As the final countdown towards the London Olympic Games begins, the city's hotel market is understandably becoming an investment hotspot for property speculators. The opening of the swish W Hotel in Leicester Square last week is the first of a swathe of new developments set to launch in the lead-up to the Games - a recent Price Waterhouse Coopers report indicates 18 new hotels have commenced construction, among them the planned Bulgari hotel in Knightsbridge and the Intercontinental Group's latest outpost at West India Dock.

This development boom couldn't have come at a better time for investors looking to buy in on the London market. Room rates in the capital increased by 3% last year, according to travel specialists Hogg Robinson Group, and are expected to go up another 2.2% this year.

With current supply levels unable to cater for the 500,000 odd visitors expected to pour into London during the games, buyers purchasing rooms in the new developments can expect great yields. CEO Stephen Worboys of Experience International, one of the local agents marketing the InterContinental's development, said the group was exceedingly optimistic about occupancy rates leading up to the Games. 

IHG are forecasting 70% occupancy in year 1, rising to 80% in year 2 onwards, which will in turn deliver double-digit yields of 10.7% in year 5 and thereafter, said Worboys. Construction has already commenced at the Docklands site with completion due Q1 2012, months before the start of the Games. 

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