UK chain hotels outside London have suffered the impact of rising costs for the second consecutive month, according to a market review carried out by TRI Hospitality Consulting.

Gross operating profit dropped another 3.2 per cent to £36.26 per available room since June, when it fell by 6.9 per cent to £39.69.

However, room sales were up by 0.3 per cent in July, which had dropped by 1.1 per cent in the previous month.

Jonathan Langston, managing director of TRI Hospitality Consulting, said: "Ordinarily, we would expect most revenue gains to convert into profit. This is currently not happening. Given an increasingly competitive environment, rising costs cannot be passed onto the guest so are directly hitting the bottom line."

Better cost control was also achieved despite annual inflation which increased to 4.4 per cent in July, up from 3.8 per cent in June. This 0.6 per cent rise was the highest change since record began in 1997, said the Office for National Statistics.

Food and non-alcoholic beverages saw the highest rises, with an annual rate increasing from 9.5 per cent in June to 12.3 per cent in July.

"Although there are signs that global food prices have reached a peak and should now start to stablise, hoteliers, particularly in some provincial markets, face an uphill struggle to restore profitability while dealing with challenging economic conditions outside their control," added Langston.

London's chain hotels, however, faired better during July.

Total sales in London were up by 14 per cent and the year-to-date figures for gross operating profit increased to 7.3 per cent, compared with revenue growth of 6.7 per cent.

Also, despite the decrease in the number of overseas visitors to the UK – according to the latest International Passenger Survey – the amount they spent in the UK increased by one per cent to £4.1bn during the three months to June.