Hotels in London are predicted to see an increase in profits and RevPAR during 2010-11, while provincial hotels will continue to struggle.

According to consultants TRI Consulting, revenue per available room (RevPAR) at hotels in the capital is set to increase by 2.8 per cent during 2010, with a further 4.8 per cent jump in 2011.

TRI is basing its prediction on an increase in inbound tourism and a number of cost-cutting exercises.

For hotels operating outside London, however, the future looks less rosy. TRI predicts that the impending increase in VAT, combined with rising unemployment and a "virtually inevitable stringent government spending policy" following the May general election will have an adverse effect on domestic travel.

Jonathan Langston, managing director, TRI Hospitality Consulting, said: "It is likely that in 2010, provincial hotels will experience pressure for further rate reduction from the leisure market in order to maintain domestic demand in this sector, with a particular focus likely to be on lower-rated business, such as group tours.

"Historically, the UK provincial hotel market has experienced a lag in recovery, relative to GDP recovery. It is likely that corporates will continue to operate on tight accommodation/travel budgets, with little or no scope for hoteliers in the provinces to enhance rate to the commercial sector."