According to the a survey of nearly 100 hotel industry experts, conducted to mark the 24th Deloitte European Hotel Investment Conference, 52 per cent said it was still impossible to obtain finance for projects outside the capital.
Meanwhile, just 8 per cent of those asked said securing financing was an issue in London.
On the odd occasions where financing is available, it has been easiest to obtain cash for budget and midscale developments and acquisitions.
"Regional hotel performance is closely linked to the health of the domestic economy," Nick van Marken, global head of hospitality at Deloitte, said.
"The real concern is that unless volume returns, hoteliers are unlikely to be able to drive pricing. The consequences of this are already all too evident, with a significant erosion of the bottom line and little sign that an improvement in profitability will be seen for some time," he added.
Looking forward, the lack of investment opportunities is resulting in grim outlooks for the next few years for regional hotels. More than two-thirds of those asked said they thought it would take three to five years before the regional transaction market returns to more normal conditions.
Worryingly, nearly a quarter think it will actually take significantly longer.
The depressing statistics for the hotel market in the provinces are in stark contrast to the fortunes in London where the highly attractive investment market and high barriers to entry are helping with strong transaction pricing.
"London is an established international gateway. As a cultural, economic and political hub, the city enjoys a pre-eminent position both domestically and internationally, contributing to robust market performance and a thriving investment market," van Marken said.
In the capital, the top end of the market is dominating transactions. Investment from overseas sovereign wealth funds and high net worth individuals is expected to continue.
The survey found that of the financing that is likely to be available in the future, traditional bank debt is expected to make up 38 per cent of financing and refinancing next year. Private equity (33 per cent) and insurance companies (15 per cent) were identified as possible alternatives.