Figures from accountants and business advisors PKF show only a limited improvement in hotel room occupancy.

Hotels were 74.2% full in 2002 compared to 72.7% full in 2001.

PKF's hotel consultancy services managing director Melvin Gold said: "We had hoped to see a much better recovery in 2002 and a war with Iraq could further destabilise the market.

"The London hotel market took quite a battering during 2001, so even a small rise in occupancy is really just a slight improvement on a very bad year."

'Clear the air'

The survey, which is sponsored by consultancy company E.C. Harris, found the proportion of visitors from the US staying in London hotels had dropped.

The figure went down from 24.7% in 2001 to 23.2% in 2002.

The number of UK visitors staying in London's hotels has risen, accounting for 38.2% in 2002.

Mr Gold said some hotel managers were hoping a short and successful conflict with Iraq could "clear the air" and allow the tourist trade to improve again later in the year.