De Vere, the hotel group that manages the Belfry, has reported a 7.8 per cent dip in full year profits.

However, the company, which owns a number of upmarket hotels in the UK, mid-market Village outlets and the Greens health and fitness clubs, saw shares rise as a property revaluation highlighted the group's worth for any would-be bidder.

Analysts said there was talk that private equity groups, such as Permira, were mulling bids for the asset-rich hotelier, which owns most of its 19 De Vere four- and five-star hotels, and the revaluation was likely to sharpen any bid interest.

"If you take the view that bidders are circling De Vere then this revaluation is only going to heighten their interest in unlocking value with a bid," said one industry analyst.

The group said the revaluation of its property portfolio gave a net surplus of £102 million over book value, and a net asset value of 786p per share, up from 519p previously.

The provincial business, which has only one hotel in London, posted pretax profit before exceptionals for the year to September 25 of £42 million.

This was at the top of analysts' forecast range of £ 38.8 million to £41.8 million. The profits fall came after the sale of the Belfry hotel earlier this year - though it continues to manage the venue - and masked what the company said was a "strong underlying performance for the year".

The hotel was sold to the Quinn Group for £186 million last March, prompting De Vere to issue a special dividend of 159 pence per share.

"Despite on-going cost pressures we are cautiously optimistic for the current year," said chief executive Carl Leaver.

These cost rises, largely higher energy and business rates, have forced the group to abandon its target for a ten per cent return on capital employed by the end of 2006/2007. The return on capital was 7.5 per cent in the reported year.

Mr Leaver said the higher energy and business rates would add an extra £6.5 million to its costs in 2006/2007 above any anticipated inflationary rises.

It proposed a seven per cent rise in the year dividend to 14.02p.

De Vere shares have outperformed the FTSE 100 Index by nearly 20 per cent this year after rising 36 per cent on the back of a hotel industry recovery and talk of a possible takeover.