Hotel values in Europe fell by 13.4 per cent last year, taking the cumulative decline over the past two years to nearly 25 per cent.

A report by HVS, the hotel valuation consultants, shows that London was the only European capital to achieve price growth during 2009, with hotel property prices bouncing back from the 11 per cent fall suffered in 2008 to achieve a 14 per cent increase in 2009.

The HVS report, called European Hotel Valuation Index, tracks four- and five-star hotel values in 36 markets.

Tim Smith, co-author and HVS director, said: "Part of the popularity of the UK, and London in particular, as a place to buy hotels is down to the cheapness of sterling against major currencies like the euro.

"But a significant factor has also been the flight to less volatile markets by international investors."

Looking ahead, Smith predicts that even though the industry may suffer further falls in room rate in the early part of the year, most hotels will have stabilised trading by the end of 2010, with many enjoying growth in profit, thus boosting the value.

"With less credit available and the banks being slow to restructure their existing hotel loans, there had been little pressure on potential vendors to cut prices and 2009 had seen the lowest volume in European hotel transactions ever recorded," he said.

"In 2010, provided that debt financing loosens up, it is likely that transactions volumes will pick up and allow investors to seize opportunities at significantly reduced prices."