UK - Despite flattening occupancy rates, UK hotel revenues will increase by 6.2% in 2007—8, according to a report published by PricewaterhouseCoopers.

Hospitality Directions Europe, the firm's trend report, forecasts significantly higher revenue growth in the capital - 10.6% in 2007 and 9.2% in 2008.

The report hinted at greater segmentation in the UK industry, with higher revenues in a luxury market boosted by a 17.4% increase in average room rates. The high-end market caters to a growing demographic of high net worth individuals - estimated by Tulip Financial Research to have liquid assets of £2m (€2.89m) and, below them, the mass affluent market.

However, the report's authors also forecast a flight from risk, as a result of tighter credit conditions, would encourage investors to be "more cautious and selective".

Performance in the English regions, where UK businesses account for 70% of hotels' business, has been mixed. However, Deutsche Bank real estate subsidiary RREEF last month entered the UK hotels market by acquiring the regional Four Pillars Hotel Group, largely because the provincial sector is driven by strong domestic demand. The group has five mid-sector assets in Oxfordshire and Gloucestershire.

RREEF CEO Alistair Dixon cited a regional market which was "not as volatile as the city centre because the weighting is towards domestic rather than international business".

RREEF bucked a trend that has seen investment in European hotels largely focused on global brands in capitals and second cities, although Dutch fund ABP recently told IPE it had not ruled out entering the budget end of the hotel market.