FPDSavills believes that the hotel sector has benefited from London's status as a world city and growth has been driven largely by the health of the global economy, rather than local influences. London's hotels depend on world trade and business as well as the number of tourist visitors.

However Yolande Barnes, head of research at FPDSavills, aired a note of caution. 'The rate of value growth slowed dramatically between March and September 2001,' she said. ' We think that values fell in the final quarter of 2001 and we expect our index to register a fall of around 5% before the next survey in March. The signs are that business hotels with a stronger UK base of visitors will hold up better than buildings in locations more dependent on tourist trade.'

In the longer term, the survey identifies continuing shifts in hotel supply and demand patterns from the traditional western hotel locations towards eastern locations and from traditional, out-of-date, converted buildings towards new, innovative, purpose-built, niche hotel types. Already, some regenerated areas of the capital have seen a 'star shift' as the number of higher grade hotels capable of being supported in an area increases.