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In the United Kingdom, hotels have proved to be the best long-term property investment, outperforming other real estate sectors by 32.5 percent over a 13 year period, according to new research by London-based consultancy PKF LLP.

PKF's report, Institutional investment in UK hotels, revealed an annual total nominal return (income and capital) of 16.3 percent from 1992 to 2005 compared to the 12.3 percent return achieved by UK pension funds from property investments overall.

Despite this performance, ownership of hotel assets by UK life and pension funds remains minimal relative to their overall property portfolio, according to Robert Barnard, head of Hotel Consultancy Services at PKF. But he predicts that high profits and returns, coupled with greater liquidity and transparency in the sector, will make hotels a more attractive investment.

Last year, UK hotels enjoyed their best year since 2000 with a 10.1 percent annual rise in yield as greater numbers of visitors filled up rooms across the country. Average occupancy rates rose 3 percent to 75.7 percent while average room rates rose 6.9 percent to £87.07.

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