream film but starring major hitter Brad Pitt, will fare.

As Adams says, with the sigh of someone zipping up yet another suitcase: "Gems do come from B-list festivals too. Right after Venice and Toronto there are San Sebastián, Rio, Abu Dhabi and Tokyo, while the new year brings Sundance, Rotterdam and Berlin. Don't forget the increasingly vital subset of documentary festivals either, such as IDFA [in Amsterdam], Hot Docs [in Toronto] and Sheffield. The cycle never stops."

Most festivals are a sort of level playing field where arthouse, foreign-language or "non-industrialised" films, as Jeremy Thomas likes to call his works, breathe oxygen and gain prominence, however briefly. Venice, Cannes and Berlin are curated firmly, the titles selected by festival directors with discerning and distinctive tastes; with occasional concessions and deals made to secure big stars — I suspect Venice showing Madonna's W.E. is an example of that. Toronto, it seems, will happily spotlight most films a studio gives it, relegating the non-Hollywood movies to an impenetrable mass of screenings.

With the multiplexes clogged with Hollywood blockbusters, the festival circuit is crucial exposure for films without the might of a studio marketing department behind them. Winning audience awards at Sundance, Berlin and various docfests was instrumental, for example, in gaining the British film-maker Lucy Walker an Oscar nomination for her film Waste Land last year.

"The momentum from festivals is crucial," she says. "Waste Land was at the very back of the Sundance catalogue and sounded very unentertaining (a doc about an artist working in a garbage dump? In Portuguese?) So everyone is rushing past you to the more Hollywoody options, but then people who see it admire it and the festival buzz machine whirrs into action. Suddenly you're a hot ticket and your film is being invited to attend a whole year's worth of progressively smaller – but still very prestigious and exotically located – film festivals and awards ceremonies."

Jason Solomons is an Observer film writer and chairman of the Critics' Circle film section.