InterContinental Hotels Group Aktie

Good morning, ladies and gentlemen, and welcome to InterContinental Hotels Group PLC Q1 Trading Update Conference Call. [Operator Instructions] I would like to remind all participants that this call is being recorded. I will now hand over to Stuart Ford of IHG Hotels & Resorts. Please go ahead.

Thank you, Gavin, and good morning, everyone, from me. As Gavin said, welcome to IHG Hotels & Resorts conference call covering the 2026 first quarter trading update. So I'm Stuart Ford, Senior Vice President and Head of Investor Relations at IHG. And I'm joined this morning by Elie Maalouf, our Chief Executive Officer; and by Michael Glover, our Chief Financial Officer. Just to remind listeners on the call that in discussions today, the company may make certain forward-looking statements as defined under U.S. law. Please refer to this morning's announcement and the company's SEC filings for factors that could lead actual results to differ materially from those expressed in or implied by any such forward-looking statements.

For those analysts or institutional investors who are listening via our website, may I remind you that in order to ask questions, you will need to have registered using the details on Page 2 of this morning's RNS release. The release, together with the usual supplementary data pack for the first quarter can be downloaded from the Results and Presentations section under the Investors tab on ihgplc.com. Now over to Elie.

Thanks, Stuart, and good morning, everyone. I will begin today's call by providing a brief overview of our global trading and development performance in the first quarter as well as some other operational highlights. I will then hand over to Michael to go through each of the 3 regions and their respective growth drivers in more detail. I'll provide some concluding remarks, and then we will open up the call for Q&A.

Let me start by thanking our teams across the business for delivering a very strong trading performance in the first quarter of the year, demonstrating yet again the strategic advantage and resilience of our globally diverse footprint. I would also like to sincerely thank our colleagues in the Middle East. Their unwavering commitment and dedication to supporting guests and owners during these challenging times demonstrates what true hospitality means at IHG, and we continue to do all we can to support them.

We remain confident in the enduring appeal of the region for both business and leisure travel, and we expect trading activity to bounce back when the conflict ends and flight capacity is restored. Turning to Q1 trading. Global RevPAR grew by 4.4%, driven by strong performance in all 3 regions and across all brands. ADR grew by 2% and demand was robust with occupancy increasing by 1.5 percentage points. All 3 drivers of stay occasions contributed to the RevPAR growth. Rooms revenue on a comparable hotel basis for groups was strongest, up 7%, followed by business up 6% and leisure up 1%.

Looking ahead, while many of you know that our booking window is short, we are pleased that our comparable on the books global revenue for Q2 indicates continued growth with the impact of the Middle East conflict and some wider disruption to international travel flows expected to be more than offset by increases in demand elsewhere. Importantly, in the U.S., which is by far our largest market, the underlying fundamentals for the industry remain robust with record employment levels, continued real wage growth, wealth creation and the unprecedented levels of investment into areas like infrastructure, data centers and artificial intelligence.

Turning to our global development activity. We opened 14,900 rooms across 82 hotels in the quarter, including 6 brand launching in new countries. Highlights include opening Six Senses London, an incredible hotel that is redefining the ultra-luxury experience in this key city. Our first Hotel Indigo property opened in the Turks and Caicos Islands, expanding our luxury and lifestyle presence in the Caribbean, and it will soon be followed by InterContinental and Kimpton. And our essentials conversion brand, Garner, also made its debut in Greater China with the opening of Garner Beijing Art District. This hotel opened just 1 month after signing, highlighting the speed at which conversion deals can move from signing to opening.

Together, our global openings exceeded last year's very strong first quarter and took our global estate to more than 7,000 hotels. This led to 6.6% gross growth year-on-year and 5% net growth. Year-to-date, net system growth was 0.9%, 20 basis points higher than the equivalent this time last year. We also added 21,400 rooms into our pipeline in the quarter, an increase of 6% year-over-year when excluding the Ruby brand acquisition in 2025.

Signings included our first new premium brand, noted Collection in the U.K., our first Ruby hotel in the U.S. and debut signings for Six Senses and Kimpton in Beijing. This led to a closing pipeline of 343,000 rooms, which is 3% higher than a year ago and equivalent to 33% growth on our current system size. Conversions represented 53% of signings, reflecting the breadth and attractiveness of our brands and the benefit to owners of joining IHG's enterprise. And we are very pleased with the progress of Garner, which has reached almost 200 open and pipeline hotels globally in 17 countries, less than 3 years since launch and already exceeds 100 hotels in the Americas.

We have released the latest episode of IHG Checks in on today. This features brand milestones, including the rapid progress of Garner, the success of internationalizing the Hotel Indigo brand and the incredible heights that the InterContinental Hotels & Resorts brand itself has reached as we celebrate its 80th anniversary this year. Turning briefly to some updates on our co-brand business. We announced back at our results in February that a new co-brand debit card agreement with Revolut and Visa in the U.K. And those card products are on track to launch in the coming months. We also said we are looking at further co-brand priority growth markets with Japan being one. We are delighted to announce a new agreement with Sumitomo Mitsui Card Company, one of the largest credit card issuers in Japan along with Visa. These new co-brand card products in Japan will launch in 2027 and mark further progress in our priority growth market where we already have around 60 hotels and more than 20 in the pipeline and millions of IHG One Rewards members.

Finally, a quick update on the great strides we're making on the technology front. At full year results, we laid out our approach to AI, which we group into 3 distinct areas. The first is guest acquisition and loyalty. The second is hotel commercial optimization and the third is corporate cost efficiency. In the guest acquisition and loyalty area, we have made excellent progress in developing an AI-powered conversational search tool that will be launched on our website and mobile app in the coming months. Guest and loyalty members will be able to use natural language search capabilities to describe in their own way and own words where they want to go and the hotel features and local attractions that are important to them.

This is a significant development that will transform how guests discover and book stays across our 7,000 hotels while also attracting more direct bookings. We are also on track to begin deploying our new AI-powered content management platform this year. This new platform will ensure the right hotel information shows up in the right channels at the right time, while making it easier for AI-powered assistants to understand, recommend and prioritize IHG Hotels as travel search patterns evolve. Furthermore, we are refreshing our loyalty platforms and rolling out a new cloud-based CRM tool powered by Salesforce so that our hotels can deliver more personalized experiences, offer more relevant promotions and extend loyalty rewards faster and more effectively.

Each of these initiatives within guest acquisitions and loyalty are designed to elevate the guest experience when searching, discovering, booking and staying at our IHG hotels and more importantly, to keep guests coming back. There are, of course, many other initiatives underway in this fast-moving space that keep advancing our leading technology platforms, and we will provide further detail on these areas with half year results. So the year has seen a great start for trading performance and development activity, and we are delivering on our strategic priorities and growth algorithm. With that, let me now hand over to Michael, who will provide more color by region.

He will also detail for you that while still early in the year, we are confident in achieving full year consensus growth forecast and profit expectations, underpinned by the strength of our performance year-to-date.

Thanks, Elie. Let me start with the Americas, where RevPAR was up 3.6%. This growth rate is particularly notable as it came on top of strong comparatives this time last year and momentum is expected to continue through the remainder of the year. Occupancy in the region was up 0.9 percentage points and rate grew by 2%. In terms of demand types, groups was strongest with comparable rooms revenue up year-on-year by 9%. Business also grew strongly, increasing by 6%, driven by broad-based growth across industries. Pleasingly, leisure was broadly flat compared with 2025 on a high base. In the U.S., which accounts for around 85% of the region's system size, RevPAR grew 3.4% and drove the Americas overall performance.

Outside of the U.S., Mexico was down 2%. Canada grew in line with the overall region and growth was very strong in Central America and the Caribbean. Good trading momentum in the Americas has continued in the second quarter to date. Looking at the rolling 8 weeks to Saturday, May 2, in aggregate, this indicated a further improvement in RevPAR growth to the 3.6% reported in the first quarter. This combined period normalizes for timing shift of the holiday periods within March and April. In terms of system size and pipeline, gross system growth was 3.5% year-over-year and net system growth accelerated for another consecutive quarter to 1.8%. In total, we signed 5,900 rooms across the Americas, representing a 32% increase on the comparable period last year.

Overall, we are very pleased with the strong performance in the U.S. and Americas in Q1, and we are confident in the industry fundamentals going forward. Moving on now to our Europe, Middle East, Asia and Africa region, which had another strong quarter. RevPAR increased 5.6%, driven by a 2.1 percentage point rise in occupancy and 2.2% rate growth. Looking at the subregions, Q1 RevPAR grew by 11% in East Asia and Pacific, 5% in Continental Europe and 3% in the U.K. Our business in the Middle East, which accounts for 19% of EMEAA's system size and only 5% of IHG globally saw significant disruption to operations from the start of March. Here, performance moved from growth of 9% in the first 2 months to a decline of 26% in March, resulting in a decrease of 2% for Q1 overall.

In April, RevPAR in the Middle East declined closer to 50%, leading to a RevPAR decline of approximately 7% for EMEAA overall in the month. However, we expect performance to improve in May with travel for the Hajj pilgrimage and religious tourism in Saudi Arabia has proven highly resilient. And more broadly, we are encouraged that comparable revenue on the books for EMEAA overall indicates an improvement in trading for May and June, which again reflects the breadth and diversity of this region. Turning to development. 3,900 rooms were opened in the quarter across EMEAA following a very strong performance this time last year, which included 13 hotels from the Novum Hospitality agreement. Gross system growth was 8% year-over-year and net system growth was 7.1%. 7,100 rooms were signed into the pipeline in the quarter, similar to the comparable period when excluding the Ruby brand acquisition in 2025. Finally, moving on to Greater China.

As we had anticipated, the improving trend over the course of 2025 led to RevPAR growth in the final quarter last year. In Q1 this year, RevPAR growth accelerated to 5.7%, supported by strong leisure demand over the Chinese New Year festive period and improvement in business travel. Occupancy increased 2 percentage points and rate was up 1.8%. RevPAR in Tier 1 cities increased by 6.4%, supported by increased international inbound and Hong Kong and Taiwan also performed strongly.

RevPAR in Tier 2 to 4 cities was up 2.9%. In this latest quarter, there were year-on-year increases in both domestic and international outbound travel. The latter was a driver of growth in our East Asia and Pacific subregion within EMEAA. In the near term, fuel price increases, which are currently leading to some flight cancellations will slow some international outbound travel, but that would once again lead to more domestic demand in China. We would expect outbound growth to quickly resume when flight schedules are restored, and we would still anticipate continued growth in domestic travel given the many structural drivers to growth in the country.

Turning to development activity in Greater China. Our record-breaking momentum continued in Q1 with the opening of 7,500 rooms. This was 73% more than the same quarter last year and included the milestone of surpassing 900 open hotels in the region. Gross growth was 12.9% year-over-year and net system growth was 10.4%. There were 8,400 rooms signed in the quarter, similar to the strong first quarter last year. We remain very confident in the attractiveness of the long-term fundamentals across the vast China market, which are underpinned by a rapidly growing middle class, broad-based economic growth and an underpenetration of hotels per capita. Government policy to boost domestic consumption is also leading to nationwide longer school holidays and flexible local guidance, which are additionally enabling more travel.

Now touching briefly on the share buyback. We are currently 25% of the way through the $950 million program announced in February. To date, this has reduced our share count this year by a further 1.1%. In concluding with some comments on consensus. As we said in the statement, while we are still at an early stage in the financial year, we are confident in achieving full year consensus growth forecast and profit expectations, underpinned by the strength of our performance year-to-date. We published details of consensus on our website based upon the Visible Alpha data service.

This currently sees consensus net system size growth at 4.5%. We continue to see more upside opportunity than downside risk to that figure, consistent with our message at full year results. Consensus operating profit from reportable segments stands at $1.380 billion. The profit consensus implies growth of 9% on 2025's results and the adjusted earnings per share consensus, which is $5.66 implies growth of 13%. This was a result in another year of IHG delivering on our growth algorithm. With that, I'll hand back to Elie for closing comments.

Thank you, Michael. To wrap up for you, we achieved a very strong trading performance in Q1 with global RevPAR of 4.4%, driven by better-than-expected demand in most regions of the world and by the benefits of our diverse global footprint. Our development momentum also continued at pace with gross system growth of 6.6% and net system growth of 5%. We are proud to have reached the milestone of more than 7,000 hotels in our system, and we're excited about the strong pipeline of growth that will add to this.

Also as noted in today's statement, we are confident of continuing to deliver on our strategic priorities and growth algorithm, which capitalizes on the scale and capabilities of IHG's platform, our leading positions and the attractive long-term structural growth drivers for both demand and supply across our markets. With that, I will now pass back to the operator to open up the call for your questions.

[Operator Instructions] We will take our first question from the line of Jamie Rollo from Morgan Stanley.

I've got a couple of questions on the Middle East and then on China. So the Middle East is 5% of your global system, but could you please quantify what percent of group IMFs it represents? And also what percent of the group pipeline and how we think about any sort of downside to those 2? And then on China, obviously, a very strong quarter, openings up 70%. But as you said, Michael, signing similar to last year. So is there anything there in terms of phasing and timing of openings? Or do you still think you can do 10% net unit growth for the year? And then sorry, just sticking with China, with over half the openings now in the region, how should we think about the sort of fee algorithm and the mix impact from those?

Thank you, Jamie. So, Elie, I'll take a crack at your questions, and Michael, please can build up on those. So look, in the Middle East, yes, it's 5% of our rooms. Actually, in the area of conflict, it's a little bit less than that, but let's just go with the 5%. And in terms of the IMFs, and we don't disclose IMFs by region or subregion. But what we've said is that in our EMEA region in total, which includes the Middle East, we are more skewed to managed hotels. Therefore, more of our IMFs come from EMEA than, say, the Americas on a proportional basis. But you're talking about 5% of our distribution. And so yes, it's down, but it's a small number from a small number. And we've said that it's more than offset by better performance in the 95% of our business. That's the first thing. In terms of pipeline, the Middle East is 9% of our pipeline. But importantly, most of that pipeline is in the Kingdom of Saudi Arabia, which has been less affected than other parts of the GCC. It's a very strong domestic market. It's got a strong religious travel. And as Michael said, the Hajj travel is expected to be just right up to our expectations here. We already have all sort of the bookings in for May, and it's trending very well. It didn't go down as much as, say, the UAE and has bounced back well. But if you look at that pipeline, 90% of our pipeline in the Middle East is actually in 3 countries: Kingdom of Saudi Arabia, Egypt and Turkey. So Egypt and Turkey are not impacted right now by the conflict and unlikely to be, and our pipeline is progressing well in all 3 of those countries. So while it's 9% of our pipeline, 90% of that is really outside of the most impacted part of the conflict. Now to China. There was nothing unusual in our system growth for the first quarter. And we're confident that we can continue to post strong signings and system growth. It looks like it could be another year of record signings and system growth in China. And when it comes down to the mix, I think the same framework on mix applies still that yes, China is growing at a lower-than-average RevPAR for IHG. But by the way, we're happy to see our RevPAR grow again. We've been saying for a couple of years that China would bottom out. It did bottom out in the second half of last year. It turned positive in the first quarter in RevPAR. It's now even more positive in the first quarter of 2026, and we expect that positive performance to continue for the rest of the year. So now we have a bigger estate in China. We have a positive RevPAR on top of that. So we're compounding our benefit from a bigger estate. And so yes, it comes in at a lower-than-average RevPAR while growing than the group, but that's compensated by higher RevPAR in other parts of the system and our growth in Luxury & Lifestyle. So it's net neutral to our mix.

Just back on the incentive fee. Yes, thanks Elie. Just back on the IMF, obviously, you gave the $134 million, so two thirds is in EMEA. So maybe to ask that another way, that $134 million last year, could that still -- that should still grow this year, right?

I mean, Jamie, that is the right number that we gave last year. Obviously, we're early in the year, and this Middle East will have a big impact on that. We don't disclose how much it is by subregion, as Elie mentioned. But as you can see, we've had good RevPAR outside of the Middle East and East Asia Pacific, in Europe, in the U.K. we still see positive growth there. We won't get into projecting and forecasting out IMF for the whole region. But you can kind of see -- I mean, really, you kind of can put the Middle East in a box and other parts of the world are still doing well. So that's why we feel confident in kind of underpinning where consensus is on our profit expectations. And we've talked about kind of the growth in RevPAR and we've seen and we've talked about that driving. If you look at our kind of fee and our base management fees and sensitivity to RevPAR, you're talking about one point being $12 million to $13 million. There will be a bit of offset of incentive management fees from the Middle East offsetting that a little bit, but kind of a little bit better as you go through as you think about that.

I mean the overall point is that once again, the strategic design of our business, geographically diversified, brand diversified, segment diversified, fee stream diversified now even more is very well structured to absorb inevitable disruptions that happen every year. Last year, the U.S. wasn't as strong and China wasn't as strong, but the rest of the world was strong and our ancillary fees were strong, and we had a strong year delivering on our algorithm. This year, 95% of our business is doing very well. We have a little disruption in the Middle East in one quarter, and we'll see how long that goes. But the rest of the business does enough to not just offset it, but more than offset it. So we're not getting into exactly what each fee will be for what quarter. But overall, for the year, we're very confident in consensus. And as Michael said, there's some flow-through if RevPAR is better.

Your next question comes from the line of Jaina Mistry from Barclays.

Congratulations on a very strong Q1. Three questions from me as well. Just following up on that previous question. You're happy with consensus, but what kind of macro or geopolitical assumptions underpin this? Are you saying that even if the Middle East is soft for the rest of the year, we could still hit consensus expectations? Second question is around the U.S. consumer. I noted that you said that U.S. momentum will continue through the rest of the year. How do you kind of square this with the impact of higher oil prices and whether that has an impact on RevPAR for U.S. corporates or leisure? And then very finally, just on net unit growth. You mentioned more upside than downside risk to full year consensus. But it feels like the risks versus full year results have kind of increased, and we're looking at the Middle East and also the risk in private credit. Are you seeing any changes to the financing environment as a result of private credit withdrawals in the wider environment?

All right. Thank you, Jaina. I'll take a crack at your questions. Michael can support too. I love your third question. I haven't -- this is the first time we hear about private credit, but I actually have some experience to share with you. Anyway, on the macro geopolitical, we're not sort of geopolitical experts, but obviously being in 100 countries for decades, following events closely, having dealt with so many conflicts and disruptions and even my personal experience from the Middle East, I can tell you that our -- we have a lot of experience dealing with disruptions. We make assumptions. I'd say the only assumption that we shared with you is that we think the worst of the conflict is behind us. How long some continued disruption goes on, we're obviously not sure. It changes day by day, and the news is breaking all the time, as you can tell, even yesterday evening. But the trend right now looks towards deescalation and looks towards some level of normalization. And it's -- I just want to go back and say it's 5% of our business, of our rooms, less than 5% when you look at the area of conflict. And so with the 95% doing very well, we're not that exposed to how much longer it goes or how much longer it doesn't go. Sure. Can somebody design a scenario where the conflict gets to a stage and oil prices get to a stage and there's, therefore, collateral damage to global economies. I'm sure you can design a scenario and you've read about them, but it doesn't seem -- that's not what's happening today. It doesn't seem like that's the direction of travel. So we're not seeing broader propagation of that right now beyond what Michael said, which is some flight cancellations, some disruptions in the immediate area, but all contained within the better performance we're seeing in the rest of our group. Coming to the U.S. consumer, look, the U.S. consumer in actually -- in their surveys, we know what the consumer sentiment surveys say, and they don't sound too good. The consumer spending is good, and it's a significant driver of GDP growth, along with the capital investment and AI investment and data center investment and greater complex investment. So I think it's been quite some time that consumer sentiment surveys have disaggregated from consumer actual spending. And that's because employment is strong. That's because GDP growth is strong, real wage growth is there. Financial markets are strong. Over 60% of U.S. households own equities and 30% of U.S. household net worth is in equities. So when equity markets are strong, there is a wealth effect, and it's been going on. Others will argue whether it's sustainable or not. All I can say is that despite the energy impact that the world is feeling, you've got U.S. markets at a record, actually, European markets is not far off. That is -- that's healthy for consumers. So could there be an impact to consumer behavior, let's set aside sentiment, but behavior from higher oil prices, you could paint that scenario. We're actually not seeing that today. We're not seeing that in our numbers. All of our segments grew healthy RevPAR in Q1. Luxury, premium, mainstream, all of our brands in the U.S. grew RevPAR. And as Michael said, in the 8 weeks to the 2nd of May, we see -- we saw even further improvement, and that's well after the conflict. So yes, I mean, there is -- someone can paint the scenario, but it's not what's happening today.

Just adding to that, Elie. I mean, I think if you think about -- and we talked about this post full year results announcement, if you look at the consumer and you look at where gas prices are, you're talking about around $1 a gallon more as it sits today. That could change, of course. But as you sit today, if you think about an average tank of gas, it's probably costing you $20 more. If you look at the travel around the U.S., we're very heavily aligned to not just air travel, but drive-to travel. And if you're going on a vacation, you're driving 600, 700 miles. I mean I think all in, round trip, you're talking maybe an extra $100 of additional fuel cost is associated with that. We don't think, and we're not seeing an indication that, that is someone is making a decision not to do a trip because of an extra bit of $100 or more of gas. prices. So we're not necessarily seeing that come through. And quite conversely, we're seeing -- and you've seen business profits do well in the first quarter. We're seeing really strong business travel, as you can see in our demand drivers in the Americas. And if we talk to bookers of travel at corporates, we're not seeing any slowdown in that or any indication that they're going to slow down. There's also all the infrastructure work that's going on. That's very supportive for demand in the U.S. And then you also have these groups that have picked up as well. And I think it's important to remember that within group, there's a lot of leisure group as well. And we're seeing good growth in leisure group as well. So I think that environment gives us the confidence. And certainly, what we saw in April, as we talked about the momentum continuing to increase. And then as you know, as we go through the year, there's a bit more easier comparables. We also have the World Cup coming. So there's a lot of positive things that give us confidence that the U.S. can continue.

Look, one last thing on energy prices is, yes, the relative increase in energy and gas prices in the U.S. is about $1 since the start of the war. But that is not a historic high. That is what the level was in 2022. So it isn't as if this is a historic high. It's -- yes, people don't like it, but it's clearly within the range of what they have tolerated when the business was doing very well. The more important thing for U.S. consumers is that their other energy costs have really not gone up. The U.S. is much more dependent on natural gas for energy, for heating, for cooling, for electricity. And actually, natural gas prices are down in the U.S. from the start of the war, not down by a lot, but they have not moved up. Europe and the rest of the world is not as in the same situation. So the U.S. consumer is not seeing a very big energy bill so far. And there's other factors of the economy, GDP growth, strong employment, the infrastructure build-out, the AI build-out, the strong equity markets, the tax relief that's coming from the tax bill of 2025 that now is paying consumers higher tax rebates and lower tax assessments and there are lower corporate assessments, that's actually adding more fuel to the economy. All that said, we think that the positives of Q1 have every reason right now, everything else being equal to continue.

On your third question regarding NUG and the Middle East, actually, if you look at our plan for this year, the Middle East and the openings we were planning for this year was roughly 5% of those overall openings within our kind of target or budget. We're not seeing anything that would suggest that, that is going to be massively disrupted. There may be a few hotels here and there that get -- that move and have a delay. But right now, as things are under construction and moving, they're continuing to be under construction and moving. And I think as you look about it and what gives us confidence to underpin and say there's more opportunity to where consensus is at 4.5% than there is risk is there other regions are doing really well. And so I think anything kind of disruption we may see in the Middle East, we can offset elsewhere in the world and that growth. So I think as we said at the full year results announcement and we say today, we really feel very confident about where we're headed and the ability and there's more opportunity above where consensus is than there is risk to the downside.

Yes. On your question about private credit, we have not seen a read across or a radiation of the private credit issues into hotel development. Actually, if we look at the U.S., our signings in the first quarter are up 30% year-over-year. Our groundbreaks are up 30% year-over-year. And I think private credit is invested maybe in other asset classes, a lot of software, I read and understand and hear from people on Wall Street, but it has not really translated into any effect on hotel development financing.

Your next question comes from the line of Estelle Weingrod from JPMorgan.

I've got 2 questions. The first one is on the World Cup. There were some articles referring to softer demand and some sort of group cancellations ahead of the event. Yet your competitors who have reported appeared comfortable on that front. Anything you can share with us on trading around the World Cup? Also, should we expect a softer momentum just before or after the event as we sometimes see in these events or not necessarily? And I've got another question on co-brand credit cards. I mean you've signed an agreement in the U.K. with Revolut. You just talked about Japan. Could this drive upside to your guidance to triple your credit card revenue by '28?

Thank you, Estelle. So on the World Cup, first of all, looking forward to the start in a few weeks and enjoying a few matches. France looks like it's in a good position. We'll see. We'll see what happens. No. Look, we're pleased with the bookings that we're seeing on World Cup, whether it's in the U.S., Mexico or Canada against the expectations we had. I don't know what other people's expectations were, but our expectations are being met so far. When you read about the other narratives in the market, it's mostly because of big FIFA bookings in big cities that then get released. We're not -- that's not what we're seeing in our properties. So we had a level of expectation. We haven't said how much. But if you read sort of where most analyst expectations or other company expectations were somewhere -- people talked about somewhere between 30 and 80 basis points. If you look at most markers, we're somewhere in between and for the annual impact to our Americas business, and that's being met. So it was never really our biggest source of optimism for the Americas. It was the fundamentals I talked about for the U.S. Americas that are driving our business. This is a nice thing on top. We're not seeing any impact on the shoulders of it, really. We think that the rest of the year has momentum, continuing the first quarter momentum. The World Cup is just something on top. It's going to affect the latter part of May, June. And hopefully, everybody will enjoy that. On your second question on the co-brand, we're pleased that we are moving ahead with our agreement here in the U.K. with Revolut and Visa, with Sumitomo Mitsui credit card company in Japan. These card agreements are accretive outside of the U.S. They're nowhere near the profitability of the U.S. market. I don't think they would move our '28 target by anything meaningful.

Your next question comes from the line of Jarrod Castle from UBS.

I think, Elie, you mentioned the use of Salesforce tool as it relates to clients. And if I'm not mistaken, Wyndham is also using Salesforce CRM. And I think they announced last year about 10% of their client-facing people were made redundant and your ambition is to do another 30% in terms of redundancies this year in terms of the efficiencies the Salesforce tool provides. So just any color in terms of how you'll be using it and how you're thinking, I guess, about what it means for headcount? Secondly, I guess, related, it sounds like maybe some of these tools are going to drive cost control and efficiency at a greater rate. How are you thinking in terms of margin development? I'm not talking necessarily about this year, but over the medium term in terms of what these tools might provide for you? And then just lastly, in terms of alternative forms of distribution, and I'm thinking OTAs in particular, are they trying to get closer to you, maybe offer you more preferential treatment than before, potentially the take rate, just given the challenges that they face in this new AI world?

Thank you, Jarrod. So I'm not familiar with what other people are doing with Salesforce and CRM. I know that we are in the process of launching really an industry-leading platform with Salesforce. But the purpose of it is much broader than -- and really much more important than cost containment. It's about getting much closer to 160 million IHG One Rewards members to deliver more personalized experience to them so that we can really understand their guest preferences, track them better, have a single view across the whole organization from front desk all the way to the loyalty plan, all the way to our sales teams, all the way to the booking channels, a single view of our customer with all of their information that they share with us so we can customize experiences and offers to them, deepen our loyalty. We reached 116 million loyalty members around the world, 65% -- 60% of our bookings every night are from IHG One Rewards, 73% in the U.S. And so we want to go deeper and further and this industry-leading tool will allow us to do it. It will bolster our top-of-funnel visibility and so make us even readier for GenAI booking and searching and driving more customers through our channels. It will strengthen our direct channels, strengthen our relationship with our customers and strengthen our performance. In the scheme of things, making our colleagues more productive is a good thing for the company, making them more efficient is a good thing for the company. AI clearly is a powerful tool for that. In general, what you've seen on cost containment and efficiency at IHG is very good control. Last year, our costs were down 3%. The year before, they were up 1%. We've guided to very low single-digit growth in our overheads. And part of that is driven by applying new technology, new processes, global centers of excellence. It's a total enterprise approach to making sure that our revenue growth is at a very high level and that our cost growth is nowhere near that.

And so we're opening up the jaws of what you mentioned then as our margin expansion. We're not saying that our margin expansion guidance has increased, but we certainly have more confidence. It's more underpinned by these initiatives. The 100 to 150 basis points on an annual run rate basis is further underpinned by the investments we're making in technology and processes and increasing the productivity and efficiency of our teams. We have very productive, constructive relationships with the global OTAs, and we continue to have constructive relationships. We're evolving our booking platforms, our content platforms, our CRM platforms to make them AI forward, AI first. I think they're doing the same thing. I think this will benefit the industry and benefit our guests. And -- but we think we're on the right side of this equation. I think we stand to benefit more from artificial intelligence through our digital booking channels, through our new content platform, through the new conversational search tools that we're mentioning. We're going to get closer to our guests, and we'll continue to have productive dialogue and relationships with the OTAs.

Your next question comes from the line of Richard Clarke of Bernstein.

Three questions, if I may. Just the first one on the U.S., an update on government travel within the U.S. How much of that was an ongoing headwind or tailwind in the first quarter? And is that a tailwind we can maybe expect that's supported through the rest of the year, sort of hearing that's coming back quite strongly. Secondly, your press release you put out, I think, on the 22nd or 23rd of April announcing 11 hotels signed in Europe had a sort of quite pointed long paragraph about a new third-party management company that's been formed by a joint venture that's going to work with world-renowned brands. Just why was that in the release? And is third-party management a big unlock in your regions? Maybe are you expecting these new management companies to sort of drive some extra consolidation within Europe? And then lastly, I guess, missing from your AI announcement that everyone else has done is the sort of ubiquitous ChatGPT app. Is that still coming? Or do you have some kind of objection to that mode of distribution?

All right. So government travel in the U.S. has bottomed out last year, of course. So this is -- it's a tailwind in this year in the sense that we're comping against that negative. And then it has started to inch up. I wouldn't say soar up, but it has started to inch up. And as we look at April, it was turning positive. And then our outlook beyond that for Q2 and Q3 is even more positive. So it's bottoming up and turning up. Not -- we're not expecting it to get back to pre-cutback levels this year. I think, yes, over time, just it will build up. Government has a way of just creeping up and government spending other way of creeping up, whether you appreciate that or not, it seems to be the reality. So it has become a tailwind of sorts. I wouldn't say a major one because government business is not a very big part of our business to begin with, less than 5%. I mean, total government business for us in the U.S. federal, state and local is 5%. So the federal is less than that. And it bottomed out, it's picking up. So it is part of the tailwinds. The strongest tailwind in the U.S., though, Richard, are the economic fundamentals, GDP growth that leads to corporate. I mean you saw the corporate profit so far with as many companies that have reported in S&P 500, I think over 80% beat expectations, strong financial markets, strong employment and wage growth, huge infrastructure investment that isn't just going to the likes of NVIDIA that are selling chips or Cisco that's selling servers. It goes to plumbing companies, electrician companies, goes to roofers, goes to concrete, goes to Caterpillar, goes to a lot of what was considered old economy businesses that hire a lot of people. And we, as IHG are actually more indexed towards the hinterlands of the country, towards industrial clients, manufacturing, technology, construction, not just the professional services in the key cities on the coast. So that is the real engine of the U.S. economy today. And all of this is the comping against the negatives, the tailwinds, the World Cup, all those are nice little sprinkles on top, and we're happy to take it.

On your questions about the third-party management agreement, there's nothing new about third-party management agreements in Europe with us. We've done it before. This is a portfolio that's being acquired by an entity that is forming a management company to operate these hotels, but part of that formation is assuming the management company of the seller. So I mean, it's a joint press release that we put out. There's a lot of context behind it. We're very pleased to have this addition of these hotels in key cities in Europe, and we look forward to them joining our system as they renovate and as they get through it. Maybe just to -- it's a franchise deal to be clear. There's no -- we're not involved in the joint venture. We're not involved in the management. They're the ones that have a joint venture, and they are the ones that are setting up the management company, and they're the ones that are going to do the operation. It's a straight, I think, 25-year management agreement for us.

Yes. Maybe just to give a little more color on it. It's a great long-term franchise agreement for 11 hotels covering Germany, Belgium, France. It's more than 1,800 rooms. It is asset-light in nature. We're not acquiring those hotels. It consists of 11 Penta Hotel properties today. They're all converting and rebranding into Holiday Inn, voco, Garner and really key city center and airport locations around the regions. It will be actually marked the debut of our Garner in Belgium, which is exciting to see, and we'll take Garner close to 50 open hotels in Germany. And so we're excited about that, and we expect that to kind of enter into IHG's system in the first half of 2027. And it's a real strategic deal. And it just -- I think it goes back to the power of our brands, the power of our loyalty program. And we've talked about conversions in Europe. It's a good way. This created a great way to do that where we don't have to do leases. We can do it in an asset-light way. And again, it just continues that what we've seen over the last few years of owners wanting to get into our brand to drive up their rates, drive up their occupancies and deliver better profit. And so we think we can do that. And you've seen us do that over the last few years with several different major conversions. This is another one.

On your last question about working with AI platforms and apps. As we said before, we're talking to all and working with all the major platforms, whether it's Google, whether it's OpenAI, Anthropic, we're working with everybody. If and when we launch tools and partnerships and products with them, we will disclose that. I think the most important thing, though, is getting your systems and getting your content ready and getting your technology platform ready so that when people do AI searches on these apps or on these tools that you're showing up and getting the right visibility with the right content. That's why we went into great detail. I'm not sure how many are discussing went into great detail about the new content platform that is already being launched, showing new features from every hotel, making it translatable in 20 language instantly with video, with 3D, with floor plans, with visual reality. And that is -- that's actually the most important thing. So then launching an app store is actually pretty easy, but what is the content that is pulling? Is your content in the cloud? Is the data structured in the right way to respond? Do you have the new images? Do you have the information? Have you structured the right way? That's the real work that is advancing, and we're very proud to be launching it right now. And yes, we'll have all these features in the end, including our own, but that is really the endpoint of the preparation.

Your next question comes from the line of Alex Brignall from Rothschild & Co Redburn. And your next question comes from the line of Leo Carrington from Citi.

May I ask a couple of follow-ups on the system growth and then change tack and ask on demand. Firstly, on the system growth, your conversions were, I think, 35% of openings and 50-plus percent of signings. Do you expect a further acceleration of conversion openings this year? Or is this Q1 something to do with timing impact? And then thinking about the U.S. specifically, is that mix of conversion similar to the headline level? Just picking up on some of your comments signings and ground breaks up 30%, I think, in Americas, your peers have indicated new build activity improving. I wonder if you have any comments there. And then separately, in the quarter, you managed to significantly outperform the industry across all the key regions. Can you just elaborate, I mean, beyond the general strength of the IHG system, are there any brand or mix factors that were especially helpful, the outperformance of business travel in the quarter? Anything that might help understand that quarter and extrapolate forward?

Let me start with the last question, and then we can work our way back. I'll start with the RevPAR performance, and then we can get into system growth, conversions, Americas signings. Michael and I will give you as much color as we can. I've said before that we're -- on the one hand, we're pleased with our RevPAR performance. And if it's outperformance, we're happy with that, too. But it's not -- we don't attribute it to one single factor. I think RevPAR performance, unless there's sort of an event, right, is on a consistent basis as we've been delivering for some time, comes from a full enterprise strategy and execution across many different things, strengthening our brands, the quality of our brands, the innovation and renovation of our brands, the service delivery, our technology platform that we talked about a bit earlier, I talked about it at full year, strengthening our loyalty plan that's now delivering 60% of our room nights globally. It's delivering 73% of our room nights in Americas that has grown faster than, I think, other loyalty plans to 165 million members. Strengthening our distribution, strengthening our relationships with our owners, our operations, it comes across many different things. In any given quarter, we're not really quantifying how much came from each, but it's a long effort to make sure every aspect of performance, strengthening our revenue management with the best in the industry AI-driven machine learning revenue management system out there that we have now in all of our hotels. Our new PMS system that's going to be in 4,000 hotels by the end of this year and it's already in thousands around the world. All these features improve hotel performance by basis points here and basis points there, and it starts to add up. The nice thing about it because it's not just one thing, it doesn't sort of unwind either. It's not just a single factor in a single quarter. We think it has momentum. We think it is structural, and we're going to continue to invest in our business properly to strengthen all the aspects of its performance. Michael, why don't you start on the system growth conversions?

Yes, sure. Let me just -- I'll give you some of the numbers just to make sure we've got the right numbers. Globally, on rooms openings in the first quarter, we opened -- new build was 64% of the openings and conversions were 35%. In terms of signings globally, new build were 47% of our signings and conversions were 53%. I think that's a great healthy balance there. We don't necessarily have a target of new build versus conversion. I think we're really excited about what we're seeing with our conversion brands, whether that's voco, Vignette, Garner. And actually, we signed our first Noted in the quarter as well. As well as what we're getting in conversions with our existing brands, like whether that be Holiday Inn Express or Holiday Inn. And so I think it's encouraging to see the conversions come in, but it's also even more encouraging to see all the new builds being built, especially as we've had over the last few years and even today, some questions around the financing environment. It really goes to show. And actually, as you go into the Americas in the first quarter, 72% of our openings were new build. And so that again tells you that financing is available. People believe in the long-term structural drivers of the industry and that they can make a profit on that. And so seeing that come through is really great. Conversely, we had 28% of our openings were conversion. If you look at our signing, roughly 42% of those were new builds and 58% were conversions. And so you see a great mix there. And really, we're going after every deal. We don't have a preference for new build or conversions. We've introduced and have a new set of brands that really allow us to go after all of those opportunities that are available to us. And that's really how we think about it. Elie, did you want to add?

Yes. I mean we've been -- what we said consistently about conversions and about new builds is we want more of both. We're not targeting proportion. And we're seeing more of both. Our signings were up in Q1. Our signing -- our openings were up. They were up in '25. They're up again in this quarter. And so we want more of both and wherever the proportion falls, so be it. But we're pleased to see both advancing new builds and conversions because, one, shows that financing is becoming more available and people have the confidence and the courage to break new ground. On the other hand, the strength in conversion shows the strength of our enterprise, strength of the IHG brand, strength of the IHG platforms and that people who already own hotels and have different brands are looking at the performance of our system and saying they would prefer to be with IHG and get that performance and get that relationship and get that support. And we believe that continues, especially now that we have more conversion brands, including Vignette Collection, which got its first signing here in the U.K., and we know that there's more coming. You look at the success of Garner, 200 hotels open and under development around the world and 100 in the U.S. already. So we're just thrilled with that in less than 3 years. And so we have more conversion brands. We have more conversion capabilities. And to answer your question, it's been sort of a theme out there is do we see conversions traveling at a structurally higher level than they used to 4 or 5 years ago? Yes, we do. Do we want the proportion to decline or increase? We're -- we just want more of both. But in aggregate numbers, we think conversions will travel at a higher level than they did before.

Your next question comes from the line of Alex Brignall from Rothschild & Co Redburn.

Following on from Jamie's question earlier. Just looking at the consensus that you have on EBIT, I think, Michael, you said 8%. So if we work backwards with the margin expansion, I think there's still a little bit of sort of fees lagging your NUG and RevPAR. And you just said that the room mix in China offset each other. I think that's likely to be sort of lag as the NUG grows or accelerates. But if you could give anything more there, that would be very helpful. And then secondly, just I didn't see it in the release, but often it's not the quarter, but leverage expectations for the full year and if you have seen any changes in sort of cash conversion expectations.

Alex, I'll take those and Elie can jump in. I think if you look at certainly where consensus is today at 1,380 against last year at 1,265, you're talking about about a 9% increase in the EBIT based on where consensus sits today. I think what you're trying to get back to is that fee triangulation question. And obviously, we don't give full P&L results now, including kind of revenue -- fee revenue and profit for the first quarter. But what I would say is if you go back to a lot of what we talked about last year and some of the main drivers of why the fee triangulation was happening and why there was a difference between the combination of RevPAR and system size and then growth, a lot of those dynamics have continued. We're continuing -- as you see, our system growth is improving and continuing to grow. Therefore, we do have more hotels in ramp-up. You do still have the fact that as hotels come into the system, there is also fee ramp-ups that happen as part of that as well. And so a lot of those things are still present. We do have a few hotels under renovation, particularly around EMEAA. And so it's getting -- I would say it's improving and getting better. But again, I would go back to fundamentally, we are not discounting our pricing. We are not changing our royalty rates. And so as we said last year, we don't -- at full year results announcement, we don't see this as a long-term issue for us, and it's more a dynamic of the current environment. In terms of cash conversion, there has been no change to cash conversion at all. We still feel very comfortable that we'll be in the 2.5 to 3x range, as we said at full year. There's been no change to that and feel very comfortable with continuing on in that range.

Your next question comes from the line of Andre Juillard from Deutsche Bank.

Congratulations for this solid start to the year. Just a follow-up question on the segmentation. You showed that groups were particularly strong. Could you give us some more color about the components, business, leisure and the regions where they performed especially well. Second question also about segmentation. Could you give us some more detail about the performance of the different brands or segments if you really outperform on the upscale and luxury versus midscale or is this [indiscernible] equal.

Well, I can start with maybe some of the RevPAR. I'll start with your second question. If you look at how we would look at IHG's results and how we really look at our luxury, upper upscale, upscale portfolio, they have performed really strong in Q1. But that doesn't also mean we haven't seen good RevPAR growth in our mid-scale and upper mid-scale areas as well. So across all of those, and we said every brand had improved in RevPAR and across all the segments that we had seen improvement. So really, the RevPAR growth we've seen has been quite broad-based across everything. However, luxury, upper upscale has performed better as has been the continuation of the trend, particularly in the U.S., if you look at that. We've also seen urban markets do very well. We tend to do well in suburban markets. That has been kind of in line with what we had expected. But all of those markets, whether it airport, interstate, small natural resort have all been positive in the U.S. And so what we see is the RevPAR being quite positive there. And so -- and then in terms of kind of demand drivers and how we've looked at it, we did talk about globally business up 6% in Q1 2026, groups up 7%, leisure up 1%. We did discuss earlier about the Americas being up, business up 6%, groups up 9% and leisure flat in the Americas. And I think it's important to remember that across that group portfolio, there's also leisure within those groups. So if you add all that together, you're really seeing strong growth across all demand drivers there. And as we look forward at our forward bookings, everything still remains solid subject to the Middle East, which let's kind of put that in a box. Obviously, there's an impact there. And we do know that will be recovering, as we've said earlier in the call. But across all the other areas, we're really still seeing strong growth in RevPAR across business, leisure and groups.

I think, Andre, the -- when the fundamentals are strong in GDP growth and employment growth in financial market strength, in private capital investment and tax policy across our major markets, then it becomes broad-based. And I think that's what we saw in the first quarter. And we started to see some of that in the fourth quarter actually last year, building up. But definitely see it here in the first quarter. It is broad-based. It's all segments. Keep in mind that the mainstream segment is a very, very large segment. So when you're growing at 2%, 3% RevPAR in a very large segment, that's substantial, and we have a lot of exposure to that, which is very beneficial. So we are -- we see it -- and even across our corporate transient travel, it was really broad-based across industries. It was broad-based across regions. And it was broad-based also, even though leisure looks like it grew less than transient than group, 60% of our group is leisure. And so leisure can be 100 people going to a wedding. It can be 6 guys going on a golf trip. And that's all group, but it's actually leisure group.

[Operator Instructions] We have one question left in the queue and your next question comes from the line of Kate Xiao of Bank of America.

I have 2 questions. The first one just on unit growth. I guess, that 5% in Q1, how should we think about this as a reference for the cadence and shape for remainder of the year into the next quarter or so? Anything to call out in terms of openings and removals, puts and takes around there for people to think about how to budget and model for the rest of the year? Second question on Garner, which you've launched into China. Can you tell us a little bit about this format, how it compares with your other mid-scale offerings in the region? In particular, how does it compare to some of the local offers, which have been a competitive strength from the local brands in China?

All right. So, we're pleased with our progress in net system growth. We're pleased with the strength of our signings, strength of our openings, strength of our pipeline under construction, which led to strong openings in Q1. And what we've said is consensus for the year is 4.5%. We're confident in that consensus. We see more upside than downside. And we're not giving any more color on the shape of the remaining quarters, but we're confident in the full year. More importantly, we're confident in the continued progression over years of our signings, of our openings, of the growth of our system. We're not saying that we're putting a ceiling on where we can -- what we can reach. We're not saying that we want to reach a certain number and then stop. But we're doing it in a thoughtful, gradual, sustainable way. And you've heard me say all along that we want to do it with keys with fees, keys that have fees. We could be 6% this year. We could have been 6% last year. And I don't say that's just an exaggeration. There were enough -- there was enough there for us to do it in a certain way, but we don't think it would have met our requirements, our standards of either quality or capital intensity or keys of fees or quality of agreement or all those things that we think create true sustainable shareholder value in an asset-light business with the right fee take. So we're -- we believe we're on the right trajectory, and we're confident in the consensus for the year, and we think there's more upside than downside.

In China, we're pleased to have launched Garner to open up our first property in record time. It's actually a very new asset that was going to be a local brand, but the owner felt that they had such a high-quality asset in a good location, they wanted a stronger system. So we don't believe that we're competing directly with the local, say, more budget brands. We are positioning Garner in China at a similar level from an ADR point of view to Holiday Inn Express, which is much more new build in China, but Garner is going to be conversion. So they're going to be similar in terms of positioning of rate and positioning of customer, say, customer income, but but one more conversion, one more new build. And as you may know, in China, a lot of structures for hotels get built before they're branded. In the U.S. and in Europe, you generally don't start a hotel project until you have a brand because you need to have a brand before you get the financing or before you can even get equity participation. In China, it's just different. We've been there 51 years. We kind of know how it works. A lot of developers will start a hotel and then find a brand along the way, sometimes just a few months before opening. And so that was sometimes wasn't an easy fit for Holiday Inn Express because we have a certain pretty prototypical format for Express. So Garner is more targeted to buildings that are either open already as hotels or on the way to become hotels but don't really fit a Holiday Inn Express. So it gives us an additional vector of growth, but the same positioning of Express, so not directly competitive with more budget local competitors.

There are no further questions on the conference line. I will now hand back over to Elie Maalouf for closing remarks.

Many thanks to everybody on the call today. I just want to remind you that our second quarter update and financial results for the first half of 2026 will be announced on Tuesday, the 11th of August. Thank you all, and goodbye.

Good morning, and good afternoon to everyone attending this fireside chat with Michael Glover, CFO of IHG. He's also joined by Stuart Ford, who's Head of Investor Relations. For those who don't know me, my name is Jaina Mistry. I'm Head of European Leisure at Barclays.

So thank you, everyone, for joining this fireside chat, especially after the wildness of this morning, thank you for taking the time. A bit of housekeeping before we start. [Operator Instructions] In fact, just drop me an e-mail or drop me a Bloomberg, my e-mail is [email protected].

So Michael, Stuart, we are thrilled to have you on, particularly at such an uncertain moment for the travel industry. And maybe that's a good area to start. So Michael, let's kick off with the Middle East. This conflict feels much more expensive than previous conflicts in the last few years. It's the first time that the Gulf states have been significantly impacted. What is IHG's exposure to the Middle East? What type of contract exposure do you have? And can you give us any commentary on the trading there over the last 4 weeks since the conflict has started?

Sure. I'm shocked that this is your first question that has come out. But thank you for having us, and thanks to everybody on the call for the interest in IHG. As we look at the Middle East, obviously, you can see from some of the industry data that's coming out, it is having an impact, and it will have an impact. But I think you need to put it in the context of the broader world as well and what we said at our full year results announcements.

And we said that we felt like all 3 regions would be positive. And even with the conflict, we still feel the same way that all 3 regions will be positive in Q1. There's no change to that, including for EMEAA. Actually, heading into the war, RevPAR was actually quite strong in the Middle East. It's obviously been affected by the war. It will obviously depend on how long this lasts and how far it goes. In terms of our system, we have about 5% of our system in the Middle East.

That includes Israel, Turkey and Cyprus. Without that -- without those 3 countries, we're a little below 5% that's about 50,000 rooms. Around 26,000 or half of the 25,000 rooms are in the Saudi Arabia market and then 12,000 are in the UAE. So they're the vast majority of those rooms. In terms of revenue impact, it's again about 5%. We don't have any owned and leased or owned hotels there.

It is predominantly franchised and managed like rest of the world. So there's no further exposure beyond our normal kind of fee rates that we take. In terms of pipeline, it's about 9% of our pipeline. And this year, it was about 5% of our kind of target for openings in the global IHG system. If you think about that from a system size perspective, we think limited impact on that. Most of these hotels are under construction or in the process. We would probably be -- at this point, we're not seeing anything pushing back, probably actually be more cost prohibitive to stop actually construction because you have crews on site, you have loans that have been made at this point.

That doesn't mean we won't see some impact in the future. But as we sit today, probably limited impact from a NUG perspective on this year, maybe some, but limited. We'll have to see how RevPAR comes out. It's still very early. We are still seeing good demand in Saudi for the religious holidays and the religious travel that's there, although not as strong as it would have been without this. So I think, again, that region is very resilient and has dealt with these things in the past.

So we'll have to see really -- we'll all have to watch how does this thing come to some sort of conclusion and when does it come to conclusion to really understand the full impact and the lingering impact.

And Jaina, just to add on contracting mix. I think probably everyone knows that we are roughly speaking, globally 70-30 franchised versus managed. For the EMEA region overall, it's more like 60-40 franchise managed. Now within EMEA, the much more developed markets like the U.K. are heavily franchised.

So the Middle East is one of those markets as part of EMEA that does have a bit more of a skew towards managed. But as Michael says, it's entirely asset-light. So there's not the 17 owned and leased hotels that are part of the Middle East region.

I think the other thing to think about as you go into and think about the region and the travel there is a lot of it is leisure travel. And actually, as you think about, there will probably be some dispersion into other markets around the world, and we'll pick that up. And actually, a good example of this is actually what happened in the U.S. last year when the new administration came in and there was some friction between Canada and the U.S. in terms of the 51st state, what we saw was a significant reduction in Canadian inbound into the U.S.

In our business alone, it was down 13% last year. But it wasn't necessarily demand destruction. Actually, if you look at our RevPAR in Canada, it was up 12%. And if you looked at demand into Latin America and the Caribbean from Canadian consumers was up quite a bit as well. So you'll have some of that movement that happens. I'm sure people are in a wait-and-see mode. Actually, the person sitting next to me here has a trip planned for the UAE this year. He hasn't canceled the trip yet and is actually looking to see what do I do? Do I go there or do I go somewhere else?

And so I think that's probably a lot of what will happen. There will be some demand destruction, right, if you were doing business meetings or things of that nature. We were actually going to go down and do some investor work in the Middle East and have actually decided to not do that until there is some sort of resolution here. But we are going to switch and we're going to move in and potentially go down to -- it looks like go down to Australia to do that work. So again, shift of where we would do it. So I think we need to kind of let all that play out and see how things move, and we'll probably pick up a lot of that demand elsewhere in the world. But I would still leave it that there will probably be some impact there.

Yes, that's interesting because there's a lot in the press about Europeans especially shifting their travel plans from the Middle East over back to Europe. Have you seen any changes in consumer behavior outside the Middle East?

I think it's really early right now. And actually, we go back to how I started this in terms of RevPAR and what we've been seeing is you may remember, as I said at the full year results that RevPAR was going to be positive for all 3 regions. And if you think back and really why did we have to make that statement is actually at Q3 last year, we were saying that we felt like the U.S. would be negative in the first quarter and as you had tougher comps there and then get better from there.

But as we moved into the year, actually, what we've seen is January and February will be pretty strong. And we've seen really strong corporate demand come back and well above our expectations. And so while the U.S. was the toughest comparable in Q1, it looks like it's actually come in pretty strong. And so we feel really good about that. And at the same time, we also had said that we felt like China would be kind of negative or flat as we kind of moved in and it had continued to improve.

But again, as we came into January, it looked strong. And while we had the shift in Chinese New Year, it was much better than we expected. And then, of course, Chinese New Year happened in February was very strong and a couple of extra days that happened there really helped and drove demand, and we saw demand all around Asia as well as a result of that.

And so as we -- and as we sit right now, it's been very, very strong demand as we've seen elsewhere around the world. And really within Europe, where we're seeing the same, you can see some of the industry data. The last kind of month-to-date, the U.K. has been up 2% in RevPAR and Germany was actually up 12%. Now there's some timing of conventions in that, but really strong data. So as we look at that, I think, yes, there probably will be, and as we look at around other parts of the world, we're seeing good demand for hotel rooms. So that's encouraging.

That's really clear. And actually, while we're talking about the U.S., let's maybe dig into the January and February data a bit more because the SCR data has been, at least on our side, surprisingly strong. What's driving this RevPAR inflection in upper mid-scale? Is it business? Is it leisure? Is it groups? What are you seeing in your numbers?

Yes. Well, really, we've been pleasantly surprised with kind of corporates and our business transient travelers that have come in. And so corporate has been very strong into the U.S. And actually, you also had 2 pretty big weather storms that happened in the middle of those -- both January and February and still had that strong performance. And so hopefully, we can resolve some of the TSA issues that we're seeing now, and that doesn't have an effect.

But as we sit right now, everything looks pretty strong. And then you have easier comps as you go on into the year. You also have the impact of the taxes and the tax breaks that have happened. You have the World Cup coming in. You have the Americas or U.S. 250 celebrations. You still have employment at all-time highs. We look at the number of people employed, that's a better indicator than unemployment for us.

And those still are in good -- those numbers are in good shape. You've seen wage increases. You've also got some negatives. There will likely be some impact on gas prices as you get into kind of the summer travel period. But if you think about that, as an American, we do a lot of drive-to locations and holidays in there. That's the kind of quintessential American holiday.

But if you're talking about maybe $20 more a tank -- for a tank of gas, you're doing maybe a couple of tanks of gas, you're talking about $100 extra maybe that would be coming in on a road trip if you're driving somewhere typical. That's not probably enough to really change in light of all the other things that's coming in, the strength of all the other things. So it may have some impact. But if you put it in context, I think we feel pretty good about going into the summer and where kind of Q2 and Q3 could land.

Okay. That's very clear. And at this stage, Q2, Q3, comps get easier, you've got events coming up. You must have some visibility over your booking curve. Q2 and Q3, could they look in line with Q1 so far? Or is it just too early to say?

Well, it is early to say. Remember that roughly 60% of our bookings happen within 7 days of the stay. What I can say is what we have on the books looks good. Groups, particularly are still up nearly double digits in bookings. So that feels really good. And so right now, there's nothing that would indicate any kind of weakness coming forward. So I think we feel good about where we sit right now.

Excellent. And we've actually just had a question come in around the World Cup. There's been so much mixed press around the World Cup, both on the positive and the negative. Are you seeing any cancellations from recent geopolitical events on your -- on the booking curves around the World Cup?

Nothing that we would pull out. I think there's -- I think because you also have an extended group of teams coming into the World Cup this year, they -- maybe some of the -- that's maybe driving some of the question around are these countries really going to be traveling countries. I think as you get closer and we will know more once we know kind of who advances and when they advance and the type of countries that advance.

But I think if history holds, those will be countries that tend to want to travel and support their teams. And I think our view is that because there are going to be a lot of international countries, it will be longer stays as well. So I think as we go through there, there's nothing I would note as of right now, any different than what we've said in the past that it looks like it will be a benefit. I think indicators around different people that have estimated somewhere between 40 to 100 basis points of growth. At this point, I wouldn't change anything. We're not seeing anything that would say that would be significantly more or less.

Okay. Very clear. We've got lots of questions coming in. So I'm going to weave something in. Let's talk about gas prices or petrol prices. You've obviously operated through several cycles with IHG. What tends to be the impact of high gas prices on drive-to demand?

We haven't had -- it kind of depends on how significant we're talking about. And -- but I mean, as like -- I gave you the example below, I was just in the U.S. last week, purchased gas. It was definitely getting a little more expensive. I think there's still a lot to see because also the governments have announced tapping some of the oil reserves. There's a movement of pipeline and gas out of the strait.

And so hopefully, we're able to mitigate some of that risk. As we sit right now, it has to generally take a pretty big move because if you put it in the context of everything else that's going on, the tax incentives that have happened and the increase in wages, the fact that people have jobs, I think the fact that people still want to travel and have experiences with their families and their friends and their partners, then it doesn't give us a concern.

It's something to watch for sure. But I think in the environment we're in right now and based on what we're seeing right now, I don't think we would call out anything that would be a risk.

Very clear. Michael, let's move on to our favorite topic of net unit growth. On the conference call at full year results, you sounded very confident in achieving the 4.4% that consensus is on. You even flagged upside to this number on the conference call. Number one, you mentioned earlier that there may or may not be some impact to net unit growth from the Middle East conflict and potentially the rise in inflation that's potentially coming. But do you still feel as confident in achieving consensus or exceeding consensus on...

We've done a lot of work on this and just to make sure that -- because we knew this would come up, not surprising. But yes, I think full year results, we said that we felt like we had more upside opportunity to the 4.4% than downside risk to the 4.4%. Consensus has moved to 4.5%. I would say, we're still in that same position, having looked at everything and understanding the data, the movement.

We do have a little more visibility into openings because you have construction schedules. And we're not seeing anything slip at this point. And we started the year strong. So I feel like the same story holds true, and we would kind of hold to that verbiage that we said. And we do feel like there's more opportunity to upside to that even 4.5% number than there is downside.

And the Middle East exposure point within that. So we mentioned of current open system size, that broad Middle East definition is around 5% of our system size. It's a bit more as a proportion of the pipeline. So it's around 9% of the pipeline. But in terms of this year's expected openings, actually, it's around 5% so not dissimilar from the mix of the open system.

So that pipeline in the Middle East is a bit more skewed towards longer-term openings, particularly given sort of the greater amount of long-term new builds that are expected to come on stream in future years. So in that sense, the exposure on the NUG expectations for this year, pretty minimal in terms of Middle East. So we'll have to just wait and see how the coming months go.

That's very clear. And then on this inflection from 4% last year to roughly 4.5% this year. What's driving that? Are there any regions that are inflecting more positively than others? Any chain scales? Do you need large conversion deals in order to hit or exceed these numbers? What's underpinning the confidence?

Well, I think, one, if you look at our pipeline, you look at what's under construction today, we said about 50% under construction in the pipeline. As you've seen in our results, we've seen really strong results really around the world, both EMEAA and China. And even last year, Americas began to tick back up. And I think we have confidence that those all 3 regions can continue to deliver.

We have greater visibility there. We have been on a journey. And I think maybe historically, we could have done a better job of being more consistent in our system growth. But if you look at our pipeline, you look at our signings and you look at how those have been coming in, the growth we had in 2024 in the pipeline and again, the growth in 2025, the amount of items under construction, you've seen us begin to accelerate that.

And we want to get to and continue to grow that and get to an enduring level and consistent level of delivery. And that's really what we've been focused on, and we feel our teams are really focused on that execution. We have great visibility of it. And I think we've got new brands that are allowing us to do that. We've got great opportunity to introduce new brands into places like China as well. We've got India that's beginning to grow.

The Middle East has been a strong growth engine for us, but other parts of the world as well. So I think we have a lot of vectors of growth now, and we feel really confident that we can continue to accelerate and have that enduring growth. I think we are impacted a bit about some of that inconsistency that we had historically. And particularly when you look at kind of what we did with the Crowne Plaza Holiday Inn initiative, we don't have anything like that coming again.

So you won't see something like that affect our system growth going forward. And that's kind of in our past and our history. Eventually, I think over time, that will come out and get out of the kind of the comparisons. And then people will see kind of what we're doing. And hopefully, today, they see that acceleration, they see that growth, they see that execution. And I think we deliver and continue to deliver on that, there'll be more trust we can do that on a regular basis.

We had a big conversion deal sort of almost exactly 2 years ago. So the NOVUM deal, which was almost entirely in Germany. That added just over 10,000 rooms in 2024, and then there was another just under 4,000 rooms in 2025. So the net unit growth last year, only a very small amount of it, a very small amount of it was to do with sort of that big conversion deal. And the further improvement that we're expecting in net unit growth this year is definitely not predicated on another large conversion deal.

If I look at the signings last year that we had on an underlying basis, the total signings growth was up 9% year-on-year. There is strength generally in conversions or conversion signings were up 10%, but new build signings were up 8% year-on-year. So there's a broad spread of that improvement in achieving a record level of signings and also breadth across chain scales as well.

Yes. Now that's not to say we won't take a conversion deal. And I think one part of the -- what's going on in the industry, if you look at kind of how much share we have versus how much share of the pipeline we have and how the industry is beginning to consolidate and what we can offer owners has improved significantly.

And so we're constantly working with owners. There's lots of interest in our brands. And hopefully, we have that -- those kind of things continue. Now probably won't be at the scale of NOVUM, of course, because that was quite a large business in and of itself. So -- but you could see more conversions happening in that respect, and we would continue to see. And you've seen individual conversions happening, but there could be some portfolios happen.

And we're constantly working on that, working with owners and exploring all avenues. Again, making sure we get keys with fees that add profit down to the bottom line. We want to do the right thing. We don't want to just necessarily grow system size. We want to make sure that converts into our growth algorithm and drives that earnings growth for our shareholders.

That's really helpful. And I guess just on that algo, when we're thinking about the medium term from here, if we hit 4.5% this year, is that a sustainable run rate going forward over the next few years?

Well, as you know, we don't give guidance. But I would say we're headed and if you take my comments earlier, we feel very comfortable that we can begin to consistently deliver. We would not put a cap on it at 4.5%. We would like to continue to grow and continue to do that, deliver even more. So that's our goals.

Obviously, we won't have -- there could be individual situations in a given year that affects that, but we would like to continue to accelerate, and you've seen us do that. And that's kind of our target and our goals is what Elie and I are working with the teams to do and motivate the teams to do and putting in place the processes and procedures and investing to make sure we can capture all that growth because I think all of us on this call are sitting here because we believe this is an industry that has structural tailwinds that the middle class is growing and that this is -- there is wealth being created around the world, particularly as we move east of the Americas or the United States and that we want to capture that growth.

And we believe this is an industry that has structural tailwinds that will allow us to achieve higher highs and higher lows. And so we will continue to push on that and make sure we're achieving our fair share or more than our fair share of that growth.

And very last question on the top line before we move on. We've just had a question come in around economic downturns. And it doesn't feel like very long since we were talking about IHG's playbook into recessions or into at least periods where consumer wallets are squeezed. How would IHG run the business in a period of macro pressure? What's the playbook do you typically see and benefit from down trading? And in particular, I mean someone is asking if business travel tends to down trade from, let's say, upper upscale down to upper mid-scale. So any insight that you have around previous trading periods, would be helpful.

Well, let's look -- I mean, if you look at it in terms of what is a one point impact of RevPAR on the business, globally, it's about, what, $13 million in fees. So if you have -- if you look in a small impact of RevPAR declines would be 1%, 2%, 3%, you're talking $30 million, $40 million in fees.

You've got some incentive management fees that might add to that, but those are kind of franchise and management fees. So it's not a major significant decrease. Now you can look back all the way to COVID and what we did with this business when it happened. We have many levers that we can pull in a downturn -- in a significant downturn like COVID. I don't think anybody is suggesting that we would get back to a COVID type decline, which was the worst in the industry. And I would actually point to what was actually happening there. Actually, in the U.S., I was actually CFO of our U.S. business. We still were able to collect over $1 billion during that time. And as a company, we were cash flow positive during that time. And if you looked at some of our brands to the question around trading down, if you looked at our Holiday Inn Express during that period, it was still running in the kind of mid-50s occupancy range.

Our extended stay brands were running in the 60% to 70% occupancy range. And so that kind of gives you the idea of the essential to business travel that's out there. This was a time period when people weren't supposed to be traveling at all, and we were still -- our hotels were half full or more than half full. And so I think that tells you that our mix of portfolio, while we have begun to expand up into luxury and lifestyle and premium. And I don't know that your high-end luxury consumer necessarily changes their patterns. You see kind of that wealth growth of baby boomers.

I think we're headed to and everybody talks about that transfer of wealth over time, but their preference right now for luxury goods and even luxury seats on a plane continues. And I don't see that necessarily stopping. But as you go into -- that's why we have such a mix of brands because it allows us to pick up all kinds of demand up and down the chain scale. Now we don't have economy, but I don't think we're talking about business travel changing and pushing down into economy. So we feel very comfortable that we have the levers we can pull no matter what happens in the industry to be able to kind of continue moving this business forward.

And I've studied some of the data, the prior 3 downturns, actually, which are the more -- like economic downturns as opposed to COVID. I mean one thing that's unhelpful when you look at that data is each downturn has got deeper. Now that's not because the industry or our business has become more cyclical. It's just actually the cause of the event was different each time when you look at the prior 3 recessions. What you very clearly see from the industry data though is that there is that clear cut resiliency of upper mid-scale. Now it still has an element of impact.

It's just a lesser impact because of that greater nature of essential travel that occurs in upper mid-scale. We've never really been able to prove any particular element of down trading. There's just a greater exposure, particularly in upscale of more discretionary business travel, particularly groups and events that tend to not -- end up not occurring in a recessionary cycle. So it's never really been proven that people go from going from an upscale brands and then there's a squeeze on so they'll go and do exactly the same stay, but they'll go to an upper mid-scale.

But it's the resiliency itself of the type of occurrence of staycation. And that's actually got something that is about both essential business travel and an element of essential leisure travel, which always sounds like kind of an oxymoron, but the relevancy is at the weekends for a staycation into Holiday Inn Express, actually, it's an essential trip to go and do that family drive to take kids back to college, et cetera, et cetera. So there is that resiliency that's been well proven in the chain scale positioning that we've got.

And then, of course, we've got the entirety of the asset-light resiliency of the model as well on top of that. We have been increasing our chain scale weighting at more of the top end chain scales. And actually, the very top end has its own level of resiliency. I mean we would like more across all of the chain scales. We're not trying to build a business that's specific to be future-proof in recession. We're building a business that has long-term secular growth drivers. So we want more of all from mid-scale all the way up to the top end of luxury.

Very clear. And I guess when we look over the last couple of years, the credit cards, your set of loyalty points and your tech fees have been a considerable driver of sales and EBIT. And I guess we're looking at 2026 now whereas -- these levers might actually grow just low double digit in the last [indiscernible]

Just low double digit.

But if we layer on uncertainty around the Middle East and just generally geopolitics, are there any other cost levers that the business can pull to drive EPS to still be within that 12% to 15% range? And I'm thinking whether it's an additional story around cost savings or ancillaries or any other levers that you would flag within your business for this year?

Well, I think for this year, I mean, we've been really clear around how we see those ancillary fees progressing. We still have the branded residence fees, but we're not getting a step-up this year. I think that, that comes more in 2027. But we do see those ancillary fees continue to grow.

Remember, the credit card is primarily a U.S. credit card or is a U.S. credit card. And so it's more impacted by demand and patterns in the U.S. So just a reminder, we are compensated based on acquisition of credit cards. So we get things called acquisition bounties. The sale of points to Chase who then gives to consumers, but then we also have a portion of the sales on the card that come to us from both partners we have with the credit card, Mastercard and Chase.

And so we still believe and have confidence that will continue to grow and nothing that we've seen today would change our pattern that we've seen. So as I've seen things coming in, we're in good shape. And similarly, with the point sales, while point sales can be global, it is heavily in the U.S. And so there's nothing there that would suggest that's not going to continue at that growth rate we've talked about.

In terms of cost savings, I think we want to be careful. We do have levers we can always pull and we will do and try to make the best decision we can there in light of what the market. I think we still need to wait and see. We also don't want to make short-term decisions that reduce the -- our ability to capture the long-term growth. And I think that's probably our biggest risk as a company is really making sure we gather and capture that long-term growth.

And so we want to invest in places like India. I want to put teams in there and make sure we're building the capability so that we can grab and build within India, but also capture those consumers so they know our brands. So for example, we were in India in January, Elie and I and the executive team, we met with some of the Ministers of Tourism. And one of the things I took out from that meeting is that the Indian outbound traveling consumer in 2024, they were in about the 13 -- 12 to 13 to 14th country as an outbound traveling group. If you look at them in 2025, they were #5.

And so that is a huge part of the world in terms of growth in outbound travel. And as wealth is increasing there, you want to make sure you capture that. And you're building your affinity to the brand, you're building your awareness to the brands. We're working with owners in India to make sure we capture that. That's just one example of I think you could be shortsighted and lose out on that opportunity long term if you try to cut too hard in the short term.

Now we always will make the right decisions and look at that in light of what's going on in the market. I think it's probably too early to really push into anything there, but we do have flexibility around a number of things. But also, I would just point you to the work that we have done recently on cost and actually work we started 3 years ago in terms of how we're adjusting our cost base and changing the way we work.

We still have opportunity while you saw us reduce our cost base last year, and we have put in that work to continue to -- allow us to continue to take advantage of technology, take advantage of things like capability centers and process improvement. We said going into this year, we would be low single digits, similar to where we were in 2024. And so we do have opportunity, and we will continue to do that. But again, I think more importantly, let's see how things progress, and we'll look and make the right decisions.

That's very clear. And again, before we move on to wider ancillaries and maybe AI, one final question on net unit growth that's just come in. When you think about the step changes over the next few years, I guess one of the moving parts is around removals/dilutions. And how do you see the path to get back to kind of 1.5%? What steps have you got in place? What processes have you got in place to get to where you want to be eventually?

Yes. Really that we feel confident that we can eventually -- we will eventually get back to 1.5%. I know we've been a little bit elevated over the last couple of years. There's some structural things that were really driving that, particularly in China and some of the size of the hotels that were being exited there. As we look and go forward, the #1 thing we do is drive returns for owners.

And if you look at all the things we've been doing around our commercial activities, the improvement in our loyalty contribution, it's gone from in the 20 -- if you looked at 2019, we were in the kind of low 50s, high 40s to today, we're in globally 65% and 70% in the U.S. So as we continue -- we've launched that into pricing program, which has helped us drive RevPAR improvement. All of those things we put in things like procurement to help lower the cost of operating a hotel for owners, building hotels, renovating hotels.

So all of these things we've been doing to try to drive benefit to our owners. And actually, we've used our scale to help owners. You may remember in 2024, we launched a discount on some of our fees to owners where we changed our loyalty assessment from 4.75 to 4.55 and then also increased the reimbursement rate to owners. And so we're all doing that. And I think that allows us the more we can drive those returns for owners, the better off we are in terms of keeping assets with us.

And certainly, we have the processes in place today to make sure that we're keeping as many hotels as we can. There's probably some natural churn that needs to happen. I think maybe in our history, and we've learned some lessons and maybe keeping some hotels we shouldn't. If you look at what we had to do with Holiday Inn back in the 2008, 2009 time frame where we relaunched the brand. And then actually, the initiative we had in -- with the Crowne Plaza and Holiday Inn initiative where we took assets out, you can -- you probably need some healthy churn. So we think getting back to 1.5% allows us to have that kind of healthy churn and keep the brand fresh. And that's where -- so I think we have the path to get there. A lot of work to do, of course, and we will work very diligently to do that.

Thinking sort of post that 2021 Holiday Inn and Crowne Plaza review, actually, the last 4 years, we've been at about 1.3%, 1.5%, 1.9%, and 1.9%. And I don't think an inference should be drawn from the last 2 years being 1.9. That's somehow a drift of 1.5%. The last 4 years have been sort of there or thereabouts around 1.5%. And as Michael said, sort of in China, the last couple of years has been their phase of sort of a bit of a post-COVID catch-up that has effectively worked its way through the system.

If I look at the 5 previous years before taking that action that we did in 2021, those 5 years were consistently sort of 2.2%, 2.3% removals a year. So if you like the step changes occurred because those earlier years, we were chipping away at the tail end of the portfolios of Holiday Inn and Crowne Plaza, and then we undertook the final exercise in 2021.

So that's all done. It was done many years ago, and we're delivering on that consistency of around 1.5% already.

Very clear. And the structural issues in China that you mentioned, has that now run its course? Are we now at a clean state again on a clean slate in China?

Well, I think -- I think it could still be a little lumpy as you have in the history of China, you really had and started to build. I was the CFO there from 2013 to '15. And you've had some really big hotels. And so sometimes you can have some of those -- the lumpiness of big hotels leave. So we'll have to watch it. But I think the COVID structural issues are probably over, but there could be, over time, some of those bigger hotels that come in and out.

Very clear. Maybe let's move on to the big topic of the year, which seems to be branded resi. I mean at various industry conferences, and that is the buzzword for the industry. And obviously, you've spoken about the step-up in fees potentially from next year. Walk us through the drivers of the step-up in branded resi fees next year.

Okay. Well, first of all, I would say why do the owners like to do branded residences. And I think you have to understand their motivation to understand why this is becoming such a popular thing. And not that it hasn't been an area of development in the past, but it's really become popular because basically, the owners can sell those units in advance of the construction. And by doing that, they get that capital in and reduces the amount that they have to borrow. And so that's quite attractive for a developer.

In fact, many developers say they can build a hotel on the back of just what they're receiving from the branded residences. And so that becomes a very attractive proposition. Now for us, historically, we haven't had a lot of great brands that could really play into this segment. We had Intercontinental, but we've acquired Kimpton.

We've acquired Regent, we have acquired Six Senses. And those all fit into this branded residential segment because it tends to be more in that higher end and more luxury in what it's built. And so as owners do that, we took actually analysts. We took [indiscernible] into our Six Senses here in London, which has 14 branded residential units. I think they have one left if it hasn't sold already. So if anybody wants one on the call, we do have one available to sell.

It does run in the GBP 20 million to GBP 30 million range in terms of pounds. But if you have that, we've got a place for you. And what it gives you is access to the facilities in the hotel, which is incredible Six Senses. The team -- all the analysts walked through it and got to see really this incredible gym, wellness facilities, spa. It actually has a club associated with it as well.

And so as an owner of one of those residents, you get access to that. And so there's a lot of benefit for the owner, too. Now also -- and how do we get fees on that? We get fees as the units are sold. There's also a bit of a management fee that can come with that. But also in many locations, those units will come back into the inventory of the hotel and be sold as rentals.

And so -- especially in resort locations. So not only do you get the fees that come in as the units are sold, you get ongoing fees, and that's both franchise fees or management fees in this case and system fees. And so typically, in a resort location with one of these hotels, the owner may use it maybe a month or 2 of the year. It will come back into the inventory. That will be rented out as guests come in, and we'll earn management fees and potentially incentive fees off of that and then our system fees. And so that's how we're rewarded because we have more brands on this and because we're kind of in our infancy, it has taken a little time before this ramps up. And we said it's in that $6 million to $10 million in fees a year range. That's where we'll be this year again. But we believe it can be multitudes of that. And based on our pipeline of deals that are being signed and opened, we have an ability to really accelerate that going forward.

And we have a reasonable lead indicator because they're being built right now, and some of them are obviously sold in advance the full sale value may be coming in a year or 2 years' time when the sale of the resis already is completed at that point. But if I look at projects that have come on stream, it's quite diversified. There's some in the Middle East, but we've got new branded residences that are on stream and selling in Thailand. We've got Kimpton in Monterrey We've got a new one coming through in Japan. These are all live sales arrangements right now across the 30-plus projects that we've accumulated thus far for branded resis across those brands.

If anybody is in the rest on the call, let us know, we'll get you set up.

Are you seeing any change in demand perhaps the Middle Eastern properties or appetite from Middle Eastern investors to buy into branded resi in recent weeks?

It's way too early. And I think to be honest, look, things can change. But I think most of these places and certainly, when we met with the Ministry of Tourism in Dubai and spent time in Saudi, they take a very long-term approach to the development of what they're doing there in the country. And really, we're impressed with their plans and what they're doing. And I think I don't think this will -- I don't believe, at least at this point, this will impact those kind of longer-term payout plans.

There may be some short-term disruption, and it will kind of depend on maybe the outcome of what happens and how long this continues. But I think long term, we'll get back to that growth because there's great opportunity there. And the strategic plans of each of those governments, I think, are really supportive for travel and tourism in the future.

Do you have to hand what proportion of your branded resi pipeline or units that are currently being sold based in the Middle East?

No, not to hand. I mean there are some examples within those projects, but -- so there's quite a lot further east of that, but then also examples, U.S., Mexico as well. So it's -- yes, it will be a proportion. I don't know the exact figure, but it's a broad push. It's effectively an opportunity for developers everywhere where there's a logic for high-end luxury hotels, they will be thinking, as Mike sort of described about the attractions of building residences alongside that.

I mean I think you mentioned sort of attending industry conferences. I know there's been a big Savills report on this, which has put out there sort of the expected twofold increase in this segment between now and 2032, I think, is what Savills was expecting is a twofold increase in the number of branded residences that will come on stream and open. And obviously, why people are doing that? It's partly to get the cash flow in early, often fund the building of a hotel alongside it.

But that same Savills study talked about the target around 30% uplift in value of the property versus the equivalent benchmark. So exactly the same spec luxury apartments, but applying the appropriate luxury brand like a luxury hotel brand from us is typically targeting to get a 30% sale premium. And that's what we're tapping into because that premium is coming from the intellectual property of our brand like Six Senses, like Intercontinental, like Kimpton that's being applied to those branded residences.

Very clear. And on the topic of luxury, I mean, you've previously mentioned luxury and lifestyle, both as areas where there could be white space in your portfolio. We've had quite a few questions come in around M&A. Would you ever consider something larger like acquiring a Hyatt or Hyatt type brand, for example? Or are you happy to stay with smaller bolt-on brands at this stage?

Well, to be honest, if you look at the kind of history, there hasn't been a ton of transformational M&A. I think the last one that happened was Marriott and Starwood coming together in terms of -- and then you saw and if you follow the industry, a bit of a potential merger between Wyndham and Choice that didn't happen. And so there were some challenges associated with that.

I think we always would look at everything that's available. We don't have any plans at the moment. But absent that transformational M&A, what typically happens in the industry is you get to kind of smaller brands that are private equity owned or individually owned, and there are changes that happen. And we kind of say you got to hang around the hoop. And you look at what we did with Ruby, and that was an individual that owned that brand. And we also have to think about being asset-light and making sure that we can come out of that in an asset-light way. And that's what we did with Ruby. We bought the BrandCo, and he continues to operate the ManageCo and OpCo -- I'm sorry, PropCo and OpCo.

And so -- and then we also did that with Six Senses. Six Senses was heavily a brand company and didn't have a lot of assets owned. And so we always are looking at opportunities like that all over the world. If you look at where we sit from our kind of balance sheet perspective, we're in a great position. We sit at the end of last year at 2.5x our net debt to EBITDA.

That's at the low end of our range. We're a highly cash-generative business. So we have opportunity, and we always will take that opportunity to evaluate. It doesn't always come up. And sometimes can be long gaps in between things happening. Our Chief kind of Head of Development that looks at this stuff says -- gives a quote you got to throw a lot of spaghetti on the wall to get anything to stick. And so that's what we do.

And so we're always out there, and we're involved in anything that comes up. And as long as you got to make sure it's the right thing and we're getting the right return for our shareholders. But there's no aversion certainly between Elie and me in growing and making sure that we're pursuing every opportunity that can potentially drive value for our shareholders, and that's how we think about it.

And would there be appetite to make an acquisition to fill in the gap in economy right now in your portfolio?

There's kind of a -- it's an area that we've looked at. I won't say, we would never do it. To date, we've looked at it multiple times, both Elie and I when we were in the U.S. spent time looking at this. And even in our positions today, we look at it. We've said today it's probably not the right place for us to go. That doesn't mean that wouldn't change. There's a lot of complications that come in with the economy chain scales. And so we would have to make sure we could be successful and also make sure it doesn't distract from really the great opportunity in front of us that we have with our Luxury & Lifestyle and premium portfolio and really the opportunity to grow the existing brands we have.

First and foremost, that's the greatest opportunity for us. We've got great brands. We're not distributing those brands all over the world. So there's still a lot of opportunity just in what we have today to continue to grow. That doesn't mean we wouldn't potentially add and even look at other segments. And think about what we would do in the luxury end, there's probably also additional capacity to add brands.

If you think about our Six Senses brand, we have more demand for that brand than we have places we want to put it because there's some value in really having the scarcity of that brand. And so we've proven that we can really deliver for owners there. We've proven we can create a great guest experience for our guests at those hotels. And so we think that's a huge opportunity as well. So really up and down the chain scales, Elie and I spend a lot of time along with EEC, evaluating what are those opportunities, what are the right things and also work with our Board to make sure we're looking at everything and have the right appetite for M&A and growth.

Very clear. Let's move on to our last topic, which is AI. I think the most interest in the industry right now is how AI will impact distribution, direct bookings and marketing. And maybe my first question is, how has the industry progressed so far? And in particular, what investments has IHG made? What are you trialing today? And how is that different to where you see the company in, let's say, 5 or 6 years' time?

Well, I do think this is a very fast-moving area. I mean you can go back not just a few months ago and one of the companies in this area was going to win everything. I think that was OpenAI. And then all of a sudden, Google is back in and taking back over. And so it moves very fluidly and it's very fast. I think what we feel good about, and Elie laid it out at our full year results announcement, is that we have really strong connections with the owner, and we own in the inventory, and there's no way to book one of our hotel rooms without going to us.

And so that is really an area that's kind of in between those 2 where you see search patterns changing. And so what we're working on, the first thing you need to have is a portfolio of -- a technology portfolio that's AI-ready. And fortunately, we've been investing well ahead of the curve on that. We were the first team to put our reservation system in the cloud with GRS. We're in the process of updating our PMS system around the world.

We'll have a brand-new cloud-based PMS system in place by the end of 2027 of all of our hotels around the world. And then we've been working on our platform and a content manager. That's a really important piece. So if you sit there and think about how is someone going to search in the future, I want to stay in San Francisco, I want to give me a hotel that has a room with a bay view.

I want nothing. I don't want anything near an elevator. I want to make sure that this has TripAdvisor scores above a 4.5. So give me that. And so what we're doing is servicing all that content so these agents can come in and get that content and push it back to the guest. And they may say, well, let me show me a video of the -- well, we want to make that video and that content available as they go through that process. Now we also -- and Google, you've heard that Google actually announced that they were working with us.

And part of the reason they wanted to work with us is we have such a great infrastructure in place. They know because they've been part of it. So all of our data sits in Google Cloud Platform. That's probably the key component of your being able to really take advantage of AI is having that platform and data in a place that can actually be leveraged by agents as they're being used. And so we're working with Google on that. We're also looking and working with OpenAI and working with them to see how we can work with the things that they're doing.

But what's beautiful about what we're doing with Google is also as you then are doing that search and you learn 10 different tendencies, if someone is saying, well, also, I need to make sure I have a pet-friendly hotel. So we want to make sure then that, that we're actually learning from that. That's what people want and updating our content. And so it becomes this cycle. And really, if you think about what we're doing, we want to work with any of those partners so that we're really expanding that funnel of all the room nights that could potentially come into our hotels.

And then we're using AI in our commercial and pricing activities to be able to yield out which of that business we want or don't want. And so all of that AI technology is coming together to make sure that we're capturing that demand as it's coming in, the way guests and want to change and how they are changing and be able to then take the business that we want.

And so that's what we're working on. We really have 3 pieces of strategy. Actually, we were -- as an executive committee, we were in California last week working on and working through some of this with our partners and having presentations from some pretty influential people in this segment. And our team is actually there this week as well, and we've hired actually a new Head of AI, Wei Manfredi, which we're really impressed with what she's brought so far and is going to bring. So we're really trying to be on the forefront of this.

We're focused on the distribution side. We're focused on the commercial side. But then you can see we're also using it within our cost base, and we'll use it also to help owners as well. So really across that whole broad spectrum, AI is changing how we work, and we want to be on the forefront of that. And actually, what I think most people don't necessarily or maybe a piece that people don't appreciate is I think this also gives us a competitive advantage on the backside because if you think about you're an independent hotel, how can you keep up with a company like IHG that has this big system fund because all this is covered under our system fund that is growing with RevPAR and with systems.

So every year, I have additional funds that I can spend on technology and make sure I'm investing to make sure we're ahead of the curve. As you get to be an independent company, how are you doing? How are you doing that with your app? How are you doing that with your loyalty program? How are you making sure your reservation systems, your property management systems can make sure you're still seeing. And I think that gives us -- continues to give us an advantage. I think also why you're seeing conversions continue to be such a big part of the story is that owners see that, too. And it's really hard to compete against the kind of investment we can make to make sure we're ahead of the game.

Very clear. I mean I think the future is really exciting with AI, and let's see how it pans out over the next few years. Well, I think we're at time. So Michael, Stuart, thank you so much for this last hour. It's been fascinating. We could have spoken to you for another hour or more on AI alone. But I guess we'll leave it there to all our investors on the line, thank you for joining. We hope you found it insightful. If you have any follow-ups, let us know, and we'll share them with the company. Thank you very much, and enjoy your evening.

Thanks, everyone.

[Operator Instructions] And I will now hand over to Elie Maalouf to introduce the Q&A session.

Thank you, and welcome to this Q&A session. I'm Elie Maalouf, Chief Executive Officer of IHG Hotels & Resorts. Hopefully, you've all had a chance to watch the results presentation, which we made available at 7:00 U.K. time this morning, featuring myself and Michael Glover, our Chief Financial Officer. Michael and I are in different locations today. Michael is at our headquarters in Windsor and I am currently with our business in the U.S. So do bear with us as we coordinate sharing the questions.

Before we open the line to take the first questions, I will briefly summarize our excellent performance in 2025. Our RevPAR grew by 1.5%, reflecting the breadth of our geographic footprint, the depth of our brands and the resilience of our operating model. We delivered gross system growth of 6.6% and net system growth of 4.7%, driven by outstanding development activity and record hotel openings.

We signed over 102,000 rooms across 694 hotels, a 9% increase with over 2024 when excluding the Ruby acquisition in 2025 and the NOVUM Hospitality agreement in 2024.

We expanded our fee margin by 360 basis points, driven by operating leverage and step-ups in ancillary fee streams. EBIT grew 13% and adjusted EPS grew 16%, supported by the completion of 2025's $900 million share buyback.

In summary, we made excellent progress on our strategic priorities and we are confident in the strength of our enterprise platform and the attractive long-term growth outlook.

Touching briefly on 2026, while very early in the year, we have seen and are pleased with the trading performance to date in all three regions. We have also announced a new -- today, a new $950 million share buyback program and formally launched our latest brand, Noted Collection.

And with that, let me turn it over to the operator to take the first question.

Thank you, Elie. And your first question comes from the line of Richard Clarke of Bernstein.

If I'm allowed, I'll do three. I guess, if I look back at 2025, if I was to strip out the cost savings and the boost on card revenues and points revenues, I think your EPS would have grown off algorithm about somewhere in the mid-single digits. I appreciate it wasn't the best RevPAR year. If RevPAR doesn't play role in 2026 or going forward, do you have other levers to pull to kind of make sure you hit your algorithm?

I guess second question, you said a couple of times, Michael, that there's some key money that's been deferred into the first quarter of 2026, just the scope of that and whether that should make us quite optimistic about unit growth and sort of luxury unit growth in 2026?

And then thirdly, I think there was -- your margins down in China. You talk -- made a comment about improving unit economics or owner returns in China. I guess Holiday Inn Express now a $22 RevPAR brand in China? I don't think you'd open a $22 RevPAR brand in the U.S. So do you need to improve those RevPAR numbers? Do you need to improve owner returns? Does the brand work at that level of RevPAR?

Thank you, Richard. I'll take the key money question first. And then I'll turn over the fee margin triangulation while I'll touch on it briefly, then hand over to Michael for some details and turn over to him the margin question on China.

So first on key money, as you saw in Michael's presentation, we have been very prudent and thoughtful deployers of capital across a range of places we -- and manners in which we deploy capital, whether it's key money, recyclable maintenance and, of course, our capital returns to shareholders.

If you go back over an extended period of time, our capital has been fundamentally stable, up some years, down some years, because some of it's lumpy, but it's been pretty stable, while our revenues and profits have grown significantly, something we're very pleased with.

But some of these investments, whether it's key money, whether recyclable, can be lumpy instead of happening towards the end of 1 year, they may happen in the other. So we're flagging that, some of it may roll over from '25 into '26, but then you never know what rolls over from '26 to '27.

Nonetheless, we are confident in the growth track record that we have. Our 4.7% system size growth in 2025 is the 4th year of acceleration. Our 6 -- our best in 6 years. Our signings were strong, as you can see, up 9%. Our pipeline grew 4.4%. Our openings were strong at 10%. And that just shows that we have a lot of firepower. Now, we have more brands with Noted Collection being announced today. We're not putting a ceiling on our growth potential for 2026. The consensus is 4.4%. I would say there's more upside than downside to that number, but we're comfortable with it where it sits. And we think we have even more potential to continue to accelerate that system size growth.

Michael will touch on the fee triangulation for 2025. Before he takes on the China margin thing, look, we have a lot of confidence in our trajectory in China. I've been saying for 2 years now that China is bottoming out gradually. It turned out to actually be true at some point, right? And we saw it gradually bottom out in 2025 quarter-after-quarter, turned positive in the fourth quarter. Indications are that, that will continue in the first quarter of 2026 and into the year.

We have a bigger system now with over 880 hotels open, over 550 underdevelopment, record signings and openings again. And the economics at a general level, Michael will take you through the details. Our economics work across our brands. That strong signings, strong performance, strong openings of Express in China last year, where we keep the full economics, economics work for our owners.

Now different tier markets have different rates, as you know. But because of the very strong openings that we have, that RevPAR is also influenced by the ramp-up, right? So many of those hotels are new in the year in China. Express is our fastest-growing brand. It was our latest growing brand, too, the one that started growing the latest because we started with Holiday Inn, Crowne Plaza, and InterContinental. So a lot of these brands are still in ramp-up. And some of them -- in fact, some of the hotels are still ramping up post pandemic.

So I think that, that is influencing the RevPAR. If you look at the RevPAR in total in China, it's about half of where it is in the U.S., which is a good place to be for a GDP that's per capita that's probably 1/8 of what it is in the U.S., right? So you actually see leverage on the RevPAR from the GDP per capita economy, it's growing at 5%, the technology sector that is actually competitive with the U.S. technology sector, leaders in renewables, leaders in many industries, exports again at a record last year. We're confident in the Chinese economy. We're confident in our business in China. We're confident in how our hotels are going to perform in China.

Michael, over to you.

Thanks, Elie. Yes, let me -- Richard, let me first go to your first question on kind of 2025 in earnings per share without the ancillaries and cost savings. I guess the first thing I would say there is the ancillaries are not going to stop growing. And so, if you look at what we've said kind of moving forward, while we don't have the step-ups next year, we do see strong growth there and at a rate in the double digits, above 10%. So we do still see that moving forward.

The second thing around cost, obviously, we've talked about this a bit at the half year. When Elie and I came in, we really started to focus and look at how we could look at this cost base and how we could change the curve and really be able to take more dollars of revenue to the bottom line. And obviously, you've seen us do that in 2025 with costs being down about 3%.

Now next year, we're -- in 2026, what we're looking at, is that being coming back and being around an increase of 1%, but still having some of that savings come through that we've been doing with our programs. And so we still feel like we'll have strong cost control as we move into 2026.

And then, I think the other thing that we also mentioned at the half year was really around the fee triangulation where I think we talk about and many of you will know where you look at RevPAR and system size and look at the fee revenue growth.

And we mentioned kind of a few things that were really impacting us in 2025. First and foremost, which is a really -- is a good thing, is that we've had a record number of openings. And obviously, as those hotels open, they're not fully ramped. So you don't get the fee income as quickly as you would normally because you're actually accelerating those openings. So it's not normalized yet year-over-year. And so you're having a bit of that impact in there as well.

We also mentioned we have a large number of hotels under renovation that obviously has a fee impact as those hotels close and renovate and then come open again.

And then the third thing was we mentioned at the half year was that we had a few large exits, particularly two hotels in New York, where the replacement hotel hasn't come in, but will be coming in and ramping up soon. So that's affected that fee triangulation and fee growth in the Americas.

So we expect that to normalize as we move into this year and not have some of those effects. The other effect is you have the NOVUM Hotels, who came in and are in the process of ramping up. That was a large impact as they -- because a large set of hotels have come in over the last year or so.

And then some smaller things like you had one less day with leap year this year. So a few smaller things there. I think we feel confident over the medium to long term, we can still get back to our growth algorithm, and that's still going to grow. I think what we showed this year is really the breadth of our organization and how we can actually, even in a turbulent time, as we've said, we can still deliver that growth algorithm, and we feel confident that we can continue to do that.

And just I'll just add to, Elie's key money point. It is lumpy. And certainly, we have not changed that guidance at all that we're going to be in that $200 million to $250 million range. So same as what we said last year. And that overall capital will be around that $350 million a year mark. So we'll continue with that guidance and view there. In terms of China, the margin was down very slightly. And -- but yet overall profit was still up by $1 million. So overall, a good result in a year where you had RevPAR negative.

And so, I think as we go forward, we've talked about and been saying for quite some time that China RevPAR is bottoming out. And we really saw that happen throughout the year with the fourth quarter actually turning positive, 1.1%. And as Elie mentioned, we're really pleased with how RevPAR is starting to shape up in Q1. We mentioned last year at the Q3 announcement, we felt like Q4 could -- sorry, Q1 into 2026 might look negative because of some of the tougher comps. As we sit here today, it looks like all three regions will be positive, and that includes China. And so early training indicating that it looks good.

So let me pass back to Elie and just see if he wants to add anything on there.

No, Michael, that was great. Just on those factors affecting the fee triangulation for 2025, just note that most of those are positive things, right? Strong openings way above the prior year's renovations, then all those other factors, whether it was a leap year or whatever, all those -- we start to comp against in a better way. So they were good factors in one end and then they become tailwinds as we go forward.

And your next question comes from the line of Jaafar Mestari of BNP Paribas.

I have two, if that's okay. The first one is just on the fee business overheads. Those $23 million of cost efficiencies in '25, should we assume they were broad-based across the three regions, across central costs? Or was the restructuring this year particularly targeted in one region, thinking specifically Americas, were you able to flex the costs more in response to what's been a turbulent here?

And then on credit card fees and ancillary fees in general, when you announced your two big renegotiations 18 months ago, loyalty point sales and the credit card fees, you are the only major global company to have something of that materiality going on really. It looks like you were closing the gap with U.S. peers who had historically more material contribution from those, and it's great that you're able to have a bit of a mark-to-market with issuers as you're much stronger today, et cetera.

But since then, we've now seen Hyatt last November and then Marriott just last week, also announced their own major renegotiations, big explicit millions of dollars targets for increase in fee contributions over the next few years.

My question is, once everyone is fully ramped up, so you've had your step up, it will continue to grow. They will have their step-up in the next 12, 18 months. When everyone's fully ramped up, where do you think that gap will be? Because historically, you were saying, well, we're a bit behind. We can convince insurers and increase that and catch-up. Where do you think that will be? Will the gap have closed over 36 months as everyone gets the renegotiations? Or will it have just translated your level of ancillaries and their level of ancillaries, please?

Thank you Jaafar, let me take those questions, and Michael, of course, jump in and build on that. So on the fee business cost, I think we just have to pull back and touch on what Michael said in his presentation earlier, what he mentioned when speaking to Richard's questions. We've always maintained a highly disciplined approach to cost management. If you look at the presentation, our cost growth over a long period of time has been well below revenue and profit growth. But since Michael and I came in, we've taken a more philosophical view of how do we just shape the whole cost structure for the future, make it future-ready, scalable, using technology, new processes, shared services, locations and now artificial intelligence.

So we can continue in the future to grow revenues and profits at a much higher gradient than cost. This was not a reaction to last year because actually, we started our work, our strategic work when he and I assumed our positions in 2023. And it took some time to really design it strategically. We had outside help. We have inside teams. We had a long runway of work that we started deploying in 2024. We saw our cost growth in 2024, be only 1%. Then you saw cost reduction of up to minus 3% in 2025.

So there's been a trajectory of us bringing in these initiatives in a thoughtful strategic way, not a reaction to a market that was up, for a market that was down. It's just really reshaping our cost base and our processes and our technology and taking advantage of new technologies like AI. So that is generally how we achieved the benefits of 2024 plus 1%, 2025, minus 3%. And we're saying that going forward, low or very low single digits is what would happen on average. It could be a little bit different from year-to-year, but we're not actually done with the opportunities in cost efficiency as technology continues to give us more opportunity.

On the credit card fees, look, I won't comment on what others have renegotiated. Are we negotiating? Will we renegotiate? Those are questions for them, and we don't have the particulars of all the arrangements or where they plan to be in the future. What we do know is we have a lot of upside and a lot of exciting upside. Maybe the most upside, I don't know about other businesses, but we believe we have a lot or maybe the most upside in the industry. And we started delivering that in 2025 by doubling the fees and credit cards earned from 2023.

And then we continue to be on the right track to triple it by 2028. We're not putting a ceiling on it. Whatsoever, we think it continues to grow from there. And I think that the -- as we grow our system, a number of hotels, as we grow our membership and IHG One Rewards is now 160 million members at a fast growth rate from 145 million. As we grow the engagement of our guests, it's not really how many members you have, it's how engaged you are.

And now we're at 66% of our members constituting our nightly stays, 72%, 73% in the United States. So we're right up there in the industry. So we've got more members. They're more engaged, they're spending more. They're taking out more credit cards. Our sign-ups are up double digits for cards. And that is all fueling our growth in card fees, and that will continue.

We don't see a ceiling to it. How it compares to others, I'm confident we compare very favorable to others. And frankly, the more potential others reveal, the higher our ceiling goes. So I'm not discouraged by what others are doing. In fact, it encourages me.

Michael, do you want to -- just want to comment on overheads?

Yes, let me jump in on both of those actually. And Jaafar, great question on the overheads. And Elie mentioned it is broad-based, but he also mainly covered the P&L. And I'd say we've also done this within the system fund as well. Because that gives us more firepower as well. And so actually in terms of total dollars, we've saved more as a part of this program in the system fund than we have in the P&L, which is actually great, because it allows us to reinvest and go after things that drive revenue.

And then if you look at kind of by region and being broad-based, it was across every region and every function within IHG, but we also had investment. And I think that's important to note as well. Certainly, we had the investment about integrating Ruby coming in EMEAA. That's why you might see some of the costs a little -- not as much down in EMEAA actually, I think it was slightly up. But we're also investing in places like India. And I think that's really important that it's not just about cost reduction, it's about investing our dollars where we can get the most growth in the future and repurposing those dollars.

And that's what we want to do. Because we've said many, many times, our biggest risk is not capturing our share of that growth in the future because this is a growth industry, it's an industry that's going to achieve higher highs and higher lows. And we want to be a part of that, we want to participate. We want to compete in that.

On the credit card fees, the only thing I'd add there is we announced a new credit card, Revolut, a deal here in the U.K. with Revolut, we have more countries we can go to, and it doesn't bring the quantum for sure that the U.S. does, and it's much smaller. But that just shows the power of the loyalty program as it grows. We have more opportunity in different countries around the world to continue to launch that. It's great to launch one here in the U.K., and we're in the process of launching others around the world and as we get those agreements done, we'll let you know about them.

I'll pass it back to you, Elie.

Thank you, Michael. Thanks for Jaafar. I'll just add that in addition to credit cards and our ancillaries, let's not forget our point sales business, which grows very nicely and also has no ceiling to it and our emerging and rapidly growing branded residencies, all of which are high margin accretive to our bottom line.

Next question.

Your next question comes from the line of Jamie Rollo of Morgan Stanley.

Three questions too, please. First, just on that Branded Residence income. I don't think you've quantified it yet. I know you've got 30 projects, both open and in the pipeline. But what did those generate for you last year? And when you say substantial increase in '27 and beyond, could you sort of give us some numbers behind that, please?

Secondly, on the removals rate, I think it was 1.9% ex the Venetian. Should we expect that to fall back towards sort of 1.5% this year? Is that what's giving you confidence to the upside to the consensus 4.4% net unit growth?

And then just coming back, if I may, on the sort of gap between the comparable and the total RevPAR and then looking at the fees, you've got a helpful slide on Slide 56. So there's about a 2-point gap between comparable and total RevPAR. And there's also another couple of points in the three regions between underlying fee income and the sum of total RevPAR and available rooms. Are you saying that those timing issues mean that those negative figures turn positive this year or at some point in the future? Just to, sort of, clarify the algorithm.

Thank you, Jamie. I'll take Branded Residences, removals, I'll turn over the fee income to Michael, and anything else he wants to build on.

So look, Branded Residences, we're very excited about that business. It builds on the power of our Luxury & Lifestyle portfolio, that just keeps growing with the six brands we have now, mainly the ultra-luxury brands: Six Senses and Regent.

I mean, just let me just give you an anecdote. I was -- I've already been to six countries, it's not even mid-February yet and -- or it is just mid-February. And I was in Bangkok early this month, late last month, and we have an InterContinental Residence project that had just started sales in the heart of the city, in December, of speaking to the owner, they were 40% sold by mid-January that raised prices 4x. I told them they have to raise prices again to slow these sales down. So -- and that's InterContinental, not even Regent and Six Senses, where we have most of our projects.

So there's more coming across more brands. Yes, we have 30 projects today. We have many more that are going into the sales space. They are in London, when Six Senses is London is opening this coming month. The Branded Residences are all sold out or maybe there's one left I understand. Up to now, I'd say the fees range have not been that material. It's been $5 million to $10 million. However, we see substantial increase in that starting in 2027 and beyond. So again, we're not putting a ceiling on that. We think it's totally accretive, and we're very excited about where it's going.

On the removals rate, yes, we're confident it will go back towards the 1.5% over the next few years. There was just a lot of lumpiness going on right now, especially in China as things normalize post-pandemic, but we see a path to clearly back to the 1.5%. I don't think that's the only thing that can give us -- it is lumpy, but I don't think it's the only thing that can give us more upside in 2026. The strength of our signings, the strength of our brand portfolio, the proven enterprise to get more openings going, whether it's conversion or even new build, all of that put together gives us more confidence in our system growth over the medium to long term.

Yes, there's opportunity also in lower removals, but that's not the primary thing. It's a combination of everything.

Michael, if you want to build on those and answer the question on fee income.

Yes, sure. I mean, I was going to say the similar on the net system size. I mean, we've been saying consensus is at 4.4% for next year. We certainly feel like there's more opportunity on the upside of that. Then there is risk to the downside as we move into the year based on the visibility we have. And really, Jamie, it's not just about removals coming down, which we do believe they will. It's really about those openings and how things are proving out and what we look at, we see really strong growth across EMEAA and China. You saw that in our results this year.

We see -- if you exclude the Venetian, the U.S. at 1.5%, we're on the right track record or the Americas at 1.5%. We're on the right track there. So I think, we feel confident in that, and that's why we're willing to say that there's more opportunity to the upside to that 4.4%.

And then when you look back -- and on your third question regarding the table in the chart -- in the presentation, thank you. We thought that would be helpful. It is. It is helpful, but it also goes back to what we talked about earlier and the reason for that total RevPAR being less than the comparable RevPAR, particularly the ramp-up of hotels.

So it takes sometime for hotels once they open to build that base business and then begin to yield as you open more hotels, and we have that acceleration in openings, you've got more hotels in that as a percentage of your system than you used to have. And so that's affecting that. You also have the renovation effect.

There's also, of course, the leap year effect, but then also the mix effect of when -- as hotels are opening around the world. So I think over time, yes, that gets back and that normalizes. We're going to still open as many hotels as we can. So we want to continue that as you see that acceleration. And really, you go back to Elie's point, of us growing our system size over the last 4 years. It just puts more openings in there and more hotels ramping up as a percent of the system size versus what we used to have. And so I do think that normalizes over time, and we get to a better position.

And I'll pass back to Elie, if there's anything else.

Thank you, Jamie. Next caller.

And your next question comes from the line of Ricardo Benevides Freitas of Santander.

Two questions from my end. Firstly, on the brand portfolio, we've seen these two recent additions to your collections brand portfolio, right? What I wanted to ask is what other thematics, let's say, are you willing to approach on further brand acquisitions or entering? Is it more collections or any other specific team? And I wanted to ask you regarding -- I mean, you've had a very strong cash flow generation this year. Your net debt seems to be very under control. Why not a bit more allocated towards your share buyback program?

Thank you, Ricardo. I'll take the two questions and Michael, if you can build on the cash generation and leverage, if you wish.

Look, obviously, we don't comment on what else we're going to launch until we launch and tell you, like today. And so actually, we indicated this collection in Q3, and we just named it today and formally launched, and we're very excited about it, reaching 150 hotels. We're starting in EMEAA with Noted Collections really because EMEAA has the largest percentage of unbranded hotels and we've typically launched our collection and conversion brands in EMEAA before going to east and west from there. So that's the future of the brand. It won't be just in EMEAA, but we'll go east and west, but establishes itself in EMEAA first.

We do look at M&A from time-to-time, as you know, and we did Ruby acquisition last year. We don't need M&A to grow. It's helpful if we find the right opportunity in the portfolio. It's most likely -- although I won't say exclusively, it's most likely to be in premium and above premium, upper upscale luxury lifestyle, and we tend to launch our own brands, when it's a soft brand like Noted Collection or whether it's a mainstream brand like Garner, those we tend to launch on our own, although there could be exceptions to that. But we don't need M&A to grow. We have 21 very strong brands now. 11 of which launched in the last 11 years with a lot of runway. So those are still new.

Those are basically still new and new to new countries. I think in 2025, there were 32 or 33 instances when we took one of our existing brands to a new country. As far as that country is concerned, that's a new brand launch, right? That's a new brand launch. So we have many more of these new country launches ahead of us for our brand portfolio, while we look at what else we could be interested in.

What are some territories it could be appealing to us? We've been very successful in ultra luxury with the Regent and Six Senses. I'd say extremely successful, not just in the hotel brand itself by expanding it, also expanding into Branded Residences. If there was a right opportunity, we could add more there. We've talked before about looking at branded shared home rentals. It's something we'll continue to explore. Anything in premium, lifestyle like Ruby is interesting. Only if it's accretive, if it's different and differentiated from the brands you already have, if it's at the right valuation also, or the right trajectory if we launch it ourselves, we don't need it given the strength of our portfolio.

But look, it's a dynamic industry, right? Guests interest are dynamic, owner, investment interests are dynamic. So our strategy can't be static. That's why we've added to our portfolio thoughtfully, but we're not competing with anybody to have a most number of brands, I don't think that, that is a recipe for success. We're competing for having the right brands for the right guests and the right owners.

On cash generation, we have a very clear capital allocation policy and philosophy. First, we invest in the business, just like launching Noted or buying Ruby to grow the business because that's where the highest returns on invested capital come from for our shareholders. Number two, we maintain and grow our ordinary dividend. And number three, we return surplus capital to shareholders. And only when it's surplus. Fortunately, we have a strong asset-light growing cash-generating business that converts 100% on average of adjusted earnings into cash flow. And again, in 2025, we did that. And so we can return surplus capital.

And we wanted to get it back into the stated leverage range of 2.5% to 3%, and we are. So we're confident that our business model can continue to generate surplus cash flow over the years and that we can return surplus cash flow to shareholders. But we're not commenting on where else our share buyback will go in the future.

Michael, do you wish to build on that?

Yes. I mean, you said that really well. What I would also just say, if you go back and look at kind of where we were in -- when we first started the buybacks again, back in 2023, we were well below the leverage range. And so a lot of what you had going on in our buybacks was a step-up to get back into the range. And we finally have arrived in that. And I think what's exciting about this buyback is that we're able to actually grow the buyback again this year and be in the range. So we're no longer getting that -- delivering the buyback and having any of the step-up come in as part of that buyback, which is really a good indication of the kind of cash generation that this business can do. I'm very happy with that.

And I'm also -- there's just a couple of other things, kind of nuanced in there that are really, really helpful. One, we've eliminated that we've greatly eliminated the currency translation on our debt. That's a huge benefit for us. And by the end of this year in the first quarter of next year, we will have completely eliminated that many of you who have followed us for many years have known about that. The other thing was we refinanced our RCF this year and have taken out and no longer have debt covenants on that. That gives us a lot of flexibility.

And as we've said many times, with our shareholders, and the expectation is that we will continue to do buybacks. And so whether it's delivering cash this year or at the next one, we will do that and we're committed to do that. You've seen our track record on that from the $500 million we did in 2023 to the $750 million we did in '24 and -- excuse me, the $750 million we did in '23, the $800 million we did in '24 and then $900 million we did in '25. We've built that track record, and we'll continue to do that.

Your next question comes from the line of Jaina Mistry of Barclays.

I have three questions as well, two follow-ups. So the first follow-up is around Branded Resi. When we're thinking about your growth algos of 100 to 150 bps on the margin or roughly 10% EBIT growth, should we think about Branded Resi next year is contributing to growth over and above that algo?

And then second question is around net unit growth. I mean, your commentary sounded really quite confident and bullish around it. If we're thinking about net unit growth being around the 4.5% mark in 2026. Is this the run rate going forward for the medium term as well, somewhere between 4.5% and 5%?

And then very lastly, just on RevPAR, I wondered if you could set the stage for '26. Why are you confident in an inflection? Or indeed, are you confident in an inflection? And could you give some color by region about what you're expecting?

Thank you, Jaina. Let me start with your last question and then work our way back. Michael, please build on my responses, if you wish.

So let me start with RevPAR outlook. Understanding we don't give guidance either by quarter or by year, but just give you some context also by region.

Let's start where I'm sitting today in the United States, although by tomorrow morning, I'll be back in London. And if you look at 2025, we're very pleased with our performance in 2025 in the United States. We believe it was competitive, but we also know there was some burden on the industry 2025, which started very well in January and February. And then we had a series of things that became sort of headwinds. You have the tariff anxiety and uncertainty.

You had reductions in government spending. The Dodge project, which affected government travel down, say, 20% on average. Then you had reductions in inbound, mostly from Canada, but a little bit also from Mexico and from Europe. Inbound for the U.S. ends up being down 4%. And then you had a record government blend shutdown in the fourth quarter.

You take all those things, and yet, I think we performed competitively in 2025. Those things either don't reappear in 2026 in the U.S. or they don't get worse. We don't think government travel gets worse, it may not get better. We don't think there's going to be a government shutdown at that length or maybe not even one or whatsoever. Instead of reduced international travel, we got the World Cup. We've got [ USD 250 ]. In many cases, we've got a weaker dollar, which is not unhelpful. And so the comps get better going into 2026.

But on top of that -- on top of that, the structural reasons to be confident in the U.S. are not a few. You have strong GDP growth as an exit rate from 2025. You have strong employment. Some months, the job report is higher than others, but January was surprisingly strong. Regardless, we're still at a record number of people employed in the U.S., low unemployment, real wage growth, diminishing inflation, improving trajectory for interest rates, they're at least stable to going down.

Consumers are still spending up in October, November, 2.6%. Wages are outpacing inflation. The corporate area has clarity on tax after last year's tax bill, and that starts to be beneficial to individuals and to corporations this year with accelerated depreciation and higher refunds coming back. And so you put those things together, in addition with the super cycle of capital investment from technology companies, not just in AI and in technology, but also in the energy to provide that and infrastructure to provide that. That's just private sector investment.

I mean, four companies have announced spending $660 billion. That's just four companies, let alone the others. So we've got a lot of capital investment going in. So I think that gives you confidence that the U.S. starts to comp against some negative factors last year. It's got a lot of positive factors. We're not putting a number on where the U.S. could be this year, but you have to -- you have to be a big pessimist to believe it doesn't have better fundamentals in '26 and 2025.

Then I flip to the other side of the world. In China, I think it's visible, right, that we bottomed out. We've always said it won't be a V-shaped recovery, and we don't think it will be, but it's a recovery. It's a U-shaped recovery. We think the gradient is upward from where we are now ready. And that becomes a tailwind for us with a much bigger system, strong signing, strong openings, a leading position in the industry across all tiers. So we're confident about what's happening there.

And then that China outbound that was up 22% last year at high rates, that is fueling our growth in Southeast Asia, big numbers in RevPAR, whether it's in Vietnam, Japan, South Korea, Indonesia, all those markets are strong for us because of the Chinese outbound. The Middle East strong double-digit to high single-digit RevPAR whether it's in UAE, in Dubai, regardless of the uncertainty, Middle East, our RevPAR was very strong there. So that region is doing well.

In Europe, yes, low GDP growth, but what do you know? Strong travel growth. Mid-4s RevPAR last year, strong exit rate in Q4. And people travel to Europe from the U.S. was up 3% last year, Middle East going to Europe, Chinese travelers come back to Europe. So when I look across the globe, everything seems to be favorable compared to 2025, where we were negative in China returning positive, where things were flat in the U.S. there's fundamental for a little more optimism. And our EMEAA region continues to move at a good pace.

So that's kind of why we are constructive about RevPAR going into 2026. And the early indicators, while early, and I'll say that we have a short booking windows, 60% of our bookings come in the last week, but early indicators so far are positive in all regions.

On net unit growth, I think I talked about it earlier. We -- we've had a consistent trajectory now for 4 years of growing net unit growth, best in 6 years. In 2025, our strong signings and strong construction starts with 50% of our pipeline now under construction give us confidence in more openings. Our strong signings give us confidence in owner demand for our brands. Our brand portfolio is stronger.

We're not putting a ceiling on where our net unit growth can be. We're comfortable with consensus where it is, Michael and I have both said that we think there's more upside than downside. But we're really more focused about the long-term trajectory for that to be sustainable so that we're not just doing say, unproductive uneconomic things to increase or not to work. You've heard me speak for years now, but keys with fees, not just keys. That's what we're focused on in all of our markets, but we think that's what we're achieving. We're not putting a ceiling on where we can go. We're very ambitious, but we're comfortable with the consensus.

And Branded Residences. It's going to be a significant contributor over time. I think that probably starts in '27, given the time it takes for some of these projects to come for sale. And we -- when you start to look at it within the growth algorithm, all these things start to fall in it. We have a range of 100 to 150, sometimes, some years, some things will push us to the upper end of the range or slightly above the range. Some years, it won't happen quite like that. But at some point, it all starts to work within the algorithm. So we're comfortable that Branded Residences just gives us more confidence about our growth algorithm going forward.

Michael, please jump in.

Elie, no, I mean I think you covered it in detail. Nothing more for me to add.

Let's take the next caller.

Your next question comes from the line of Alex Brignall of Rothschild & Co Redburn.

I'm just going to stick to one, if that's okay. It's a similar vein to Richard and Jamie earlier. If I take your fee revenues less your non-RevPAR fee revenues than your sort of take rate as a percentage of gross revenues was down 8 basis points this year, and it was down 6 basis points the year before and is down sort of 25, 30 basis points from pre-COVID levels. There was some noise in the COVID years. I can't imagine that this is from existing contracts. So how do we solve for that in terms of the contribution of new properties? The same trend is exactly as seen at Marriott and actually also Hilton this year. So how do we -- how does that not mean that new rooms are coming with a slightly lower sort of effective royalty rate?

Alex, thank you for your question. I'll take it, then Michael build on it. Our take rate is not reducing. I can tell you that. So there may be -- there are a few factors working into it. As we moved into more luxury lifestyle premium, and we've been very open about it, our key money has moved up too, because we're now participating by strategic choice in a sector that has more key money to plan it, but also has higher fees. So that key money amortization is starting to come through and affect a little bit of the fee revenue, and we've quantified that actually for you.

And so I think that there is that factor and the -- but our fee rates that we get, whether it's mainstream, whether it's some premium, with a Luxury & Lifestyle have not been diminishing. And so you might be seeing some year-over-year fluctuations due to normalization of key money or other factors, but it's not a headline fee rate change.

Michael?

Yes. I mean, I just would go back to the same factors I said when -- on Jamie's question, and Richard's question as well. I mean, it's just a bit of noise, Alex, right now. It goes back to these record level of openings being incrementally more than what we've had in the past. And just to give you an idea, it takes time for a hotel to ramp up. And because we've had such strong openings, you've got a greater percentage of that in your system. Over time, if those are normal -- openings are normalized, and it equals, it equals. But you've got more hotels earning less fees as they come in. And so that's affecting your fee triangulation and some of that fee growth.

Now that normalizes over time. So that's why I say it's a bit of noise. Elie discussed the key money, which we talked about as well. We've talked about leap year, we've talked about renovations. There's a number of things like that, that are -- that's kind of in there that's affecting this. As we look out and we look forward and we model this business, there is nothing to suggest that we will not still be able to hit that high single-digit fee revenue growth over time.

I go back to the algorithm. There's no reason to believe we can't generate the 100 to 150 basis points of margin improvement. We've been demonstrating that over the past several years and including that EBIT growth of around 10%.

And that earnings per share growth in the 12% to 15% range. Everything we do, everything we look at how we model the business, nothing of that has changed with this noise that we're kind of seeing right now.

I mean, if you look at the pace of openings, Alex, not only was it a record in a number of hotels last year, but a lot of our openings tend to be skewed to the second half. Our fourth quarter tends to be our biggest opening. So from an arithmetic point of view, you're not really even getting 6 months of fees in that given year for those openings while the unit now accounts for the full year. Now that's okay if you have the same percentage increase in openings year-over-year because you start to lap all the same amount. But when you have a surge of openings like we've had, then you get a bit of dislocation, which normalizes. We're happy with that. We'd rather have more openings happening sooner. And as the hotels ramp up, the fees will come through. That doesn't concern us.

I just -- that's why I didn't ask the question like Richard and Jamie, I asked it as a percentage of the gross revenues, which would be, I guess, -- is there a reason for the fee revenues, just the net fee revenues and the gross revenues to have different timing? I wouldn't have thought that, that would affect in a year.

No, I mean, I think gross -- I mean, you get the fee -- Michael, maybe you can help with that, but the -- you get to the net fee from the gross fees and you're not earning the gross fees if the hotel opens in October. You're not earning the same amount of gross fees from a hotel that has a partial year of revenue but has a full year of denominators and net unit growth. So I think that it's -- you're not earning the full fees yet. So it's the same thing.

But the gross revenues would be -- and the gross fees are counted in the same way. That's why I'm not looking at it versus NUG. I'm just looking at it versus gross revenues, which you've disclosed in the release and the net revenues that you've disclosed in the release, and that's where the royalty rates has come down a bit. But we can take it offline.

Yes. Just I want to conclude that there is nothing that we see where our royalty rate is decreasing across any of our brands or our management fees neither. Thank you, Alex.

Your next question comes from the line of Andre Juillard of Deutsche Bank.

Just two follow-up questions for me. First is on segmentation. Could you give us some more color about the trend you're seeing segment-by-segment? And do you see a pickup in the MI segment especially?

Second question about AI. I really appreciate the Slide 40, 41. Could you give us some more granularity about the disruption you're expecting from AI? Is it mainly a top line driver, a mix of top line and cost optimization? Is it a real change in the yield management? So I would appreciate any information you could give us.

Okay. Well, thank you, Andre. I'll start with your second question on AI. I'll turn over the question on segmentation to Michael, okay? So just bear with me because when we talk about artificial intelligence, we shouldn't just focus on one small thing, because our strategy around artificial intelligence and what we're seeing is broad and enterprise-wide. Yes, there is disruption, but I want to start by saying that there are two things that we fundamentally believe are not changing.

The first one is that there will always be a guest that will want to travel for business or for leisure. We absolutely see no change in that. In fact, we see more interest in that. And on the other hand, they want to go to a destination that has a live real experience. The more people experience the virtual, the artificial, the digital, the more they favor live experiences. Sports events, theater, restaurant, bar and hotel, people want live experience, everything in between, the distribution, how you get there, how you book, how you view it, how you share it, how you search it, that is changing.

We don't think it's a disruption for us. We think it's an opportunity for us. And we feel like we're in a strong position to capitalize on these opportunities and to actually deepen our competitive moat because of the huge strides we've made in recent years to modernize our tech stack. We're in a fortunate position because of the work we've been doing over 5, 6 years. You've heard me talk about our guest reservation system on the call. We're the first to roll out this industry-leading guest reservation system. Then we migrated our core enterprise data to the cloud and that allows to quickly plug AI powered systems into our tech ecosystem.

Since then, we were the first to deploy machine learning AI revenue management to all of our hotels. So to your question about revenue management, we're already doing it. It's all of our hotels, AI Powered. Then we added new cloud-based DMS platform that will be most of our hotels by the end of this year. And now we're adding new loyalty and digital content platforms. So this foundation of systems, platforms, data solutions, places us in a very strong place and to be AI ready.

And the areas of focus are generally the ones that you touched on, guest acquisition, commercial optimization, cost efficiency. So on guest acquisition, yes, it's about delivering top funnel visibility, driving booking conversion and deepening guest loyalty. I mean today, 66% of our global room nights come through IHG One Rewards. So strengthening that incredible foundation is a big opportunity. And we do that.

First, in search, with this new content platform that we discussed in my presentation today, now we're going to be able -- which we're launching this content platform at scale this year. We already started launching some elements this year. You're going to be able to take all that digital information, the right information, put it in the right channel at the right time, that strengthens those digital hooks needed for our hotels to be recommended by AI agents. This matters as travel search patterns evolve.

It will also create new ways to combine information digitally, move it around, shift it, recombine it, unlocking the greater flexibility and how this content is created, deliver, personalized. So it makes it an even more powerful factor when layering AI-generated search on top of it.

And you're going to have more engaging types of content, which we don't have today, but we will, video, 360 images, virtual tours, automated language translation, floor plans, everything to get the attention, a, of guests searching directly or of their agents doing it. And we're going to begin deploying this platform this year.

Second, in discover sort of we're working on trip planning capabilities in partnership with Google. It's not a stand-alone project for us. It's an evolution of how our guests plan trips and enabling a more conversational search experience on IHG's owned websites and apps. So we are going to be leaders ourselves in this. And we're going to be testing these capabilities with external customers later this year.

And then we're adding AI-powered marketing across all of our tools for more targeted, more personalized, meaningful improvements on click-through rates and on ROI. Then, we mentioned in my presentation, a brand-new CRM system powered by Salesforce that launches this year for our loyalty platform, unifying all of our customer data in a new cloud-based system. This gives us a seamless view of our loyalty members, all their experiences, whether they're calling a customer care center, checking into hotel, requesting a copy of their bill, we can provide more personalized experiences, more relevant promotions, better benefits, loyalty rewards faster, more efficiently. And so we can scale our platform across the state.

We're going to take this CRM platform and scale it across the state in 2026. And there are many other things that build around these tools to rapidly analyze huge amounts of data, guest feedback and be more responsive to our guests.

Lastly, we talked about the commercial optimization. This, through the revenue management system that we have launched already is already creating revenue uplifts. You asked about cost efficiency. You see it in our results in 2025, with our cost being down 3%. We're using the latest technology, new ways of working, automating routine tasks, delivering insights through AI across the business.

You've heard us say this technology, together with the process redesigns and greater leverage of our centralized support, it's unlocking a more efficient, more scalable cost base for us. In addition to the step change savings we delivered in 2025, we believe those are sustainable for the long term. So we think this actually is an opportunity to make our business stronger, more scalable, more efficient, build a deeper and wider moat and give us a competitive advantage.

So Michael, do you want to address Andre's question on segmentation?

Yes, sure. Happy to do that. Well, first, I'll just start with where we ended up the year. As we discussed in my presentation, that business was up 2%, Leisure was flat for the group and groups were up 1%. And that's been very pleasing to see in as Elie described a turbulent year across, particularly the U.S. And so as we look forward in what we're seeing right now, as we started 2026, we actually saw really solid business demand coming in.

Obviously, in the U.S., that then began to get affected by the storms in the cold weather that hit the U.S., but overall, still positive and moving forward. And so, then if you then look at groups and what we see right now, what we see on the books is still almost double digits up year-over-year. So it looks like groups are going to be strong. And remember, particularly in the U.S., 2025 was lapping against the election year, which had the big events like the Democratic National Convention and the Republican National Convention and then all the other events that happen as part of the election.

So you're now out of that, and so you should have better comparables there as well as you get in it. So we look groups continue to be strong. We have less visibility in leisure as, of course, the booking windows on that are shorter. However there's nothing right now to indicate things would be slowing down there. If you go back to Elie's comments on the different markets and how we're seeing things shake up, it seems to be more positive than the previous year. Now we're obviously very early in the year, so we'll need to see how that progresses. But that's how we're seeing it shape up as we sit today.

Maybe one additional question, which is a follow-up. If you consider that you have 2/3 of your clients, which are a part of the loyalty program, what is a reasonable target for you? And what is proportion of new clients you're welcoming every year?

We're very pleased with the progress of our IHG One Rewards program hitting 160 million members. We believe that on a member per room, we're right up there and the leadership across the industry. The important thing is that they're very engaged too. You go back 5 years, we're below 50% room nights contribution from our loyalty plan now. We're over 66% globally, over 72% in the U.S. That's a remarkable move up. So they're engaged, they're staying more. They're spending more. They're joining our co-brand products. They're spending on those core brand products. So it's a whole flywheel of virtuous behavior that we're fostering.

So we're not putting a ceiling on what our membership could be. We're not putting a ceiling of what our contribution could be. We're a growing business. Look, we -- with all of this, we still have only 4% of the rooms in the world with 10% of the pipeline. So as we grow our openings to grow our brands, to grow our system around the world, the opportunities for greater membership and greater penetration just continue to expand. We're ambitious, but we're not putting a ceiling on it.

And we have one more question in the queue, and this comes from the line of Kate Xiao of Bank of America.

Just a quick follow-up question from me. I wanted to ask about your pipeline, obviously, 33% relative pipeline size. And you mentioned over 50% of that is under construction. Is it possible to give some color around which bit of the pipeline is new build versus conversion? I'm asking that because in the context of conversion accounting for over 50% of the new openings last year and obviously, the 4.7% underlying, excluding the [ nation ] impact was helped by a bit of conversion and some conversion deals. I'm just thinking your visibility into kind of conversion this year. Are you looking at new conversion deals that could help kind of maybe give you a bit more confidence to really hit that 4.7% kind of run rate and maybe accelerate after that?

I'll just touch on conversions in general and Michael can take you through the proportions and what that's been. I just want to address, sort of, conversion opportunity and tell you that what we firmly believe is that the conversion opportunity is not as limited as some in the industry might have mentioned, the analyst industry might have mentioned. It is not for us strictly converting from independents.

The addressable market is much larger. Most of our conversions actually come from branded operators, whether large or small or regional, it's owners who see the strength of our enterprise, the strength of our brand portfolio, the strength of our -- support of our people and want to join a stronger system. So we don't think it's limited just independence and therefore, we think that the addressable market is very large. And we have now more conversion brands and products with the addition today of Noted Collection. The success of voco, Vignette, of Garner, all of which are way ahead of our initial projections and are many more markets than we thought they would be early on.

So -- and many of our conversions actually come from our non-specific conversion brand. So we can convert across most of our brand portfolio already, and we have more dedicated conversion brands and the addressable market is broad, and it's not just the U.S. It's actually EMEAA, where there's a large -- the largest unbranded proportion of hotels. And in China, conversions are picking up. So we think there's a lot of runway in conversions. And we're not looking at it as a percentage of signings and openings.

Actually, I don't really care about the percentage. What I cares is that both grow. I care that new build signings grow, and they grew globally and that conversions grow, and they grow in absolute figures and the proportions can fall wherever they may.

Michael, let me turn it over to you for the detail.

Sure. Thanks, Elie. Just to give you the numbers here, I think it may be a little surprising to say and to hear that only 20% of our pipeline is typically conversion around that. But there's logic behind that. It's because they come in and out of the pipeline much quicker as obviously, it takes not as much time to get those open as it does a new build. And so -- but if you look at 2025, just to give you a feel of that, if you look at our openings, roughly 40% of those openings around the world were conversions with 50 -- roughly 54% being new build, and then there were some other items in there as well.

And then, of course, our signings were 52% conversion and 43% new build. So the reason you see those higher numbers in the signings and openings is that they come out quicker. And so that's why we would see overall the pipeline having a smaller percentage over time than what you see opening and signing.

And this does conclude our Q&A session. I would like to hand the call back over to Elie for closing remarks.

Thank you, everyone. It's been great to connect with you today. We are very proud of what our teams have accomplished in 2025, and we remain confident in our ability to continue delivering on our strategy and driving shareholder value creation going forward. Our next market communication will be our first quarter trading update on Thursday, the 7th of May. Thank you for your time and your interest in IHG, and I look forward to catching up with you soon.

Hello, and welcome to IHG's 2025 Full Year Results Presentation. I'm Stuart Ford, Senior Vice President and Head of Investor Relations at IHG Hotels & Resorts. And shortly, you'll be hearing from Elie Maalouf, our Chief Executive Officer; and Michael Glover, Chief Financial Officer. Before we proceed, I'm obliged to remind all viewers and listeners that the company may make certain forward-looking statements as defined under U.S. law.

Please refer to the accompanying results announcement and the company's SEC filings for factors that could lead actual results to differ materially from those expressed in or implied by any such forward-looking statements. In addition, the presentation will refer to certain non-GAAP financial measures. Once again, please refer to the accompanying results announcement and SEC filings for reconciliations of these measures to the most directly comparable line items within the financial statements. The results announcement, together with the usual supplementary data pack as well as the presentation slides accompanying this webcast can all be downloaded from the Results and Presentations section under the Investors tab on ihgplc.com. Now over to our 2025 highlights reel, followed by Elie.

[Presentation]

Hello. I'm Elie Maalouf, Chief Executive Officer of IHG Hotels & Resorts. Welcome to IHG's 2025 Full Year Results Presentation. I will kick things off in a moment by sharing highlights from the year, a period of excellent financial performance and further progress on a clear strategy that's unlocking IHG's full potential for all stakeholders. Michael Glover, our Chief Financial Officer, will then provide a financial review, after which I will share areas of progress on our strategic priorities.

We delivered excellent financial performance in 2025. RevPAR grew by 1.5%, driven by rate and occupancy gains, reflecting the breadth of our global footprint and the diversification of our demand drivers. We opened a record 443 hotels in the year to take our total estate to more than 6,900 hotels and over 1 million rooms. Gross system growth was 6.6% and net system growth was 4.7%, representing the fourth consecutive year of accelerating growth. We signed 102,000 rooms across almost 700 hotels, 9% ahead of 2024 levels when excluding the Ruby acquisition and NOVUM conversions.

Signings were driven by strong momentum across our brands, and our pipeline now stands at almost 2,300 hotels, representing 33% future rooms growth. Our fee margin grew by 360 basis points, further increasing operating profit and EPS grew even faster, supported by 2025's $900 million share buyback program. Today, we're pleased to launch a new $950 million share buyback, which together with growing our ordinary dividend payments is expected to return over $1.2 billion to shareholders in 2026.

Cumulatively over 5 years, this will mean IHG has returned more than $5 billion to our shareholders. We're also very excited to announce the launch of our new premium collection brand, Noted Collection. Together with the acquisition of Ruby, this new brand will further strengthen our portfolio and growth potential in the critically important premium segment. More on this later. Altogether, we delivered another excellent set of results, demonstrating the strength and resilience of our business model and the power of our growth algorithm despite some turbulent trading conditions.

RevPAR growth, system growth and margin expansion collectively drove a 13% increase in EBIT. And with the strength of our cash conversion, which funds our investments, dividends and share buybacks, we delivered adjusted EPS growth of 16%. This performance is above the top end of what we laid out as the compound average that we are targeting over the medium to long term. And we are confident as we enter 2026 that we will continue delivering on this growth algorithm going forward. Let me now hand over to Michael to take you through the details of our financial results.

Thanks, Elie. I'm Michael Glover, Chief Financial Officer for IHG Hotels & Resorts. Let me take you through some more detail on a great set of results for 2025. I'll start as usual with reportable segments, which includes the fee business and our owned and leased portfolio of 17 hotels. Revenue was $2.5 billion and EBIT was $1.265 billion, growing 7% and 13%, respectively. Within this, we saw similar trends in fee business revenue and fee business operating profit, which also increased by 7% and 13%, respectively.

Fee margin increased by 360 basis points to 64.8%. I'll touch more on this excellent performance shortly. Adjusted interest increased to $200 million, which was at the midpoint of our guidance range of $195 million to $205 million. Our adjusted tax rate was 27%, unchanged from the prior year. Adjusted earnings per share includes the accretion benefit from the $900 million share buyback program executed in the year as well as the annualized impact of 2024's $800 million program.

The combination of strong revenue growth and fee margin progression, together with the accretion from the buybacks resulted in earnings per share increasing by an impressive 16%. The total dividend is proposed to increase 10%, consistent with the growth rate in each of the past 3 years. Moving on to a summary of RevPAR performance. Americas RevPAR grew 0.3% for the year with a 0.5% increase in rate more than offsetting a slight 0.1 percentage point decline in occupancy. After strong growth of 3.5% in Q1, RevPAR declined 0.5% in Q2 with the shift in timing of Easter between March and April and the onset of reductions in certain types of business and leisure travel in light of macroeconomic developments.

RevPAR declined 0.9% in Q3 and by 1.4% in Q4 when there were tougher year-on-year comparatives due to hurricane-related demand in the fourth quarter of 2024. Outside the U.S., RevPAR for the year grew 4% with Canada, Mexico and the Latin America and Caribbean subregion all delivering growth. In EMEAA, RevPAR grew 4.6% for the year with occupancy up 1.6 percentage points and rate up 2.4%. In Q4, RevPAR accelerated strongly to 7.1%, driven broadly evenly by increases in occupancy and rate and with good growth in each of business, leisure and groups.

By major geographic markets, full year RevPAR growth ranged from 1.1% in the U.K. to 4.2% in Continental Europe, 5.5% for the East Asia and Pacific subregion and just under 9% in the Middle East. In Greater China, RevPAR for the year declined 1.6%, with occupancy up 0.5 percentage points and rate 2.4% lower. The RevPAR decline of 3.5% in Q1 was followed by 3% in Q2, further improving sequentially to a 1.8% decline in Q3 before returning to growth of 1.1% in Q4 with notable improvement in leisure demand.

This slide shows the business, leisure and group's demand drivers, presenting booked revenue broken down by room nights and ADR. Global rooms revenue for business bookings grew 2% on a comparable hotel basis, driven by both room nights and rate. Group's revenue increased by 1%, predominantly due to rate, while leisure revenue was unchanged year-on-year with both occupancy and rate broadly in line with 2024's strong performance.

Turning to development activity. Gross growth was 6.6% as a record number of hotel openings saw over 65,000 rooms added to the system, 10% more year-on-year. Just over half of all openings were conversions. 26,000 rooms left the system, equivalent to a 1.9% removal rate when adjusting for the Venetian. This is slightly higher than the 1.5% average we generally expect, though not indicative of a longer-term trend. Higher removals in China, reflecting lagged post-COVID exits, combined with the natural lumpiness of exits elsewhere led to this temporary variance.

Taken together, reported year-on-year net system growth was 4% or 4.7% when adjusting for the Venetian. We signed over 102,000 rooms in 2025, a 9% year-on-year increase when adjusted to exclude the Ruby acquisition and the prior year's NOVUM agreement. Pleasingly, both new build developments up 8% and conversion activity up 10% contributed to this performance. A little over half of all signings were new builds.

Moving to cost control. As I noted in our half year results, IHG has maintained a disciplined approach to cost management for many years with this mindset embedded in how the business operates. Through process redesign, greater leverage of centralized support and enhanced use of technology, including AI, we continue to build a highly efficient, scalable cost base with step change savings delivered in 2025 that are sustainable over the long term.

Setup expenditure to realign our business in this manner resulted in an exceptional cost within the fee business of $12 million. This delivers a cash-on-cash payback within 12 months with further savings thereafter. These actions, alongside those taken in previous years are, therefore, already yielding results. Fee business overheads of $666 million in 2025 were $23 million lower than in 2024, a reduction of 3%. Going forward, this sets us up to continue holding overhead growth to a lower rate of increase than revenues and therefore, driving further margin expansion.

Moving then to fee margin, which increased by a very pleasing 360 basis points. This was achieved through a combination of improved core operating leverage, including the disciplined cost management I highlighted and step-ups in ancillary fee streams. As a reminder on those step-ups, in 2024, we announced that revenue generated from the sale of loyalty points would begin to flow directly to IHG. Initially, 50% of these revenues were recognized in 2024, representing an incremental $25 million to IHG with 100% of revenues and therefore, a further $25 million step-up recognized in 2025.

This delivered an uplift in margin equivalent to 50 basis points. We've also seen a step-up in co-brand credit card fees. When we announced the new arrangements in November 2024, we said we expected an incremental $40 million of co-brand revenue in 2025. This was achieved and delivered a further margin uplift equivalent to 80 basis points. Historically, IHG's central costs exceeded central revenues, resulting in a central loss. With the step-ups in point sales and co-brand fees, this segment now generates a net profit after central overheads.

For analysts and investors who maintain models looking to forecast IHG's Central division, I'd refer you to an episode of IHG Checks In On released today alongside these 2025 results. This episode provides more detail about the composition of Central, how we report it, what has changed in the last 2 years and how you should think about modeling it going forward. So there was a combined 130 basis points of margin improvement from step-ups in ancillaries and our operational leverage and cost actions drove the other 230 basis points of margin improvement.

Both the Americas and EMEAA delivered strong margin expansion, while China saw a slight decrease due to strategic one-off cost investments and lower incentive management fees. It's worth reiterating that the overall margin achievement in 2025 was unusually strong, driven by the step-ups in ancillaries and by the additional cost action that was taken. Going forward, it remains our ambition to expand the fee margin by 100 to 150 basis points a year on average, which would be driven by achieving fee revenue growth of a high single digit whilst controlling overhead growth to a low single-digit increase per year on average.

Moving on to cash flow. Adjusted free cash flow was $893 million, representing a year-on-year increase of $238 million. This improvement was driven by the increase in EBITDA of $143 million or 12%. There was also some lower outflows, including cash tax being $36 million lower than the previous year and CapEx within free cash flow, $29 million lower, which I will come on to in just a moment. Free cash conversion was a very strong 115% of adjusted earnings, well above the around 100% average we expect over the medium to long term.

After other flows beneath free cash flow, principally the $1.1 billion of returns to shareholders, the overall increase in net debt was $551 million, which resulted in leverage at the end of the year of 2.5x net debt to EBITDA, thus returning us back into our target range. Back at our Q3 update, I noted that in September, we issued an $850 million 5-year Eurobond swapped to $990 million with interest payable semiannually at 4.9%. In December, we then entered into a new $1.5 billion RCF, replacing the previous arrangement. This new 5-year facility is covenant-free and remains undrawn.

A look now at capital expenditure. Key money investment totaled $177 million, $29 million lower year-on-year. We previously indicated that we expected key money spend in 2025 to be broadly in line with 2024, but some of the outflows we had expected in late 2025 have shifted into 2026. Importantly, our total key money and maintenance CapEx guidance remains unchanged at $200 million to $250 million. Gross recyclable capital expenditure of just $16 million was $52 million lower year-on-year. These arrangements are often inherently lumpy, and some of these have also carried over into 2026, but such that we still remain within our average annual gross CapEx guidance of $350 million.

This chart shows you the evolution of our capital expenditure deployment. A key takeaway is that our overall CapEx spend has been stable while revenue and profit has grown. As I will show you on the next slide, this is a testament to our capital discipline. In the earlier 4 years on this chart, you can see that system fund CapEx and maintenance CapEx were the largest components. With the completion of our GRS investment and rollout between 2016 and '19, together with the ongoing reduction of our owned and leased estate and along with the greater utilization of software as-a-Service solutions, CapEx requirements for the system fund and maintenance categories have since decreased.

These prior investments have also ensured we have a very well-invested scalable tech stack and enterprise platform to support future growth. Therefore, in more recent years, the strong growth of our premium and luxury and lifestyle brands have shifted the mix of CapEx towards expansionary investment in key money and recyclable CapEx. In 2025, overall CapEx spend was lower than anticipated. And in 2026, we may catch up on some timing slippages. But to reiterate, our annual gross CapEx guidance on average of around $350 million remains unchanged. The strength of our model is resoundingly evident when comparing the acceleration of our fee business revenue, which has grown at a CAGR of 4% over the last decade and fee business profit, which has grown at a CAGR of 7% against our gross and net CapEx, which continues to represent a small proportion of our income.

The takeaway is clear, we are achieving very attractive returns on the relatively limited capital required, which supports our medium- to long-term growth ambitions as already shown by the acceleration of fee revenues and profits in the more recent years. For analysts and investors who want to understand in more detail IHG's approach to capital expenditure and with particular focus on key money, today, we have released a mini teach-in on this topic as a further episode of IHG Checks In On.

In this episode, I discussed these areas with Stuart Ford, Head of Investor Relations; and 2 of our regional Chief Financial Officers, Blake Longstaff, CFO, Americas; and Matt Woollard, CFO of the EMEAA region. Our strategy for uses of cash remains unchanged. After investing behind long-term growth, which is the foremost priority, we look to sustainably grow the ordinary dividend. In this regard, as mentioned, we are pleased to propose a final dividend growing by 10%. That rate of growth has been consistent for each of our dividend payments over the last 3 years.

A year ago, we announced a $900 million buyback program, which completed in December. This repurchased 7.6 million shares and reduced the share count by 4.8%. Together with ordinary dividend payments, we returned over $1.1 billion to shareholders, which was equivalent to 5.9% of IHG's market capitalization at the start of 2025. Today, we are pleased to announce that a new share buyback program will commence immediately, returning a further $950 million. Together with the anticipated sustainable growth in ordinary dividend payments, this will return another $1.2 billion to shareholders, equivalent to 5.8% of IHG's market capitalization at the start of 2026.

Cumulatively, for the 5 years of 2022 to 2026, this will mean IHG has returned more than $5 billion to our shareholders. And finally, modeling considerations. The interest expense is expected to increase to within a range of $230 million to $250 million for 2026, given the increase in average net debt and a slightly higher blended cost of borrowing. We anticipate no change to our adjusted tax rate of 27%. Capital expenditure guidance also remains unchanged with key money and maintenance CapEx of $200 million to $250 million within a gross total of up to $350 million on average annually. For reference, this slide also shows a summary of our growth ambitions over the medium to long term. With that, let me now hand back to Elie.

Thank you, Michael. I will now share an update on our strategic progress in 2025 across the 5 areas shown here. Starting with excellent development activity across our brands. Between 2015 and 2025, we doubled our brand portfolio from 10 to 20 brands. And today, we are pleased to announce the launch of our 21st, Noted Collection in the premium collection space. Across these brands, we are capturing more guests at more price points and more owner interest than ever before.

At the top end, in ultra-luxury, Six Senses is delivering exclusive one-of-a-kind experiences and sought-after leisure destinations, driving average daily rates of over $1,000 per night. At the other end of our portfolio is Essentials. Garner is rapidly scaling and further broadens our presence in the affordable mid-scale space. In the middle of the brand ladder, we have doubled down on the fastest-growing premium segments with the acquisition of Ruby in 2025 and today's launch of Noted Collection.

Across all our brands, new and established, we are unlocking the power of our industry-leading enterprise platform for even more owners. Our expanded brand portfolio diversifies our customer mix, enhances the value of our loyalty program and brings more property types into our system, and we continue to consider options to further develop our portfolio in the future. In 2025, we opened a record 443 hotels and added a further 694 into our pipeline.

Our 10 established brands, which include InterContinental, Crowne Plaza, Holiday Inn and Holiday Inn Express drove the majority of development activity, accounting for around 2/3 of openings and signings. And with over 900,000 rooms already in our system and nearly 30% growth in the pipeline, these established brands will continue delivering system growth going forward. Meanwhile, our newer brands are scaling quickly, accounting for 1/3 of openings and signings in the year. They've grown to already represent 10% of our current system size and 22% of the pipeline.

By brand segment, we are very pleased with the continued evolution of each of our 6 brands in luxury and lifestyle. Together, these higher fee per key rooms account for 14% of our system size and 22% of the pipeline. Our 2 ultra-luxury brands, Six Senses and Regent, are creating a halo effect and opening up new ancillary fee opportunities in areas like branded residential. Regent was recently voted one of the top 3 most loved hotel brands in Travel and Leisure's prestigious 2025 World's Best Awards. And we are thrilled in a few weeks' time to be celebrating the opening of Six Senses London.

This landmark hotel will be a cornerstone in the brand's exclusive and growing portfolio and will redefine urban luxury. Intercontinental is delivering even higher guest satisfaction as we continue to reimagine the luxury experience for today's modern traveler. With over 240 hotels open in more than 60 countries, InterContinental is the world's largest international luxury hotel brand. And 80 years since its launch, the brand is still young and has a long runway for growth with over 100 hotels in the pipeline.

We are also very pleased with the continued growth of Vignette Collection, Kimpton and Hotel Indigo. Vignette Collection launched in 2021 is tracking ahead of its goal to reach 100 hotels open in a decade. Kimpton further expanded its global footprint with notable openings, including a first hotel in Hong Kong, and Hotel Indigo has now exceeded 320 open-end pipeline hotels in nearly 50 countries, reflecting its accelerated pace of development.

Turning to premium. We are focused on expanding our offer in this large and fast-growing category, which is key to unlocking cross-category demand between Luxury and Essentials. Each of our 6 brands in this category is highly differentiated, capturing a range of stay occasions and guests. Our premium portfolio is anchored by Crowne Plaza, a trusted name for both business and blended travelers. The brand is building strong momentum with hotel openings and signings increasing over the past 4 years, taking its total open-end pipeline hotels to 578.

And with 34% rooms growth embedded in the pipeline, Crowne Plaza's growth prospects are at their highest level in over 15 years. Driving this demand is a successful evolution of the brand and enhanced quality of estate. Today, 70% of Crowne Plaza properties in the Americas and more than 60% globally are new to the system or have undergone a renovation. At the same time, we are doubling down on premium's fastest-growing segments. Our versatile premium conversion brand, voco already has 124 open hotels across more than 30 countries since launching in 2018, with a further 108 pipeline hotels as signings continue to accelerate.

Our recently acquired brand, Ruby had 20 open hotels at the time of acquisition, has signed new deals in new exciting destinations, including the U.S., and we expect it to reach 120 hotels within 10 years. And Noted Collection launched today, we expect to also scale rapidly. Let's take a look at the short reel to give you a brief flavor of the brand.

[Presentation]

Noted Collection, which is designed to power the performance of high-quality upscale to upper upscale hotels with their own unique identity fills a key space in our brand ladder and further expands our offer for guests. It will initially focus on our EMEAA region where there is a significant proportion of high-quality hotels with strong individual brand equity that would benefit from fast connection to our powerful enterprise, global scale and expertise.

We are already in initial discussions with multiple owners, including several with portfolios of hotels, and we expect to reach more than 150 hotels over the next decade. More details about the brand, including the media release and the full highlights reel can be found on our corporate website. We also continue to extend our mainstream leadership through our powerhouse Essentials and Suites brands. Our world-leading Holiday Inn Express brand opened another 95 hotels in 2025, taking its open estate to 3,300. Its strongest level of signings in 6 years, around 170 hotels takes its pipeline to 655.

And during the year, we also opened the brand's first Gen 5 hotels in Greater China and Europe, a format designed to boost both owner returns and guest satisfaction. Our latest Holiday Inn Design has also expanded in the U.S. and is delivering performance uplifts. And as mentioned earlier, we are very pleased with the speed of Garner's growth, becoming IHG's fastest ever brand to scale globally. Garner entered 6 new countries in 2025 alone, Mexico, Austria, the Netherlands, Italy, Turkey and Thailand.

Finally, we continued the strong momentum of our Suites brands with 50 hotel openings in 2025, up around 30% year-over-year based on rooms, and we signed a further 90 hotels into the pipeline. We now have over 1,200 open and under development suites hotels. Let's now turn to priority growth geographies, where we are achieving impressive development activity across our regions. Let me first begin with a reminder of our global position today. IHG is a large domestic player in large domestic markets with the U.S., Europe and China collectively accounting for 79% of our current system size.

We are also large domestic players in Canada, Mexico, Saudi Arabia, Japan and Australia. This is by strategic design. In 2025, approximately 90% of guests staying at our hotels around the world traveled either domestically or from nearby countries. Therefore, shifting travel flows, while impactful to certain markets and regions, usually have limited impact on IHG's global performance. And as we approach 7,000 hotels in over 100 countries, we are well positioned to capture guests even further wherever and whenever they choose to travel.

Our pipeline of 2,300 hotels also deepens our presence in the world's fastest-growing economies. Almost 60% of this pipeline is located east of Europe and in countries that will collectively see economic output rapidly increase by more than 40% over the next 10 years and the number of middle-income households increase by more than 80%. Taking a closer look at our largest market, the U.S. development momentum continued to pick up in 2025 with gross openings accelerating for the second consecutive year to grow 11% year-over-year. We opened 156 hotels, driven by momentum across our Premium, Essentials and Suites brands and signed 233 hotels into the pipeline, highlighting owners' continued confidence in investing behind our brands.

In Greater China, we celebrated IHG's 50th anniversary and our 800th opening in early 2025. By year-end, we reached 882 open hotels with net system growth of nearly 9%. It was another record year of both hotel openings and signings with the latter taking our pipeline to 582 hotels. During 2025, we also opened our first Atwell Hotel. So 13 of our brands are now present in Greater China. Many of these brands are still in their infancy in the region, and we will introduce additional brands into this vast market in the coming years, including Garner in 2026.

Looking ahead, 56% growth is embedded in our pipeline, and we remain confident in the market's long-term structural growth drivers, supported by a middle class forecast to approximately double over the next 10 years and a significant underpenetration of hotels per capita relative to the U.S. Turning now to EMEAA and 4 priority growth geographies where our strategic focus is delivering strong growth momentum and market share gains. Starting with Germany, one of Europe's largest hotel markets with strong domestic consumption and inbound travel and also one of the largest sources of international outbound travel globally.

In 2025, we doubled our presence in the country to 190 hotels from 96 in 2023. We are also pleased to have signed a further 25 hotels into the pipeline as growth momentum in the strategically important market accelerates. Momentum is also accelerating in Japan, where the top 3 global players account for only 5% of industry supply. In 2025, we opened 8 hotels and signed another 18, our strongest year in the country since 2007. We also launched several successful local partnership initiatives, including an IHG MiniApp in Japan's most popular messaging platform, the LINE.

We now have 4 million followers, 4x more than our closest competitors. In Saudi Arabia, we opened our first Kimpton in 2025, which takes the number of brands present in the country to 7. We also signed a record 21 hotels, including the launch of Even hotels for the wider EMEAA region as well as 2 portfolios totaling 6 hotels across 5 different IHG brands. We continue to see tremendous opportunity in Saudi Arabia with over 80% rooms growth embedded in our pipeline, industry-leading signing share in the first 9 months of 2025 and nearly 20% share of future industry supply.

In India, we surpassed a major milestone of 50 open hotels in 2025 and delivered record signings in this rapidly growing market, taking our pipeline to 89 hotels. Notable signings included the first 5 Garner hotels, and we opened our first Vignette Collection. This momentum reflects strong owner confidence in our brand portfolio and the power of our enterprise platform in this rapidly growing market. We see large and long-term potential going forward with around 160% growth embedded in our pipeline and an ambition to triple our open and pipeline hotels over the next 5 years.

Overall, the strength of our brands and global geographic positioning drove our strongest gross and net system size growth performance in 6 years, with 33% further rooms growth embedded in our pipeline, around 50% of which is currently under construction and attractive long-term structural industry growth drivers at play, we remain confident in the momentum of our system growth going forward.

Now turning to the important progress we're making in developing our leading technology and enterprise platform to capture demand, deepen guest loyalty and drive hotel owner returns. Our industry-leading connected technology ecosystem is the backbone of our enterprise platform and one of our key competitive advantages, enabling us and our hotel owners to capitalize on the opportunities that new technologies like artificial intelligence are creating. At the center of how we optimize operations for owners is our first-in-the-industry guest reservation system, which is extremely well invested in and is the backbone upon which other core systems connect.

The GRS interconnectivity is also central to how we leverage the ecosystem to promote all IHG Hotels and engage our guests. I will come back to developments across the promote and engage pillars in just a moment. Before that, touching on core systems a little further. In 2025, a further 3,400 hotels adopted our new revenue management system, completing the rollout of the platform across the eligible estate. This new RMS offers best-in-class cloud-based solutions that incorporates data science, machine learning, AI and forecasting tools to deliver advanced insights and recommendations to owners.

This significant innovation is made possible by the previous rollout of our GRS. We are creating even greater value for owners by providing hotels with a next-generation property management system through cloud-based above-property solutions that apply the latest technology and allow the deployment of fast, efficient enhancements. Benefits include quicker colleague onboarding and training and streamlined front desk processes via mobile and remote access. The accelerated rollout of our new PMS solutions reached 2,000 hotels in 2025, and we expect to double this to 4,000 by the end of 2026.

Turning then to the next phase of our technology evolution and the ways we are weaving artificial intelligence throughout our enterprise platform and transforming how we deliver on our growth algorithm. Our approach to artificial intelligence can be grouped into 3 distinct areas: guest acquisition, commercial optimization and cost efficiency. Starting with guest acquisition. Our teams are leveraging the latest technology to develop new ways to promote our hotels, drive bookings and deliver more memorable stays for our guests.

Within this area, we are pursuing 4 key initiatives: search, discover, book and stay. First, we will begin rolling out our new content platform this year, ensuring the right hotel information is showing up in the right channels at the right time. Second, we are developing foundational AI-powered trip planning capabilities in partnership with Google, a key step in moving towards a more conversational search experience on IHG's owned websites and apps. Third, we are piloting new AI-powered marketing tools that are delivering meaningful improvement in click-through rates and ROI in initial testing.

Fourth, we are refreshing our loyalty platforms and deploying a new AI-enhanced CRM platform this year that will help our hotels know their guests on a more personal level and drive deeper loyalty. I will touch on this and the content platform in more detail shortly. Together, these capabilities will strengthen our direct channels, bring more guests to our hotels and keep our most loyal guests coming back.

Turning to our second area, commercial optimization. Our new RMS, which builds upon our previous investment in GRS and leverages machine learning AI is fully rolled out and achieving positive impact on owners' top line performance in the form of revenue uplift and market share gains. Our hotels are also seeing efficiency gains through the use of automatic language translation and digital assistants that answer common guest questions, freeing up time for our hotel colleagues to focus on more value-added activities.

Finishing with our third area, we are leveraging AI to drive cost efficiencies and transform how we deliver on our growth algorithm. By providing our colleagues with the latest technology, we're establishing new ways of working, automating routine tasks and delivering insights across the business faster and more effectively. As you heard Michael say earlier, this technology, together with process redesign and greater leverage of centralized support is unlocking a more efficient, scalable cost base with step change savings delivered in 2025 that are sustainable over the long term.

Now let's take a closer look at our new digital and AI compatible hotel content platform. This platform, which we will begin deploying this year, will bring property features and attractions to life in new and exciting ways with videos, 360-degree images, floor plans, virtual tours, automated language translation and more. It will transform how we structure hotel content and strengthen the digital hooks needed for our hotels to be recommended by AI agents. It will also create new ways to combine and display information, unlocking greater flexibility in how content is created, delivered and personalized.

Importantly, this will create new advantages for IHG and our hotels as the search environment continues to evolve. To deepen loyalty, we are also making big advances to get more familiar with our guests, especially our most loyal guests. We are refreshing our loyalty platform and unifying our customer data with a new cloud-based CRM. We began the rollout of select functionality in 2025, and we'll continue scaling this in 2026. This refresh will provide a seamless view of our customer throughout their IHG experience, whether they are engaging digitally, calling a customer care center, checking into one of our hotels or requesting a copy of their bill post checkout. Combined with AI, we will be able to anticipate their needs, personalize their experience, offer more relevant promotions and benefits and extend loyalty rewards faster and more effectively.

The loyalty platform evolution will bolster our customer acquisition capabilities, widen our competitive moat and unlock the full potential from IHG One Rewards from an already strong base. In 2025, our IHG One Rewards membership base rose to more than 160 million members. This means it has grown approximately 60% since the program was relaunched, an outstanding achievement. Globally, loyalty penetration is now approximately 66% of all room nights booked, growing by over 3 percentage points in each region, and it is highest in the U.S. and Americas overall at 73%.

Loyalty members spend more and are 10x more likely to book direct, which drives enormous value for owners. And our engaged members are the ones driving this program growth. Reward night redemptions increased by 9% year-on-year, and there was 12% growth in the number of milestone rewards selected as we delivered value to our most frequent guests. Overall, the strength of IHG One Rewards, together with our industry-leading technology ecosystem and all the channels and sources we manage for our owners is driving increased total enterprise contribution that provides hotels with 83% of all the rooms revenue booked. This is generating more high-quality revenue for owners, lowering their costs and enhancing their returns.

Now an update on our valuable ancillary fee streams driven by the strength of IHG One Rewards and our powerful brand portfolio and enterprise platform. We've said before that our loyalty members are our most valuable guests, spending more and booking direct. Our co-brand credit card holders stay even more frequently and spend even more in our hotels. In 2025, the number of U.S. co-brand card members saw high single-digit percentage growth, alongside a comparable uplift in total card spend as we delivered more rewards to more cardholders.

The continued growth in the program, together with the new agreements between IHG and our U.S. issuing and financial services partners is driving the step change in co-brand credit card fees that Michael spoke about earlier. We're also excited to announce that we have recently agreed a new U.K. co-brand debit card partnership with Revolut alongside Visa with card products scheduled to be launched later this year. Further co-brand opportunities in priority growth markets are targeted for future years.

Turning to point sales. We are very pleased with the growth of ancillary fees as consumers engage with IHG One Rewards while buying and redeeming points across our global estate. We expect this product and fee stream to continue growing in the future as our loyalty program and system size expand further. Finally, we continue to see meaningful fee growth potential from branded residential developments. The number of properties in this industry segment is forecast to approximately double by 2032, and our industry-leading luxury and lifestyle brands give us an advantageous position to capture that growth.

We currently have more than 30 open or selling projects in the market across 15-plus countries and more in the pipeline. Fees earned by IHG from branded residences increased in 2025, benefiting from strong sales at Six Senses Dubai Marina. Signings in 2025 for future branded residences developments included Six Senses Myoko Japan and 2 in Thailand at the InterContinental Phuket Resort and the InterContinental Residences Bangkok Asoke. Further fee growth is expected to be substantial in 2027 and beyond as more of the current residential units under development are sold and as we continue to leverage the global reach and potential of our luxury and lifestyle brands.

To conclude, we are very pleased with the strength of our financial performance, the growth of our brands and progress made in 2025 against a clear strategy that is unlocking the full potential of our business for all stakeholders. The strong performance went beyond the growth algorithm, delivering RevPAR growth of 1.5%, net system size growth of 4.7% and 360 basis points of fee margin expansion. We returned over $1.1 billion to shareholders, and this culminated in adjusted EPS growth of 16%.

We remain confident in our ability to continue delivering the growth algorithm on average over the medium to long term, driven by high single-digit fee revenue growth. 100 to 150 basis points of margin expansion per annum from operating leverage, approximately 100% adjusted earnings converting into free cash flow, sustainable dividend growth, returning surplus capital to shareholders while targeting financial leverage between 2.5x and 3x and ultimately, delivering 12% to 15% adjusted EPS growth as a compound annual growth rate. And with that, we thank you for listening to our 2025 results presentation.

Hello, everyone, and welcome to today's IHG Third Quarter Trading Update Call. My name is Seb, and I'll be the operator for your call today. [Operator Instructions]

I will now hand the call over to Stuart Ford to begin the call. Please go ahead.

Thanks, Seb. Good morning, everyone, and welcome to IHG Hotel and Resorts Conference Call covering the 2025 third quarter trading update. I'm Stuart Ford, Senior Vice President and Head of Investor Relations at IHG, and I'm joined this morning by Elie Maalouf, our Chief Executive Officer; and Michael Glover, our Chief Financial Officer.

Just to remind listeners on the call that in discussions today, the company may make certain forward-looking statements as defined under U.S. law. Please refer to this morning's announcement and the company's SEC filings for factors that could lead actual results to differ materially from those expressed in or implied by any such forward-looking statements. For those analysts or institutional investors who are listening via our website, may I remind you that in order to ask questions, you will need to dial in using the details on Page 3 of this morning's RNS release. The release, together with the usual supplementary data pack for the third quarter can be downloaded from the Results and Presentation section under the Investors tab on ihgplc.com.

Now over to Michael.

Thanks, Stuart, and good morning, everyone. I will start today by providing an update on trading and development activity as well as covering off some other financial updates. I will then hand over to Elie, who will give an overview of our new collection brand launch and his summary. We will then open up the call for Q&A.

Global RevPAR grew 0.1% in Q3. As anticipated, this was similar to the performance seen in Q2 and was driven by strong trading in EMEAA, along with further improvement in Greater China. Demand remained robust with occupancy up 0.4 percentage points, while rate eased by 0.4%.

For the year-to-date, global RevPAR grew 1.4%. In the Americas, RevPAR for the region as a whole was down 0.9% in the quarter, with the U.S. 1.6% lower given the continuation of some slower trading conditions for the industry. This included government travel continuing to be around 20% lower than the prior year, lower international inbound travel, and there was also some small impact at the end of September from the timing of Jewish holidays.

Whilst we've seen some softer demand in the U.S. for a couple of quarters now, we remain confident for the return to growth in due course when economic uncertainty further subsides and the travel industry's fundamental tailwinds prevail. It is encouraging to see the ongoing stability to the U.S. jobs market and the expectations for substantial infrastructure investment and continued economic growth.

In EMEAA, we saw another strong quarter with RevPAR up 2.8%, taking year-to-date growth to 3.8% overall, occupancy in the quarter was up 1.6 percentage points to 75.3% and rate was up 0.6%. By major geographic markets within the region, RevPAR ranged from 0.1% growth in Continental Europe, where France and Germany, in particular, had tough comparatives, but this was offset by leisure-driven growth elsewhere, particularly in Southern Europe.

There was growth of 2.8% in the U.K. and 3.3% in East Asia and Pacific, and there was a very strong 9.5% growth in the Middle East, driven by the UAE, supported by a favorable events calendar and infrastructure projects.

In Greater China, RevPAR was 1.8% lower in Q3, a further sequential improvement on the 3% decline in Q2 and the 4.8% reduction in full year 2024. Occupancy was up 0.6 percentage points to 64.4%, while rate was down 2.7%. There was strong growth in Hong Kong, while on the Mainland, Tier 1 cities also outperformed, down only 1.2% compared to Tiers 2 to 4, which were down 3.9% with further impact from increased international outbound leisure trips.

We continue to remain encouraged by the breadth and strength of China's economic growth and the attractive long-term secular growth drivers such as the increasing scale of the middle class and how that triggers more demand to travel and experience. In terms of the overall demand drivers on a global basis, rooms revenue on a comparable hotel basis for business days was up 4% globally, while leisure and groups were down by 2% and 4%, respectively.

As a reminder, all 3 drivers saw growth on a global basis in the first half of the year, while the headwinds seen by leisure and groups in the third quarter were predominantly due to the trading conditions and the year-over-year comps in the U.S.

Moving now to system growth. We opened 14,500 rooms across 99 hotels globally in the quarter, up 17% year-on-year, excluding the NOVUM conversions. This produced 7.2% gross growth year-on-year and 5.2% net growth when excluding the Venetian removal. After the record levels of openings seen across the business in the first half, the strong pace has continued.

The 46,000 rooms added year-to-date represents our strongest ever performance through the first 3 quarters. Our signings performance has been just as strong with nearly 23,000 rooms added to the pipeline in the quarter, an increase of 18% on the same period last year. Excluding last year's NOVUM signings, both our EMEAA and Greater China regions are tracking at record pace through the first 3 quarters of the year. And the Americas also saw strong signings growth in the quarter.

Roughly half of all our signings globally were quicker to market conversions, reflecting the continued breadth and attractiveness of our brands and the benefits to owners of joining IHG's enterprise. Looking now at each region in more detail, the Americas gross system growth was 3.6% year-on-year with a further 2,700 rooms opened in Q3. Net system growth was 1.5% year-on-year, adjusting for the impact of removing the 7,000 Venetian resort rooms.

7,600 rooms were signed to the Americas pipeline in the quarter, an increase of 14% on last year. These included 33 hotels signed across the Holiday Inn brand family, 16 across our extended stay brand and 8 voco conversions. Garner, our mid-scale conversion brand, also saw good progress in the quarter with another 9 signings. And the brand now has 25 open and 49 in the pipeline in the region. Conversions represented over half of all rooms opened and signed in the quarter.

In the EMEAA region, gross system growth was 10.4% year-on-year with 4,200 rooms opened in the quarter, an increase of 25% versus the same period last year when excluding the NOVUM portfolio. Net system growth was 9.1% year-on-year and 5.2% year-to-date, which puts 2025 on track for record levels of system growth in the region. 7,100 rooms were added to the EMEAA pipeline in the quarter, which was growth of 22% on last year.

There were 12 hotels signed across luxury and lifestyle brands, including 2 incredible properties for Regent, 9 Crowne Plaza and 8 Holiday Inn signings as well as 5 further Garner properties as developed across the region. Conversions represented 60% of all room openings and approaching 40% of room signings in the quarter.

Our Greater China region remains on track for a second consecutive year of record development performance. 7,600 rooms opened in the quarter drove gross system growth to 12.8% year-on-year. These openings were up nearly 40% versus last year and have contributed to year-on-year net system growth of 9.8%. Highlights include the opening of the Atwell Suites Shanghai Wuning, marking the debut of this brand in the region as well as the Kimpton Tsim Sha Tsui, which represents the first for the brand in Hong Kong and is a truly incredible location steps from Victoria Harbor.

Signings of 7,900 rooms in the quarter were up nearly 20% on last year. These included 17 Holiday Inn Express and 16 Holiday Inn properties, along with 6 voco's and 3 Luxury & lifestyle signings, further demonstrating our strength across chain scales in the regions. Conversions represented around 40% of all rooms opened and signed in the quarter.

Moving next to update you on the share buyback. We are currently 78% of the way through this year's $900 million program. To date, this has reduced our share count by a further 3.9%. Today's statement also notes for you that we completed another bond issuance in the quarter. We have a total of $4.1 billion of bonds outstanding with very evenly spread maturities and a blended borrowing cost of around 4.3%. The view of leverage at the end of 2025 remains around the middle of our target range of 2.5 to 3x net debt to EBITDA.

One thing that is new news in today's statement at the top of Page 3 is that IHG intends to change the currency of which our ordinary shares are traded on the London Stock Exchange from British pounds to U.S. dollars with the change planned from the start of January 2026. This change has recently became possible whilst maintaining FTSE Index inclusion following updates to the index rules administered by the FTSE Russell Group.

IHG has reported its financial results in U.S. dollars for the past 17 years. Changing our share price currency to match our reporting currency will help reduce the translational impact of exchange rate fluctuations on the share price, therefore, better aligning the share price to financial performance and simplifying the investment appraisal of IHG. The change will not impact IHG's London listing in any other way, and the change will have no impact on IHG's ADR listing in New York. The change is simply to the currency of our share price and should not be perceived as a precursor to any other changes.

To wrap up, touching briefly on our outlook. As we've said in today's statement, we remain on track to meet current full year profit and earnings expectations. We published details of consensus on our website based on the Visible Alpha data Service. This currently sees consensus average for operating profit from reportable segments as $1.259 billion. The profit consensus implies growth of 12% on 2024's results and the adjusted earnings per share consensus, which is $4.99, implies growth of 15%. This will result in another year of strong delivery on our growth algorithm. And with that, I'll hand over to Elie.

Thank you, Michael. So hopefully, you've got a flavor of our third quarter performance. Trading was as anticipated, similar to Q2 with another strong performance in EMEAA, further improvement in Greater China and a continuation of some slower trading conditions in the U.S. But bringing those together, you see the power of our globally diverse footprint. And beyond the short term, we remain really confident in the long-term demand drivers.

The quarter was another strong one for our development activity with 2025 set to be one of our biggest years ever for both openings and signings. So the growing demand from owners for our portfolio of world-class brands and for accessing all the other benefits of our enterprise platform very much continues.

As Michael mentioned at the start of his remarks, we are excited to announce the upcoming launch of a new collection brand in the coming months. To meet growing guest and owner demand, our teams have been hard at work for some time now to create this new collection brand within the large and fast-growing premium segment and positioned an upscale to upper upscale. It will initially focus on our EMEAA region where there is a significant proportion of high-quality hotels with their own unique identity, and we're adding a collection brand will further expand our offer for guests, and it will allow even more owners to benefit from our strong enterprise platform.

The new brand will complement our versatile premium conversion brand, voco, which has already reached 225 open and pipeline hotels across more than 30 countries since its launch in 2018 and we'll look to replicate the success of Vignette Collection, which is positioned higher in the luxury and lifestyle category and which is already tracking ahead of its goal to reach 100 hotels in a decade, currently with 27 open and a further 41 pipeline properties.

The voco and Vignette brands also initially launched in the EMEAA region. We look forward to telling you more about this exciting new offering in the coming months. In the meantime, for those of you who want to learn more about our brands, I encourage you to look at the latest episode of IHG Checks In On, which our Investor Relations team have released today on the corporate website. This tenth episode is an opportunity to learn more about IHG's design and innovation center in Atlanta, where we lay out the latest room formats for the Premium, Essentials, and Suites brands, and we have an equivalent center in Shanghai.

The mini teach-in walks you through the latest format evolutions and design innovations for 9 of our brands, Holiday Inn Express, Holiday Inn, Avid, Garner, Candlewood, Atwell, Staybridge, Hotel Indigo and most recently, Ruby, which we announced just a few weeks ago is now available for development in the U.S.

The tenth episode is a 40-minute watch, which we hope you'll get a lot out of. So to summarize where we stand after the third quarter, global RevPAR increased by 1.4% year-to-date. Gross system growth is 7.2% year-on-year and net system growth is 5.2%, with openings and signings up 17% and 18%, respectively, on the same quarter last year, and our teams have delivered a performance that reaffirms our confidence in driving the core components of our shareholder value creation in line with market expectations and our growth algorithm. That growth algorithm sees consensus expecting us to deliver in 2025 around 12% EBIT growth and around 15% EPS growth, and we remain on track to meet those expectations.

And with that, let me pass it back over to the operator to open up the line for your questions.

[Operator Instructions] Our first question is from Jamie Rollo at Morgan Stanley.

Three questions, if I may. First is really about net system growth for 2026. It looks like you're probably going to end this year at about 4%, including the losses of Venetian and the NOVUM openings, which broadly match each other. You've obviously announced a very big signings number today. You've got the new collection brand. One of your competitors yesterday talked about a big increase in construction starts in the U.S. They raised their net unit growth guidance for this year. So how are you feeling about next year's net system growth, please? I think consensus is about 4%.

Secondly, I know you don't guide on RevPAR, but it looks like you're a similar flattish performance in the fourth quarter. What sort of puts and takes can we think about for 2026, specifically in the U.S., please?

And then on the credit card fees, I know you've explicitly guided for 2025, an extra $40 million or so and then the remaining $40 million over the next 3 years. Could you talk a little bit about the cadence of that? Is it front-end loaded into '26, please?

Thank you, Jamie. Look, we feel very good about the trajectory of our net system size growth. I think consensus for 2025 is 4.5%, excluding the Venetian, and we're very comfortable with that. What encourages us even further is a strong pace of signings and then converting those signings into openings as you saw year-to-date and especially in the third quarter. with a pipeline up 4.7%. We've got a lot of fuel in the tank to continue our net system size growth.

So if consensus is 4% for next year, we're quite comfortable with that. We feel like we can continue that momentum. Regarding the developments in the U.S. market, look, lower interest rates, we see the 10-year bumping now at 4% or even lower, lower inflation, lower energy prices, all of that is a catalyst, a slow growing catalyst, as I've been saying for a couple of years now. It's a grind forward, not a V-shaped acceleration, but our new build signings are still most of our signings around the world. And therefore, we feel that between the strong conversion momentum we've had with our new conversion brands, and we're adding a collection one now, as we mentioned, but we're still getting strong new build signings and openings. So we feel like we've got the pipeline. We've got the momentum. We've got the brands to continue this growth.

Actually, Jamie, just to clarify, consensus for next year on system growth is around 4.3% growth. And I think we said at the half year, we felt comfortable with where that is based on our visibility and how you see things coming through. We still feel comfortable with where that sits. And as you know, we don't give guidance, but I can say we do feel comfortable with where that sits.

I think if you go back to what we said last year at the strategy update in February, all the things that we were doing to strengthen the performance of this company, including the trajectory of our growth by taking our brands into new markets. Last year, it was nearly 30 instances where we took existing brands into new markets. This year, year-to-date, it's already 15 or 20, and we're making progress along that pace by entering and growing faster in markets like the Middle East, like India, Southeast Asia, Japan, Germany, by strengthening our enterprise loyalty, commercial, revenue management, all these things are helping our brands perform better, as you can see from the RevPAR that we're delivering and then helping the confidence in our owners to sign up for our brands and open them up.

On your second question, maybe I'll take the first stab at that and then Elie can jump in. Yes, I mean, we've said if you look at where consensus is in terms of RevPAR for the full year, it's around 1.3%. We've delivered 1.4% year-to-date. And we'd say we're comfortable around where that range is for consensus. And really, if you look at it, to get to that, you're somewhere in a range that's similar to where we were in the third quarter, more on the positive side. And so we feel comfortable with that and being able to achieve that.

We still have booking windows that are very short, 60% of our booking windows, our bookings are done within 7 days. So the booking windows are very short. For us, as you know, we had quite a bit of benefit from the hurricanes last year. So we're lapping some of that. You had the election last year as well. And so there's lapping that as well, which took some trick stays away.

So I think in overall, I think that's where we would position it. As we get into 2026, it's obviously very, very early in the period, and we're just going through our processes today. So we wouldn't really go out and give any kind of indication of what we feel like 2026 is right now. However, if you look at the fundamentals of the economy, maybe I can let Elie take you through how we're seeing the fundamentals of the economy in the U.S.

Yes. I mean and it's not just in U.S. I'll go a bit beyond, you got to look at the fundamentals and say that the underlying factors are pretty optimistic. If you start in the U.S., we're still at a record number of people employed. We've got wages that are outpacing inflation. Wages are accelerating, inflation is lower. Consumer spending is resilient, 2.6% year-over-year in July and August. And I think that, yes, the consumers have the bit of the tailwind now with the energy prices being lower.

GDP growth in the U.S. is over 3% in the first half of the year and then predictions for the second half are between the high 1s to 2% when the government ever gets around to publishing those results. But the Fed has been cutting rates. Equity markets are record highs, actually not just in the U.S., but in many parts of the world.

We got clarity on the tax situation for consumers and corporates, and that is a constructive clarity, not a negative one. And look, travel trends are still pretty solid. You saw the AMEX results for Q3. You saw the airlines pointing to a solid Q4. You still see TSA passenger volumes growing despite the government shutdown.

Supply is still -- supply growth is still low, although we're taking share and growing more rapidly. And that still doesn't include all the benefit of the super cycle of investment with hundreds of billions of dollars in domestic and foreign direct investment that are coming into the U.S. for AI, energy and other capital projects, pharma companies and auto companies are investing more to reshore into the U.S.

I mean just the 4 largest U.S. hyperscalers are projecting to spend over $400 billion in CapEx this year and projections are for double-digit increases next year, and that investment is only expected to increase. So you look at that, you look at the correlation between private nonresidential fixed investment, which is a leading indicator to our industry and to RevPAR growth. That's accelerated from 1% in Q4 to 3% in Q1 of this year to 4% in Q2 this year. That's a pretty good leading indicator.

So you look at all these structural growth drivers. And yes, there is still some turbulence in the macro and then the tariffs out there. But you look at these fundamentals, you got to feel pretty optimistic about the mid- to long term in the U.S. On the other side of the world, we have been saying for a while that China is bottoming out, and our data shows that RevPAR has been getting sequentially better. The Tier 1 cities have been getting even better.

The economy is still growing at 5%. Exports are still strong for China despite the tariff tensions. So on both ends there, and in the middle, EMEAA has been a strong driver for us, especially in the Middle East, Southeast Asia. So -- and it's -- despite the lapping of events, we see very strong resilience in Europe and in the U.K. So I think the fundamentals and the tailwinds are positive for next year.

To answer your final question, which was on the credit card fees, you are correct. We did state that in 2025, we would see roughly about $40 million increase in this year. And that we said that we would triple what 2023 was by 2028. And so as you go through the next few years, it would be more spread evenly across those years, not front-loaded into really 1 year. And that's really driven by the economics of the agreement and increasing card signings and spend on the cards.

And -- but we would say that we would see our ancillaries growing at a fee rate at a premium to where RevPAR growth. And so I think that's maybe how you could think about it as we get to go into next year.

And it's not just the credit cards. It's the point sales that are growing at a healthy clip, and we're starting to see the benefit from our branded residential business that's growing, too.

Our next question is from Leo Carrington at Citi.

If I could just do two questions, please. First, on this new brand, you mentioned, I think, 50% of openings from conversions. Is the market tilting further to conversions? Is this the reason for launching this brand? Could I check why the opportunity is greater in Europe for the moment, i.e., why not the U.S.? And if you've given a total target for the openings like they've been yet?

And then separately, going to the U.S. demand at the moment. I take your points about the outlook improving from a sort of fundamental perspective. But in terms of the reasons for the weakness and the weakness in leisure demand, how do you see it given the flight data is good? Is it substitution? Is it behavior? Just any color or ideas that would be very interesting.

Sure. All right. Let me take a shot at those and Michael will jump in and create even more color around them. It's on the new brand. We've -- we're really excited about this, launching this new collection brand and upscale to upper upscale, and if you look at why -- let me start with why EMEAA first. A couple of reasons. over half of the supply in our EMEAA market, which is, of course, U.K. all the way to the Pacific and Africa, Middle East, India, over half of that supply is still independent.

Then within the branded supply, a lot of it is smaller to regional brands and that are addressable with conversion and collection brands for IHG. And then there are other larger brand addressable categories. So you end up in 60%, 70%, 80% of the market that we think is addressable for conversion for collection. And we've seen the success of voco in conversion, which now we already have 225 properties open on development in 30 countries.

We've seen the success of Vignette that is on track to reach 100 open hotels in line with the projection we gave when we launched it, both launched in EMEAA, then both branched out East and West, west to the U.S., the Americas, East towards China successfully. And -- but because of the larger conversion and independent market in EMEAA, it makes sense to launch our conversion and collection brands there. That was the case with Voco. That was the case with Vignette. They've both been very successful.

In the -- to your question of is the market tilting more towards conversion. Clearly, post pandemic, we've seen a proportional increase in conversions while new builds have been under pressure still growing back from the pandemic, but a slower rate.

You had inflation and you had high interest rates and you had those subsiding eventually, but at high cost and then you have now tariff noise. And so there's been quite a bit of headwinds for new build, but we're encouraged to see the gradual recovery of our new build signings or new build openings that still comprise the majority of our signings and our openings.

But yes, conversions of proportions have increased, and there are really three fundamental reasons for that. First, it is structural in the sense that this large independent and other branded market is a large addressable territory that is well over half the market. Even in the U.S., where 40% is independent. Of that 60% branded, a lot of that is small regional and I would say, addressable brands that are not in strong enterprise systems.

So there is a realization that there's a strong addressable market. Second owners of these hotels, whether branded or independent, are seeing the strength of enterprise systems like our enterprise system. It's delivering 65% of room nights from loyalty, 70% in the U.S. that's delivering RevPAR premiums quarter after quarter. That's delivering high direct contribution, lower OTA contribution, that's delivering group business and corporate business and that has strong technology platforms and enterprise systems like our new revenue management system that drives optimal RevPAR performance.

So they're seeing that benefit and are being attracted to it. That's a structural tailwind. And so those are structural reasons why we think that the conversion momentum is not temporary. Now we also believe that new builds will come back and the proportions may change, but we'll be doing more of both in the aggregate.

To your question about weakness in leisure in the U.S. So I think this year, in the U.S., you've had a few factors that we do think are unique to this year and some of it temporary. First, you've had that turmoil around tariffs, tensions, policy in the beginning of the year. You saw the equity markets take a big drop. They have definitely recovered since then, that's why we're optimistic. But that did create some pause, we think, in corporates and in leisure customers in making decisions. And we saw that translate in the first few quarters of the year.

Second, you've got lower international inbound in the U.S. A lot of that tends to be leisure, especially during the summer months and the holiday periods and of course, from Canada due to some tensions there. Now that has affected some of the leisure business. Fortunately, we're 95% domestic in the U.S. and a lot of our business is drive to. So we have been not overly affected by it. But in total, it has had some impact on the market. But you've also seen the business segment up 2% in the U.S.

So there are some puts and takes towards it. We do think that the leisure segment fundamentals, I'd say the third factor there, too, Leo, is it's been a very strong run-up in leisure over the last 3 or 4 years. And at some point, things may pause a little bit before repricing. But the fundamentals that I talked about earlier in answering Jamie's question in the U.S. economy in terms of employment, wage growth, investment, productivity, strong equity markets, all that, we think, sets up corporate and leisure markets well for the mid- to long term. And we see the short-term softness, but we believe in long-term strength.

I would also add, Elie, as we look at -- just to give you some more facts around the detail, Elie mentioned that U.S. business in the third quarter was up 2%. Groups were down 7% and leisure was down 5%. But if you look at business across all 3 regions, all 3 regions saw positive growth in business with EMEAA up 6% and China up 5%. And so that was really great to see that strong business performance.

If we go specifically into the U.S. and we look at groups, you may remember last year around Q3, we were in the U.S. election cycle. And so there was a lot of groups happening as a result of the Democratic National Convention or the Republican National Convention.

We also had hurricane displacement that was happening in groups moving back into certainly address the issues that were happening as a result of some of the hurricane activity, particularly as people left those areas and came out of those areas that were impacted by that. And as Elie mentioned, I think what you -- what you mentioned on leisure makes -- was exactly what we've seen. And again, it's been the most recovered since COVID. And so -- but we still expect to see growth from here. We're not seeing any fundamental changes that would expect leisure to be structurally impaired.

Our next question is from Estelle Weingrod with JPMorgan.

I've got 3. On the launch of the new brand, just back to Leo's questions, what are you planning in terms of the timing of the first launch? And how should we model this to ramp up over the next few years?

Second one on China. You sounded quite positive on the latest trends in there. However, comps seems to be getting a little bit tougher in Q4. Just for model purposes, like should we model a sequential slowdown in Q4?

And on signings, clearly very encouraging overall. But just to get some clarity on a per brand basis, is there any brands you're particularly satisfied with? And are there some you would have expected to perform better?

All right. Thank you, Estelle. So on the new brand, just stay tuned in the next few months, and if not that many months, we will come back to you with greater detail on the name of the brand, the exact positioning, the visual aspects, the launch timings, the projections for how many we expect over a period of time, all of that, as we've done with all the brand launches, voco and Vignette launched in the same way. We introduced it to the market and to you in a sort of a tease like this. And then a few months later, we gave you all the details, and they've proceeded to be very successful. So stay with us, stay tuned. You'll be the first to know.

When we get to China, No, we don't think our comps get tougher into the fourth quarter. I think we are going to continue to see this improving trajectory and eventually, we'll turn positive in RevPAR, driven by the economic growth of the Chinese economy, driven by the continued strength in travel. Yes, we've had some softness in rate because of the Chinese outbound mostly, frankly, but that we've benefited from in Southeast Asia and beyond also in Europe this summer, we saw a lot of Chinese travel.

But we're going to be lapping over that too next year. So even if Chinese outbound continues to be strong next year, which we're just fine with, frankly, because we benefit outside of China even at higher RevPAR's, but even if that continues, we'll be lapping over that next year.

So we do believe that the continuing trend of improvement in China will progress and eventually will turn positive. And we're going to turn positive in RevPAR in China on a much bigger system. We're now well over 800 open hotels with nearly 600 hotels under development, signing and opening at record levels and maintaining our occupancy, so absorbing the demand and absorbing that supply.

So we're optimistic for the mid-to-long term in China. And we don't think the fourth quarter is going in a different direction than the ones -- the trend we've seen so far. In terms of the brand portfolio, look, with this new brand, we'll be up to 21 brands. We love them all. They all have growth pipelines of 20% or more of their opening estate, some more because they're newer, some less because they're huge like Holiday Inn Express, but Holiday Express is still in the '23 to '24 pipeline to open.

We'd love for all of them to grow faster. That's why we work every day, all day to make our loyalty plan stronger, our brand performance stronger, give better tools to our owners, market them with cut-through marketing, drive technology like the one that we're doing with revenue management, with the reservations with the new CRM system that's launching next year, with the new content manager launching next year. It is a force of many things that we do to make our brands perform better, which means they grow more quickly. We're pleased with every one of them. But yes, we want every one of them to go even further.

Our next question is from Jarrod Castle at UBS.

Maybe 3 from me, please. Just coming back to the launch of the new brand. I guess, Elie, Michael, at times, you've looked to buy something. So I take it, there was nothing interesting on the market. And I guess related to that is how is Ruby performing your most recent acquisition.

Secondly, churn, still starting with the two when do you think you get it down to 1.5%. And are there any brands which might need a more extensive refresh? I think the answer is no. But I'll leave it to you. And then just lastly, buyback. I mean it seems like it's gone well so far. I mean do you think you'll be able to complete it by the end of the year?

Okay. So Ruby, it's going well. We've got 5 signings since opening, 20 open hotels in the system in major European cities, a further 10 hotels in the pipeline to open. We just announced that it's ready for development in the United States. So in fact, I was in New York City last week walking around a couple of potential sites. So we're excited about it. And it will go further east after having gone West. If you haven't stayed at one or visited one here in London, Jarrod, I would invite you to do it.

Sorry, just related to that, there was nothing out there, Michael, Elie that look like a brand which might fit with this new launch or that was interesting to you? You thought organic was the better way to take it?

Look, you've -- we are always doing both things. We're always looking at our portfolio to see are there profitable territories for us to enter in brands or in markets or both? And then which is the best route to enter? Is it to build or to buy? So it's an ongoing process.

Just because we launch something doesn't mean that there's nothing out there that's interesting, just because we buy something like Ruby, doesn't mean that there's not something that we're working on internally to launch.

We announced the acquisition of Ruby in Q1. You would have to think that if we're announcing the launch of this brand at the end of Q3 that, that might have been in progress by then, too. So we're always doing a bit of both. The industry is dynamic, the market dynamic, therefore, our brand strategy is dynamic, too. But we're thoughtful not to just have to do things just for the sake of them. They need to be brands that are differentiated from the ones that we have that have a meaningful scope for expansion and a profitable one for expansion.

I'll address the removals question, Jarrod, on that. So first, yes, I mean, you're right, it is a little bit elevated against the 1.5%. We did talk about this at the half year and really no change to that as well is we do have some rather large hotels that have exited the system, particularly in China as China again, continues to come through kind of COVID and the final remnants of that.

And then as you look in the U.S., there were a few also fairly large hotels that left. And so we still believe that going back to -- getting back to 1.5% is our long-term trajectory. There may be some ups and downs along the way with that. But we think 1.5% is the right way to look at that over the long term.

In terms of a refresh, no, we don't really see any brands needing a refresh in the future. That was what we did with the Crowne Plaza Holiday Inn initiative was a onetime initiative, and we really don't see any need to do that at all.

And then -- and your final question regarding the buyback, yes, I feel really comfortable that we'll be able to get through the full amount of the buyback by the end of the year. Really no concern with where that sits now. We're at 78% of the way through year-to-date. So really no reason to believe we can't finish that through the full year.

The next question is from Alex Brignall at Rothschild & Co Redburn.

I'm going to just focus on the U.S., if it's okay, maybe because the other bits of business are going great. Just an industry question. Hilton was obviously very bullish yesterday about the improvements, and you've alluded to some macro dynamics that might help. But can you just -- we just look at the data for now, occupancy, I think we've talk about before occupancy is a long way below where it was pre-COVID. Could you just give us sort of your high-level thoughts, not for you, by the way, your occupancy is flat in the Americas versus pre-COVID.

But for the industry, could you just talk about why that would be the case? Just influencing factors why it would be different to other travel segments. We haven't seen the same thing in airlines, but it's almost 600 basis points down at sort of 67 versus 73% in the overall U.S. industry. So that obviously is -- could be seen as something that will hold back RevPAR growth.

And then I guess, looking at the U.S., you've got an overall very strong signings development. But if I look at Americas signings for the first 9 months, they're 35% below where they were in the same 9 months for 2018, 2019. And obviously, taking consideration for the Venetian, your room count in the Americas is also flat versus pre-COVID.

And if I look at your net openings year-to-date, if I add back the Venetian impact, it's only 2,000, which is obviously a very small proportion of your overall net openings, obviously, because you are doing very well in the other regions.

So I guess it's just -- it's -- I understand all the positivity around the Americas and how it will get better, but it kind of looks a little bit like it's stuck for the industry at lower occupancy, which, of course, is informing why sort of industry growth is much lower. And so I'd be keen to understand how that gets better.

All right, Alex. So first, I think there are a couple of factors. When you look at the gross industry occupancy, I think there's been -- and we think we've talked about this before. There's been better revenue management where operators have preferred where possible to drive rate than to fill up with occupancy so that they have recovered RevPAR in total in a more profitable way.

And that, I think, is a judgment and probably a productive judgment, which on the positive side, still leaves headroom for occupancy once you have achieved and established the fact that you can earn higher rates. I think in some markets and in some categories, there were certain perceived rate ceilings that you could never charge more than this in this town or you can never charge more than this in this brand category or you can never more charge in this much during this period.

And a lot of those ceilings in taboos have been shaken loose. And now you have the upside of that occupancy at those higher rates, which actually I think is upside. We don't look at it as a negative, irrespective of that. Our occupancy has generally recovered from 2019. So we've taken share as others have adjusted their revenue management, but I think there's headroom in the industry, and we have headroom at IHG.

Regarding your comparison of IHG signings to 2019, you are correct. We're still a measure below where we were in 2019. We think that, that is headroom for us, by the way. But there has been clearly some weight. There have been headwinds to the development market in the U.S. I mentioned them before. I think I mentioned them on every call.

We think those headwinds are slowly subsiding. You see our signings grow every year for the last 3 years. It's not a V-shaped recovery, but it's a recovery, and we're pleased with that. And a lot of the headwind have been on the new build signings where pre-pandemic 2019, that was 75% of our signings back then, new build versus now it's 50%.

And yes, we're doing more conversion, but the aggregate of new build is lower than what it was. Higher interest rates, tighter bank regulation, higher inflation, just it's been -- and then the tariff weight that came upon it, there's just been a lot of weight on the return of new build signings -- of new build openings, but it's coming back.

We see it quarter after quarter. The enthusiasm, we see the growth in our applications -- franchise applications. And so for us, it's all headroom, and we go into the next set of years with more brands, a stronger enterprise platform, higher share among conversions and new build signings. And as that market recovers and returns, we're confident we'll be getting more of a share of it. So yes, we believe we can get back to 2019. It won't be quickly, but we think it's all headroom for us.

So we're optimistic about where we go. In terms of the size of the system, you have to put into account two meaningful factors. One was the Holiday Inn Crowne Plaza plan that we did in 2021, I think. And then also the SVC exit, which we and a few other publicly traded brand companies went through. Again, I think that was 2021, 2022. And those were big chunks that we let's just say, exited from our system voluntarily. But that we -- if you look at the 5-year period comparing to 2019, yes, point-to-point, you won't see that much growth. But after that, we're resuming our growth after that.

That's fantastic. And then just a question because it's really important that I just want to understand because the U.S. just looks very different, having recovered very quickly at the beginning of COVID. It just now it's very different versus the others. And it's clearly a much more business travel-driven market. I mean you can see it in sort of an Easter move helps in Europe and hurts in the U.S. So a huge amount more of the underlying demand in the U.S. is business.

And against 2019, the U.S. now is a meaningful outlier outside China against all other regions, including Europe, which it led for a very long time. So I'm just trying to work out whether that is structural because business travel, as we know, has kind of stopped recovering lower than it was in 2019 on a sort of volume basis and obviously, on a percentage of GDP and the population obviously much lower or whether it's room for upside as kind of everyone is trying to say.

Yes. I mean you will be shocked to hear that we are in the latter camp. But for good reason, not because we're just blind bulls, but for good reason. I mean let me take you back to, to what you said, which is that the U.S. recovered very quickly post pandemic, and when that was happening and leisure was the biggest part of that recovery, what was the narrative then?

Well, that business travel will never recover. And it's all going to be leisure-driven, business travel will never recover or that other parts of the world other than the U.S. will never recover. That didn't turn out to be true. It turned out that business travel recovered later, but it's fully recovered and continues to recover. We -- our business travel was up in all 3 regions, actually the least of which in the U.S. was up 2%, but China was up 5%. EMEAA was up 6% in business travel. So business travel continues. Why? Because business expands, because GDP expands, because companies expand and employment expands and people have to go to do stuff. That's why.

Events, our events calendar is very strong. People go to do stuff in business. So I think that, that idea that business travel would never recover obviously has been dispelled. And now we're entering the phase where we start to doubt, well, is leisure travel over? No, we don't believe that either.

As I answered the question earlier, leisure travel may be taking a bit of a pause after a very strong run-up, but there are some headwinds this year with international inbound being down, Canada travel being a bit down, all the turmoil policy and economic and political turmoil in the first half of the year, putting some pressure on people's plans going into the summer. We just think that's momentary.

You have to push against a lot of economic gravity to look at all the fundamentals I listed below in investment, in employment, in financial markets, in lower inflation, in lower interest rates and say that those aren't good precursors to economic growth, job growth, GDP growth and therefore, travel growth.

There could be another scenario unfolding that would not be the typical scenario from those fundamentals.

So no, we do think it's upside. But yes, it goes through cycles, Alex. It does go through cycles. So sometimes it slows down, sometimes it's faster. It makes higher highs and higher lows. That is the fundamental thesis. It does have ups and downs. It makes higher ups and higher downs, and that's why we think it is upside, not structural.

Next question is from Kate Xiao from Bank of America.

The first question is on system growth. You mentioned you're comfortable with consensus at 4.3% for next year. But really, when we look at your underlying growth so far ex Venetian, you're at much higher. So I guess the question is, do you see any upside to that number?

And then just secondly, on RevPAR, your RevPAR has been quite strong compared to some of the peers in the U.S. and in the bigger regions, including U.S. and Greater China. Can you help us unpack a little bit what's idiosyncratic there for IHG? And do you expect these to kind of continue?

And then just third question, hypothetically, if we go into 2026 with a flattish RevPAR environment in the U.S. again, what would you say is the likely scenario to your EPS growth? Are you still comfortable to hit that low end of at least 12% EPS growth in that environment? And if so, can you help us understand why?

Sure. A lot in your questions. So we'll take them one at a time. So yes, we are comfortable with the consensus of 4.3% next year. We do think we have underlying strength from our signings and from openings momentum from the performance of our brands.

We always want to do more. We're ambitious. We're not saying that, that is a ceiling. We're saying we're comfortable with that consensus. It is still early. We haven't even started next year yet. Obviously, we're working on it in our signings and in our construction teams to get things done. But yes, we always want to do more.

We don't guide. And so what we're telling you is we have very high confidence, but we're not going to put a ceiling on it. And we're not going to hold our teams back and hold our owners back if they go further.

Now on RevPAR premium, yes, we are pleased that our team is hard at work in hotels and our owners hard at work are in markets, some are faster, some are slower, wherever they are, are delivering RevPAR premiums to the competition. That is a full enterprise effort. There's not one thing. Maybe it is idiosyncratic to what we're doing. I don't know. We're not into the business of exactly what others are doing.

What I do know is how hard we work across the full range of enterprise platforms from making our brand stronger, making sure our hotels are renovated, make sure our customer service is the best every day, making sure that our marketing is cutting through, placing the right people in the right places in our managed hotels and training our franchisees to deliver the best operations, having revenue management systems like N2Pricing now in 6,000 hotels that we know are using artificial intelligence in a way to drive our RevPAR premium, launching our new property management system, which is now in 2,000 hotels and will be in most of our hotels by next year, which makes hotel operations, check-in, checkout, upgrade, loyalty, training, everything much simpler.

All of those things that we're doing are loyalty investment and growth at 65% of room nights globally, 70% in the U.S., that drives RevPAR outperformance against the competition. All of these things working together are driving performance. I don't know which one is driving which amount of basis points, but I do know that collectively, every quarter, they're driving strong performance over here, and we work very hard to keep it continuing. Your last question, I'll turn it over to Michael on the hypothetical.

Well, as you know, we don't deal with hypotheticals very well, and we don't actually give out guidance for next year. But I would say what we've gone back and what we've talked about is the growth algorithm. And over the medium to long term, we would hit that 12% to 15% earnings per share growth on average over that period. There'll be some times that are up and there will be sometimes that may be below.

But I mean, we've just talked about our net system size growth, and we talked to that where consensus sits at 4.3% and being comfortable around that. Elie gave you a little bit more color on that just a second ago. And so you kind of can see that coming in. And you can also see that our ancillaries are continuing to grow.

We talked about that earlier being at a growth faster than RevPAR. And so that comes in and helps us as well. And as we talked about at the half year, we've always had and continue to have and have seen strong cost management within this business. And so we feel very good around how we've set the business up to continue to grow and develop.

And for what we can see in terms of system growth and our ancillary fees, still really strong growth in those areas next year and expected for next year. I won't comment on does that mean we get into the range on the EPS next year. But I think if you can see how we've set up this business, it's really, really strong, and we've got a great opportunity to continue to deliver.

[Operator Instructions] Our next question is from Andre Juillard from Deutsche Bank.

Two questions for me, if I may. First one about Greater China. Do you see any significant improvement in this country, considering that we've been under pressure through the past few years and still negative. So that's my -- the first one.

Second one is about the new brand and new development. We've been seeing a quite aggressive development from some of your competitors on the resort side. And you are creating a new brand, which is not expected to be focused on this leisure segment. Do you see any opportunity? And do you see any logic to improve your presence in this segment?

Okay. Let me just actually address your second question first. We have not given out any detail on the positioning of this brand yet. So please do not conclude that it would not be compatible with resorts or which positioning type of destination it would be for.

If you can be patient with us for just a few months here, we'll give you all the detail. I think you would be surprised if a collection brand like this, when we say collection, upscale to upper upscale wouldn't have a wide range of applications, urban, suburban, resort, leisure, business.

We typically don't build brands that are narrow in scope. Our brands tend to have wide application, especially in the upscale to upper upscale segment. So more to come, but don't make the conclusion you seem to have arrived at.

The first thing is China is on a good trajectory. I think it's not us just saying it. I think it's the data saying it. Our RevPAR in Q3 was better than first half of the year was better than Q2, better than last year. The economy is doing well, still tracking 5% GDP growth.

The middle class is still growing. The airline capacity continues to improve. Individual travel, business and leisure is still strong. Rates are a little bit under pressure, but we keep hitting records of travel during holidays, including the last one that was -- that just concluded. And there's one coming up here in October, and we think that's going to be very strong, too.

Let's also not forget that China is a major technology and artificial intelligence innovator and investor, really only second to the U.S. and very effective at it. That is transforming that economy, creating productivity, jobs, innovation. It's bringing optimism to the economy, and you can see the stock market reflects it, really trading at highs for multiple years, maybe a record high, but certainly at the highs of the last 5 or 6 years.

And so you put all that together, GDP growth, technology investment, recovery in RevPAR, middle class still growing, exports, still pretty strong, 7%, 8% growth despite trade tensions with the U.S. You see a lot of resilience. And therefore, you shouldn't be surprised that we're relatively optimistic about the mid- to long term.

We're not calling a return to positive RevPAR next month or next week. It may happen. We're not saying it won't happen. We saw a definite improvement in the third quarter for us, but we're optimistic it's going to happen in the near term, and then it will become a tailwind for us.

Actually, Andre, I guess if you look at what you might be surprised about is if you look at our occupancy actually in China, it was actually up 0.6 points in the quarter, and it's actually up 0.4 points year-to-date. And so what that shows is there's still quite a lot of demand for travel within China.

And then if you take that and add in that we've seen incredible outbound travel from our -- from China into Southeast Asia countries. And if you look at just RevPAR in the quarter, from some of those. If you look at Vietnam, year-over-year growth in the third quarter was up 31%, and that was driven a lot from the outbound China travel.

You've seen double-digit growth in places like Australia. We've seen year-to-date strong growth in Japan, and so you've seen that outbound Chinese -- that consumer within China still traveling. Now there's -- within China, obviously, as that outbound comes out, you don't have some of the higher-end suites and higher-end travelers staying within China.

So you get a bit of a rate issue, which is what we've seen in China. But overall, if you look at that demand, at least for our hotels, even with all the supply growth that we're adding, you're seeing additional demand come in. And so I think we feel comfortable that China is on the right trajectory.

I think what is important for all of us to keep remembering is the importance of being strong in large domestic markets like China, also like the U.S., like Europe, eventually like India is yes, to be strong in those large domestic markets because they are or will be among the largest travel and hotel markets globally just domestically, but they are also extremely large outbound markets.

To be a strong global hotel company like ourselves, you need to be strong in those domestic markets, which then power your international markets because China, U.S., Europe, eventually India are going to be or are already the largest outbound markets, and we benefit from Chinese travel in Southeast Asia, in the Middle East, in Europe, maybe not so much in the U.S. today, but the rest of the world, we have hotels who are benefiting from that, too.

We benefit from U.S. travelers into Europe into the Middle East into Asia. We benefit from European travelers around the rest of the world. So being strong and continuing our 50-year success in China is important, not just for our very profitable business in China, but for the expansion of our business in the whole world.

We have no further questions in the queue at this time. So I will hand back to Elie for closing remarks.

Well, thank you for that. And so to summarize where we stand after the third quarter, global RevPAR has increased by 1.4% year-to-date. gross system growth is 7.2% year-on-year and net system growth is 5.2%, with openings and signings up 17% and 18%, respectively, on the same quarter last year. And our teams have delivered a performance that reaffirms our confidence in driving the core components of shareholder value in line with market expectations and our growth algorithm.

That growth algorithm sees consensus expecting us to deliver in 2025 around 12% EBIT growth and around 15% EPS growth, and we remain on track to meet those expectations.

Many thanks to all of those on the call. And as a reminder, our financial results for the full year, along with the trading in the fourth quarter will be announced on Tuesday, the 17th of February. Thank you, and goodbye.

This concludes today's conference call. Thank you all very much for joining. You may now disconnect your lines.

Thank you, Sean, for that introduction. So as Sean said, I'm Muneeba Kayani. I cover the leisure and transport sector for Bank of America and based in London. Delighted to be here today. This is my second time joining the lodging conference in New York, and it's our first time hosting Elie here at this conference. So Elie, thank you for joining us today. So maybe we just have 35 minutes. So I'm going to dive straight into the -- what's, I think, on people's mind is the demand side of things.

And you reported -- when you reported your 1H results, your RevPAR in 2Q was slightly positive. I think you said in the earnings call that 3Q demand trends are similar to 2Q. Can you talk about what you're seeing in your key markets?

Sure. Well, first of all, great to be here and a beautiful day in New York, my first time at the BofA conference. So pleased to be here with you. I'd say that if you were going to put one word on demand around the world on average, I'd say it's just pretty steady, pretty steady. What we reported at the half was a 1.8% global RevPAR. That was 3.5% in the first quarter, 0.3% in the second quarter. And then there were some parts and pieces to that, which we talked about the Easter moving, which was part of it from Q2 -- from Q1 that moved the business up into Q1 a little bit, mostly in the United States for groups and business travel.

And then you had the whole March through early May, what I call turbulence of tariffs, of rates of stock market drops around the world, bond tensions. And what we said in May and what we said again in August after our half year results that -- we believe that was peak turbulence and that we've been coming off that turbulence then we've been getting steadier, that trade tensions are turning into trade deals that rates have stabilized and financial markets have recovered the really almost either at or almost at a record in all major indices around the world. So we think that, that's put the demand side into a more steady, more stable view.

Now if you look at the industry data, we don't give guidance, and I'll try to do that for as long as I possibly can. It's just much easier on life. And we obviously don't give mid-quarter updates. But if you look at industry data from major markets, whether that's U.S., Europe, China, it would suggest that the same trends you saw in Q2 are continuing into Q3. That's just the very short term. But you've heard me say before, I'll keep repeating that our focus, while we observe the metrics in the short term and the data in the short term and everything that's happening short term, this is a long-term business. We're an asset-light compounding business with a global presence that's indexed to structurally positive growth drivers of middle class population growth of GDP growth around the world.

So there will be highs and lows, and this industry will make highs and lows as economic cycles make highs and lows, but the trend is always upwards, and you make higher highs and higher lows. So yes, we watch this quarter and last quarter. We don't stress out about it as much because we make higher highs and higher lows, whether it was post the pandemic, whether it's post-GFC, whether post 9/11, whether it was post anybody's anxiety of anything, this April of 2025 when people thought that due to changing tariff policies and rate policies that we were reaching some form of climax, right? That's not where we look at it today. Things have steadied much better. And I -- we just have that confidence and investors in IHG, our long-term investors have that confidence.

Maybe we could then talk about some of the key markets and starting from the U.S. If you look at kind of the industry data for July and August, the U.S. is tracking minus 1% RevPAR. We are seeing the luxury chain scales doing better. So from your side, what are you seeing? And on the U.S. consumer, are you seeing kind of any difference between the high end and the low end of that?

Yes, we've seen the industry data for a couple of years now showing that the upper end, but the real upper end, not just sort of upscale, but the luxury side has disaggregated itself from the rest of the economy. And that makes a lot of sense when you think about the amount of wealth that's been created, not just in the U.S., by the way, Europe, Asia, Middle East, in the ultra-high net worth, it's just a staggering amount of wealth. I was at dinner last night with a major global hospitality developer, and they develop in resorts around the world. You know the name. I'm not going to name them, but they were telling me in one of their global resorts, they're selling branded residential at USD 5 million to USD 20 million for apartments.

And for people that are going to use them once or 2 weeks a year, it doesn't make economic sense in the way we would think in terms of replacement costs. Of course, that's not how people are figuring things, right? And so that ultra-high net worth has really separated itself. Markets could be down 20%. They won't be happy. It ain't going to change their spending habits. And so that's on one end of the barbell. On the very other end where we don't participate, the economy segment has not been doing well for over 2 years now. We don't participate in the economy and budget for a reason. It's highly economically sensitive. And today, with inflation that's happened over the last several years, that segment is feeling pinched.

We're in sort of mid-scale and upper mid-scale and above, really, the heart of our business is from upper mid-scale and above. And so if you look at our U.S. performance in the first half, yet our luxury brands were in the 4% to 5% RevPAR, but our upper mid-scale brands and our mid-scale brands were still over 1% RevPAR. So we were not -- we saw positive growth in every one of our segments across the world. Each one of our brands had positive RevPAR growth.

So yes, it was a higher performance in the upper end, which is what we expect given the strength of the ultra-high net worth customer. But we saw steady performance also in our everyday travel brands, whether it was Holiday Inn, Holiday Inn Express, Crowne Plaza, our Essentials and Suites brands, every one of them. And I mean, quarter-over-quarter, those things will change. But also, you have to think about the resilience of the everyday brands of our mainstream Essentials and Suites brands and the value they bring. And in the pandemic, when demand went to almost 0 around the world, right, Holiday Inn Express occupancy never went below 50% in the United States, never went below 50%. So those hotels were cash flowing for owners and making money for IHG.

Our extended stay brands never went below 60% occupancy. Candlewood Suites never went below 70% occupancy because there's a level of essential travel that will continue into these brands no matter what the conditions are. So yes, on the one hand, we are growing more in luxury and lifestyle because there's an ultra-high net worth customer there that is resilient to economic downturns. But on the other hand, our Essentials and Suites brands are resilient also in the sense that there's a very high floor, right? There's not an infinite ceiling, but there's a very high floor.

And in the U.S., like can you remind us what's your exposure to the U.S. government and what you've seen on that sector?

For our U.S. business, total government travel, which is federal, state, local. And remember for -- I mean, those of you here in the room that are mostly U.S.-based, understand that state and local government is not an inconsiderable amount of the bureaucracy. The total government is 5%. Federal, we think is around 3%. So yes, you would not be surprised that given all the government efficiency and cost measures that government travel is down. It was down mid-double digit, 15% or so. And we expect that to continue to stay down. But we're already -- we'll be lapping over that pretty soon. But that's 15% from less than 3%. So in the scheme of things, it wasn't material.

And one thing to keep in mind, though, is that even before government efficiency program, the government is actually very efficient on its travel spending. They're not a very high-rated traveler. I mean government rates, per diem rates are pretty low. So yes, we were happy and we're happy to take government business, but it's not a very high-rated business. So actually, on a revenue -- comparable revenue impact, it is less than the percentage because we've been able to replace -- not all, but we were able to replace some of that government travel with higher rated either leisure or corporate travel. So we think that, that's a segment that is going to be always for the foreseeable future, subdued, but we're replacing it with other segments.

And we look at the totality of things, our exposure to so many different industries in the United States that are doing quite well, the surge in technology spending that you're seeing, strength in retail, strength in manufacturing, the super cycle of CapEx investment that is underway, not just tech investment, but also the infrastructure investment that is following that. Even if they spend only half of the trillions that they say they're going to spend, that's still a really impressive amount of capital that we're not distributed only to the white collar professional services, people like us that travel New York, London, L.A., Miami. Most of our distribution is to the heartland of the country where we benefit from that.

If you can switch gears and talk about China. So there, we've seen kind of those negative RevPAR trends for quite a while. It was minus 3% in the first half. You've talked about kind of easing comps. How are you thinking about kind of the RevPAR trajectory in China? When does it kind of start getting flat or positive even? And kind of the industry supply-demand balance in China, how are you thinking about that?

I'll try to keep it brief because we can talk about China for a very long time, and it's a very important topic. Look, we've been in China 50 years -- more than 50 years. Now we celebrated 50 years in China. In January, I was there. We opened our 800th hotel. By early next year, we'll open our 900th. By the year after, we'll open 1,000 hotels. We got over 650 hotels or so under development. I mean -- so it's a very big business, and we think we have the leading business of all international companies in China given our experience there.

And so I've been saying now for over a year that China is bottoming out, and that's happening. Q2 RevPAR was better than Q1 RevPAR. Q2 RevPAR of this year was better than Q1 RevPAR of last year, and we expect that the second half of this year will be better than second half of last year. It's not turning around in a V-shaped recovery. It's a very, very big market, but it's bottoming out. And so the drop in RevPAR is really all rate. Our occupancy has been steady, flat really over the last 2 years, flat in the first half of the year to last year, which shows you that demand is still growing because we're growing our system at record rates, actually, had almost 9% system growth. We have a very strong pipeline. We had record signings and openings in the first half of the year in China, and we're holding occupancy.

So we're absorbing demand that is growing, and we're not building into declining demand whatsoever. Demand is growing to fill the supply that we're bringing. And that's a feature of developing markets like that. Supply will grow usually ahead of demand for a while. That has been the feature of the Chinese market for 50 years. And people have been worried about oversupply in China for 50 years. And for 50 years, we've held occupancy. So it shows you that demand has been growing. I think that you have to look at the Chinese economy in a way, the way you look at the U.S. economy, and there are only two economies that are in the $20 trillion GDP range in the world. There's U.S., there's China and then there's everybody else. If you come from everywhere else, please don't be offended, but that's just the reality. Everything else just drops off the scale. It's still very attractive to us. We're in 100 countries, but you have U.S., China, everybody else.

China is a highly diversified economy. So yes, the residential real estate sector has been under pressure. It's still under pressure. It's being digested. The oversupply is being digested. That's one thing to watch. Prices keep coming down, which is good. Sales have moved up, which means that the market is clearing, but it's a messy digestion, which is similar to the messy digestion of the overbuilding of residential that we had here in the U.S. during the GFC. I was here, and it was awful. It took 5 years to digest that overhang, but they got digested and they're letting the market clear. They're not really supporting prices, which is what you need to do.

At the same time, the residential real estate sector is not all the Chinese economy. Chinese economy is very diversified. After the U.S., where we have a super cycle of infrastructure investment driven by AI and technology. China is the other place where there's AI infrastructure being built and technology infrastructure being built. And that is driving that side of the economy. They're leaders in EV technologies. They're leaders in battery technology. And I mean, you saw their first -- second quarter GDP over 5%. Second quarter exports grew 7% despite export tensions with the U.S.

So I think that there's a very diversified economy that finds ways to grow, a middle class that's doubling over the next 10 years. And you asked about it's supply, well, you look at the penetration of rooms in China per capita, somewhere between 1/5 to 1/10 depending on whose analysis you look at, 1/5 to 1/10 of what it is in the U.S. Well, that gap is just going to keep tightening as the economy matures. So we're in China for the long haul. RevPAR is bottoming out. Our occupancy is flat. We're growing our system at record rates with the highest quality estate, we think of the industry. So we're very optimistic about the future there.

And if you can wrap up with the rest of the world as you were talking about...

Rest of the world is a lot.

It's a lot, which goes into your EMEAA segment. And Europe, specifically, we had some high comps. We had the Olympics, euros, all of that going on. So maybe specifically in Europe, what you're seeing from a demand perspective and any other regions you'd kind of.

Pretty steady. It's kind of the same theme as I said earlier, it's pretty steady after very high comps from last year, which, yes, it was event-driven, but not only event driven. There's a lot of tourism into Europe. Americans have been going to Europe with a strong desire for the last couple of years. This year, the projection is still somewhere between 5% and 10% increase by the end of the summer of Americans going to Europe despite a weaker dollar, despite whatever atmospheric issues people still packed with Americans in Europe and paying strong rates. And we've seen a resurgence of Chinese travelers to Europe, and I'll come back to Chinese outbound in a minute.

So Europe has been pretty steady despite the high comps, and that's been good. And as you start to move East from Europe, the rates of growth are higher. Middle East, mainly in the Gulf where we're very present. We've been there over 60 years. It's been a steady year and pretty strong. As you move into Southeast Asia, we've had double-digit growth for a second year in a row, a lot of it driven by Chinese outbound. So Chinese outbound is one of the reasons, by the way, why RevPAR in China has been down because the high net worth and upper end of the Chinese market has been traveling outside of China because of the visa-free restrictions.

And most of you may not know that in China, you actually need a visa to leave the country, not just to enter a different country, but they have made a lot of arrangements with neighboring countries and even some European countries to where it's visa-free in and out for Chinese travelers. And so you've seen a surge of Chinese travelers to Japan, South Korea, Vietnam, Indonesia, Thailand and so forth. And we benefit because we're in all these markets and at high rates, by the way, with IMF managed properties. And so we benefited from that surge of Chinese outbound. So Chinese outbound has been helping Southeast Asian growth. It's been helping European growth. And that's a long secular play for us. India has been good for us. It's a long way away from being as strong and profitable as China is, but it's an emerging market for us. Saudi Arabia has been strong for us, so is Japan.

So we think that it's been steady and a little bit better as you go further East. But I step back again and talk about the long term. What you see in Southeast Asia, you see in the Middle East is a huge market, by the way, over 1.5 billion people, excluding India, too, it's 3.5 billion people if you throw in India, 2.5 billion if you throw in India. And I think that younger population, higher rates of GDP growth, a stronger middle class growth, add on top of that, the highest growth of aircraft orders and airline development network. So we know what happens when airline networks, especially low-cost networks collide with population middle class growth and GDP growth. You get travel, right? This was the phenomenon we saw in the U.S. in the '80s when Southwest really expanded its network.

And you see that in Europe, despite flat population growth, you see travel growth because there are so many low-cost carriers, and that's what's happening in Asia. All the biggest aircraft orders are in India, they're in Malaysia, they're in the Middle East, and that's building that network. So you've got to think out long term for the structural drivers of this industry and where the growth is going to come. And you can look at this quarter and that quarter. But if you're a long-term investor looking for a compounding business like ours, that's what you have to focus on.

And so as you speak to the hotel owners, and what are you hearing from them? Maybe if you can start talking about the U.S., right? It's been -- with all the macro and tariff uncertainty, have you noticed any change in behavior or interest?

Well, I mean, going back to that April through May period, there was a change in behavior in everybody, right? Everybody kind of took a pause. What does this mean? What's going to happen? Is this a whole new world? We now know that it isn't. It's just some different trade arrangements. If there's going to be inflation driven by that, we haven't seen it yet. We're not saying it won't happen, but we haven't seen it yet. And so past that turbulence, people have relaxed. I'll just give you an anecdote, the same development group I was having dinner with last night here in New York. They are very large U.S. and global development company, hospitality and leisure development company, everybody here would know them. And so what are their reflections, which are similar to those of many others.

First, interesting to say that credit is incredibly available, that borrowing is available to strong players, which are most of the developers that we work with. There's this sort of interesting situation where there is very strong demand for credit today, driven by private credit investors, driven by banks willing to make credit available and see really tightening of spreads in all segments. So for an industry that likes to borrow 65%, 70% of project cost, that's a favorable thing. And they've got a lot of equity investors interested. They're looking for product. They're looking for ideas, looking for investment opportunities. And so they're generally in a constructive mode.

Yes, they want their returns to work, but they've also recognized that the days of getting 20% IRRs on everything, those are gone because interest rates aren't 2% anymore. Interest rates are 4% to 5% on the benchmark, although spreads are tight, but I mean, the benchmark is higher, forget the spread, at some point, you're paying what you're paying. So I think that they've adjusted their expectations from everybody's got to get always 20%, which we know nobody always got anyway, but it was sort of an idea out there. And so I think that the market is converging, the bid-ask is converging in the market, and we're seeing our owners moving forward. You look at the first half of the year, we had record openings around the world.

Our own room openings around the world were up 75%, even if you strip out the NOVUM deal, which was a franchise deal, but it was a big lump deal that was still 57% year-over-year growth in openings. Our signings were up 15% year-over-year. And that wasn't just conversions, which were 57% of our signings and openings, but it was single high-digit growth in new build. So there is confidence. We're not back to the same levels of new build signings and openings that we had before the pandemic. I think we're just grinding our way there. I would hope it would happen sooner than later, but we're grinding our way there. But our owner community, hotels are cash flowing, credit is available, equity is available. They're concerned about cost, obviously, labor cost, material cost, but that seems to have steadied. So I think they're in a constructive place.

So with that, like your own net system growth, it was 5.4% ex the Venetian in the first half. How should we be thinking about it in the medium term? Like is it a 5% handle now going forward?

I would say that the way to think about it is within the growth algorithm that we set out when I took over in February 2024, right, which is our aim is fee growth, right? Our investors want fee growth. And so our aim is fee growth through net system growth and through RevPAR growth and some combination of those two around the world, which will vary from time to time. Clearly, the more of either is better, but sometimes they don't coincide. The important thing is that not all system growth is the same. We want system growth that brings fee growth, not just hollow system growth. That's why in China, our business is fully controlled by us. It's not partners, it's not master franchise, and we keep all the economics. That's why we look at transactions on a rigorous basis to make sure that they're accretive, some more, some less than others. There's always a strategic element, but we look for things that drive fee growth, not just things that drive system growth.

Notwithstanding in the 10 years to 2019 -- 10 years to 2022, our system growth averaged 3% at IHG. Since then, we've done better. We've been over 4% and accelerating every year since then. And consensus next year is for 4.5%. Consensus this year is for about, I think, 4.4% next year is for 4.5%. We're comfortable with both. We can do better. We know we can. We don't put out guidelines. We don't put out benchmarks out there as we don't give guidance for anything. We are very ambitious. But we have, what is it, 34% of our open system, which has now reached 1 million rooms -- over 1 million rooms. We have 34% of that under development, right, 34% in pipeline, which means that even if we didn't sign another hotel, we have a lot of -- we have 1/3 of growth already happening. And so yes, there is fuel in the tank to do what we're doing continuously and even more. But the key thing is we're looking at it within that equation to make sure that it's driving fee growth, driving EBIT growth, and driving EPS growth because ultimately, that's what we deliver to shareholders.

And within that, China is -- you mentioned your pipeline, that's about 35% of your pipeline. So what's your exposure across the Tier 1 to 4 cities in China and the environment there?

Yes. I think it's -- well, first, I'd say that our pipeline is one of the healthy aspects of our pipeline. It's pretty equally distributed. America is 1/3, EMEA, 1/3; and China, 1/3. So we can -- our pipeline isn't just China. Our pipeline is 2/3 of it's outside of China and equally distributed around the world, which is strategic. It's not accidental. We didn't just land there by throwing darts on the wall. That was strategically because we are strong believers in these 3 major economies and 3 markets.

And in China, if you talk about Tier 1 through Tier 4, in Tier 1, we might have 10% of our pipeline. In Tiers 2 to 3, you might have 50%. Tier 4, by the way, is another, I could be wrong, I mean, 10%, 15%. Tier 4 isn't like the lowest thing. Tier 4 is resorts, which end up being high RevPAR. But let's put Tier 2 and Tier 3 in perspective for a moment. China has 100 cities with a population over 1 million. The U.S. has 10. China has 10 cities of the population over 18 million. U.S. has none. I'm U.S. citizen, proud and happy to do business here. But I'm just putting in perspective that a Tier 2, Tier 3 city in China is not a small village, right, with people on the horses and carts. It's -- it can be up to 5 million people with an industrial base and a growing economy.

So I just want to put it in perspective, Stuart and I were talking on the way over that I want how many people know how many people live in Manchester. It's not even 1 million in the U.K., right? There's -- there are only 2 cities of the population in the U.K. that are over 1 million. and we're listed in U.K. and we're proud to be there. But only 2 cities, London and Birmingham. Everything else is under 1 million. So these aren't small villages. And so when you start Tier 2, Tier 3, we would not relegate them in our mind to backwaters. These are economic powerhouses and emerging ones.

So I think that, again, when you look at the long term of China at a diversified economy at the industrial sector, the technology sector, the manufacturing sector, the middle class growth, you have to push up against a lot of gravity, a lot of gravity to believe it's not going to be the largest domestic hotel market in the world and the largest outbound market in the world. And let's not forget how important it is. What's important for our global network is we're strong in domestic markets that also feed our global network. We're strong in the U.S. There's also today the biggest outbound market in the world.

We're strong in Europe, which is a strong domestic market, but also a very large outbound market. Germany alone is 80 million outbound visitors every year. China is third competing with Germany. You have to believe China will surpass Germany, right? It just will and will be even larger than the U.S. and outbound -- nearly 100 million outbound today, it's going to be over that. And India eventually will be a very, very large outbound market. So you can't just look at these very large markets as confined to themselves as what is the power they bring to our global network, and it's measurable.

We -- let's talk about your credit card agreement. You signed a new one at the end of last year, and you're starting to see that contribution coming through in EBIT this year. What's been kind of feedback from your credit card partners? And how are you thinking about rolling out co-branded credit cards in other geographies?

Look, we've had a long and very successful relationship with Chase and with Mastercard. We -- after a competitive overview and process, we renewed with them for another long period. And we're very pleased with it. I think I know they're very pleased with the progress we're making. And you can see the progress we're making. I mean 5 years ago, we had 100 million members in our loyalty plan. Today, we have 145 million members in our loyalty plan. 5 years ago, our contribution globally from our loyalty rewards night -- reward members was 46% every night. Today, it's over 65% globally, the fastest growth of any major player. And it's over 70% in the U.S. And so that has built a power base underneath our credit card program.

Keep in mind that the credit card program is really going to live off the strength of your loyalty program. Yes, others will join the credit card that are non-loyalty member, but the -- by far and larger most your most prolific pool of customer candidates comes from your loyalty plan. So with a stronger loyalty plan with a growing loyalty plan, we also have a growing credit card. That's why we did give guidance in this aspect, which is not a habit we'll make. But in this aspect, we said that our credit card fees would double this year from 2023, and we're on track for that and that they would triple by 2028, and we're on track with that. And then continue to grow. So there's no ceiling. We haven't set a ceiling that we think if there is a ceiling, it's very, very far from where we are today. But we're on track with that.

And I think it shows the strength of the partnership with Chase and with Mastercard, the strength of our loyalty plan, the strength of our brand portfolio, which now not only is strong in Essentials and Suites brands like Holiday Inn, Holiday Inn Express, Staybridge Suites, but also very strong in luxury and lifestyle with Six Senses, Regent, InterContinental, Kimpton Hotels and Restaurants. I think all of that is powering the system in a strategic manner. And so I think ultimately, it's delivering value for shareholders.

So maybe if you can kind of go back to your growth algorithm. And starting on the margin side, so you had 390 basis points margin expansion in the first half, which is actually well ahead of what you've laid out in your growth algorithm of 100 to 150 per year. Even your EPS growth was higher than your targets in the first half. So can you think -- help us think about how you're thinking about, firstly, the second half of this year from [indiscernible]. I know you don't give guidance, but how do we think about that and then the medium term within your growth algorithm?

Yes. We've said in our growth algorithm that we target 100 to 150 basis points of margin accretion every year from operating leverage. And we think that the nature of our business, which is asset-light global, heavily franchised just by adding more hotels as we do every year, just by RevPAR growth, which plus or minus by different markets continues every year that, that in and of itself drops above the cost base to margin accretion. Then beyond that, we have a philosophy of running the company efficiently, investing in the business, adding resources where we need, leveraging technology, putting the right infrastructure, but making sure that our cost base is growing at a materially lower gradient than our revenue than our fee revenue. We think that the scalability of our business allows for that, and we think we have a discipline to continue that.

So what you saw in the first part of this year, part of that is that philosophy of applying technology, processes, centralized centers, new designs to build -- continue building an infrastructure that is efficient, that contains cost that bends that curve of cost, doesn't necessarily always reduce cost, but bends the curve of the cost growth well below the fee growth. That is a compounding business, and that's what's going to continue to drive, in our view, the 100 and 150 basis points. And then on top of that, because we've got the 390 basis points in the first half of the year, which I would not pencil in for the continuous future, but we had the step-up in ancillaries, which was the credit card fees and the points sales, which are doing very well, too. And so you had the combination of those two drive 390 basis points.

Consensus for the year which we're comfortable with is for 250 to 300 basis points. So you're going to see, of course, some rebalancing of that for the second half of the year. The step-up in ancillaries will continue, but the year-over-year sort of change in cost structure won't. So you'll end up still at a healthy, we think, 250 or consensus is 250 to 300. And from there, we're comfortable with the 100 to 150. But it's a combination of things. One is, yes, there was a step-up in ancillaries, but that philosophy of running the business efficiently, leveraging technology, and it is giving us many more ways to do it today, including artificial intelligence, which I'm not going to major on here as many others would drop it in many different ways, but we are leveraging new technologies like that to reduce cost and be faster processes and take care of customers better and support our owners better and do everything better and cheaper, but also centralized centers and new process design is going to continue bending the curve.

Great. Well, I think we'll wrap up on that note. Thank you, Elie, for joining us, and thank you, everyone, for listening in.

Well, thank you, Muneeba. Good to be with you.

Hello, everyone, and welcome to today's IHG Half Year Results Call.

I will now hand the line over to Stuart Ford. Please go ahead.

Thanks, and hello and welcome from me to IHG's 2025 Half Year Results Q&A. So I'm Stuart Ford, Senior Vice President, Head of Investor Relations at IHG Hotels & Resorts.

And I'm in the room today with Elie Maalouf, our Chief Executive Officer; Michael Glover, our Chief Financial Officer; and Jolie Fleming, our Chief Product and Technology Officer.

I am obliged to remind all viewers of the webcast and listeners in on this call that the company may make certain forward-looking statements as defined under U.S. law. So do please refer to the accompanying results announcement and the company's SEC filings for factors that could lead actual results to differ materially from those expressed in or implied by any such forward-looking statements.

In addition, we may also refer to certain non-GAAP financial measures. And once again, do please refer to the accompanying results announcement and SEC filings for reconciliations of those measures to the most directly comparable line items within the financial statements.

That results announcement, together with the usual supplementary data pack as well as the replay of this morning's presentation and the slides for that presentation that accompany the webcast can all be downloaded from the Results and Presentation section under the Investors tab of ihgplc.com.

So now over to Elie for a few opening comments.

Thank you, Stuart, and welcome to this question-and-answer session. I'm Elie Maalouf, Chief Executive Officer of IHG Hotels & Resorts. Hopefully, you've all had a chance to watch the results presentation, which we made available at 7:00 this morning.

It featured myself, along with Michael Glover, our Chief Financial Officer; and Jolie Fleming, our Chief Product and Technology Officer. Both Michael and Jolie are here with me today.

Before we open the line to take the first question, I will summarize our strong performance in the first half of 2025. Our RevPAR grew by 1.8%, reflecting the breadth of our geographic footprint, the depth of our brands and the resiliency of our operating model.

We delivered gross system growth of 7.7% and net system growth of 5.4%, driven by outstanding development activity and record openings.

We signed over 51,000 rooms across 324 hotels, a 15% increase over 2024 when excluding M&A and large portfolio conversions.

We expanded our fee margin by 390 basis points, driven by operating leverage and step-ups in ancillary fee streams. EBIT grew 13% and adjusted EPS grew 19%.

We've completed 47% of our $900 million share buyback program, which, together with ordinary dividends, will return to shareholders over $1.1 billion this year.

In summary, we made excellent progress on our strategic priorities, and we are confident in the strength of our enterprise platform and the attractive long-term growth outlook.

And with that, let me turn it over to the operator to take the first question.

[Operator Instructions]

The first question is from Jamie Rollo at Morgan Stanley.

Three questions, please. First, could we start, if we may, on any flavor on current trading. I know you don't guide, maybe talk a bit about how you think Q3 is looking and whether you expect a pickup in Q4 RevPAR in the U.S. given the election comps and holiday shifts mentioned by some of your peers?

Secondly, just on the half, the Americas fee revenues were down about 1% despite sort of 1.5% RevPAR growth at around 1.5% adjusted net unit growth. So if you could sort of bridge that 4 point -- roughly 4-point gap for us and talk about whether some of that might continue into the back half of the year?

And then finally, on the central line, obviously, a very big swing from negative 40 to positive 17. On your prerecorded call, you mentioned some cost phasing. So if you could please quantify that? And are we now looking at something like a sort of $30 million, maybe $40 million sustainable profit line? And should we expect that to grow in the future?

Thank you Jamie. I'm going to address your first question, touch on the third one a little bit and turn over the second one and more detail on the third one to Michael.

So first, current trading Q4, Q3, as you said, we don't give guidance. We look usually, of course, at the short term, but more usually at the midterm and the long term.

And we feel, as we said in our statement, that most of the uncertainties and the turbulence that we experienced in March and April is subsiding. You still have some trade tensions, but you have more trade deals than trade tensions.

You have financial markets that were down in March and April, they fully recovered, and got a record in the U.S. and in some European countries, too.

You've got this clarity on the U.S. tax bill, provide certainty for businesses and consumers on lower tax rates going forward.

We've got still job growth in the U.S. despite a job report last week that wasn't as high as people expected. It was still job growth. And we are at a record level of employment in the U.S. with stable inflation, stable interest rates. And you've really got a corporate capital investment boom, especially in technology in the U.S., driven mostly around data centers, AI infrastructure, power delivery to those and everything goes along with that. That's an underlying force.

So we think that these fundamentals to continue a constructive outlook for U.S. demand, U.S. growth, U.S. hospitality and our performance in the U.S. are pretty good. What Q3, Q4 will be, we don't give guidance. But what we did say today, and which is similar to what we said after Q1, is we're comfortable, very comfortable with full year profit and EPS consensus.

So we're not too stressed to add about it. If RevPAR is another point up or another point down, it's not going to change the trajectory of where we land at the end of the year at this point.

We're focused on what we think is a constructive outlook going beyond that.

Regarding Q4 election, you know what, we didn't call it out last year. We didn't think it was a significant mover for us. So we're not going to look at it in Q4 of this year as being anything different than what it was last year.

Michael -- let me just touch on the central a little bit and Michael will go into the details. I don't think there should be a grand surprise about where we are in what is termed a central cost. We said for some time now that the point sales are going well, and they would step up another $25 million this year from the $25 million last year, and they're going to continue to grow.

We said that our credit card revenues were going to step up and double this year from $40 million in 2023. And those are on track, and we've said that, and they're going to grow from there.

And we've always been pretty efficient about our cost. Last year, our cost growth was only 1%. You can go back 15 years and see that our cost growth has been well disciplined below our revenue growth.

We've taken some bigger opportunities this year that we saw -- that we could capture due to really the possibilities that we have with technology, artificial intelligence, shared service centers around the world that required a little further investment, which we called out in the release today, but those are sustainable. First, they're sustainable, and they're going to grow from there, but I don't think there should be any surprise there fundamentally.

Michael, back to you on the last 2 questions.

Yes, sure. So Jamie, on the Americas fee revenue increases, obviously, what you're looking at there is the triangulation between net system growth and RevPAR growth in the half, you've seen 1.4% in the Americas, 1.2% RevPAR growth in the U.S., and you're seeing roughly in the Americas 0.3% system growth. So you're kind of triangulating that and saying why has that gone negative?

Now there's a number of things causing that in the first half of the year. First, you do have some hotels that have exited that were pretty high fee-paying hotels. And those -- particularly, there was one in New York, and that has impacted that. But we have a replacement hotel coming in to replace that hotel. It's just not in the numbers yet, and so you're getting a bit of that.

The second thing is we have a bit more of hotels under renovation right now. So if you look at that on a total rooms available basis, you see -- won't see the rooms available growth. That's partly driven by that. There's also a bit of the key money amortization coming into that. You also have the leap-year effect. We've got 1 less day in the first half of the year. So there's a few bits and pieces that are coming into that, that's driving that. We don't see it as a long-term issue there.

Not only that, let me just add that. I think the bigger thing to take into context here is our openings in Americas were up, I believe, 40% year-over-year in the half, and those haven't really fully ramped up. But when we have such a step-up in openings that is not the same year-over-year, there's still some ramp-up of those hotels that will accrete the fees on an increasing basis going forward, but we're not getting the full benefit of that yet. We're very happy with the fact that our opening stepped up that much in the Americas and in fact, globally, 75% year-over-year. But we still haven't gotten all the benefit from that fee growth because it is a significantly higher step-up than before.

Our next question is from Jarrod Castle at UBS.

Yes, 3 from me as well. Elie and Michael, you spoke a little bit about residential contribution in your prerecorded remarks. I just want to -- if you can, can you give us anything around kind of general scale of contribution to group profitability and how you see kind of the phasing or lumpiness of that business? Is it smooth? Is it a particular period, et cetera?

Secondly, some interesting kind of within the presentation, you have many bucket on the tech buckets you're kind of investing in, in terms of promote, optimize, engage. Can you give a bit a little color in terms of where time and investment is generally going amongst those 3 buckets? It seems it could be wrong, it seems like optimized through the PMS and the RMS systems.

But that would be the greatest amount of time and spend, but any comments there?

And then Michael, on your -- again, your prerecorded remarks, you spoke about Ruby, and that seems to be going well. Elie also spoke about Ruby in terms of pipeline and integration.

But if I'm not mistaken, you also mentioned you have potential for further M&A or additional brands. Is that more a medium term? Or is there anything in the short term that can be done there?

Thank you, Jarrod. So first, on branded residential, Look, we're very excited about our trajectory there. First, it really starts from having constructed what I think is the leading Luxury & Lifestyle collection out there, may not be the biggest yet. That's not the goal. I think is the most aspirational, the leading one. The majority of our Six Senses and Regent Hotels coming into the pipeline now are coming with the branded residential, and that's led us to having 30 properties now that are open and selling, and usually they start selling well before the hotel opens, right? Well, before the residents are even finished. And so that starts to bring cash flow to our owners and actually fees to us even before the hotel or the residences are ready.

And we have quite a few more coming under development. There's a lot of excitement around this space. And it's extending beyond just those 2 ultra luxury brands, but also to InterContinental to Kimpton, and we're getting demand from owners for some of our other brands, some of other lifestyle brands.

So I think we've got a vector of growth there for fee growth. It is today still smaller than co-brand and point sales, but it's growing, and we think it's going to be a consistent contributor.

I'll be visiting actually next month in Dubai, some of our developments, where we have quite a bit of branded residential, either already selling some open and some coming. And here in London for you that are calling from here, the Six Senses in London is getting ready to open and those branded residential sales are on track.

On how we're investing under the 3 technology pillars that Jolie spoke about. We don't disclose the individual investments. They are in our system fund. We manage them and govern them very prudently in the interest of the system fund of our owners. They all have very high returns, I can tell you, and we've been at it for some time. I mean, we've been investing in GRS for a long time, even before I started and here at IHG 11 years ago.

Our new app has been a consistent investment for years. The PMS new project has been going on for at least a couple of years. It's now active in the market. And everything we're doing with the RMS, revenue management system, has been going on for a couple of years, and it's not most of our hotels.

So it's nothing new. And you have to think about this as a consistent level of investment. It's not sort of a big build the product and then just watch it go.

We think more in terms of product management here, in terms of -- not so much in terms of a project because you have to keep these things current. You have to keep it fresh. You have to keep it competitive. Those investments are in the system fund, but they're delivering very good return for our owners.

I would just add on that, Elie, a lot of that -- a lot of people think about do you have tech debt that you have to do and big outlays of cash that you have coming up. We really don't have that. As Elie mentioned, we have been consistently growing and investing in our tech as a result of our system fund.

So we will continue to do that. And so we don't expect to see any large investments that would come out of the ordinary in what we do.

And part of it is because we've been on a journey for multiple years to stay current and update our tech stack. So we don't feel like we face a significant or any deficit that requires a massive leap of capital and effort.

On new brands, M&A, of course, I'm not going to make any specific comments, as we never do. But we're very pleased with the trajectory of Ruby. 16 of the hotels I mentioned already in our system. The next 4 will be in our system before the end of the year.

And the pipeline of 10, which is now a pipeline of 14 since we bought it will be opening over the next several years in incredible destinations today around Europe, but we'll be launching the brand in the U.S. by the end of the year, and then we'll take it further east from there.

And we've shown that ability to take brands, whether the ones that we develop ourselves or the ones that require internationalize them and lead them to success.

And by the way, adding more brands to our portfolio, which I don't know when it will occur, but it will occur. It has been occurring. So it's going to continue to occur. Doesn't have to be just inorganic through M&A or partnerships. At least half of the new brand additions we've had to our portfolio have been organic internal development. So that could occur, too.

Our next question is from Jaafar Mestari from BNP Paribas.

I've got 2, if that's alright. Firstly, on operating leverage. So Americas fee margin is up in the half, but there's obviously a better Q1 than Q2 there in terms of RevPAR.

I know you're expecting some improvements later in the year in Q4. But big picture, how should we think about fee margins, if you were to remain around the 0 RevPAR?

Would fee margins be flat. Could you make some progress from efficiencies? Would they be down because flat RevPAR and some cost inflation?

I'm not expecting you to communicate on the Q2 fee margin, but yes, along those lines at flat RevPAR, how the fee margins look please?

And then secondly, group's bookings, Americas Group's bookings, if I remember correctly, were one specific point of strength you had mentioned in the previous call with some visibility.

I think you had plus 7% group's bookings on the books for the summer. In the half, group's occupancy was actually down in the Americas.

Just curious what the moving parts are? Are the long lead time bookings you already had on the books, are they definitely happening and holding? It's just a short lead time bookings that have not been very strong? Or have there been any cancellations, for example, on the stuff you had on the books?

Yes. Well, let me pick up the operating leverage and the margin. I think we have said many times in the past, we expected Americas margin to continue to improve, and it wasn't at the highest level. So it's pleasing to see that continue to move.

And we've had a number of things in the Americas, and we've talked about the cost exercise that we've done and the improvement in margin that we've seen from operating leverage.

Our margin was 390 basis points up at the half, 130 of that has come through our ancillary fees.

So we talked earlier about the step-up in credit cards and step-up in co-brand -- sorry, point sales, and that delivered 130 basis points.

The operating leverage delivered 260 basis points. And within that, we had really strong cost management. And that is really around the company. It was across all functions within Central within the regions.

So everybody has been involved with that program and working to reshape our cost base so that we can scale this business center in the future.

And that's something that Elie and I have been working on since the beginning that we started. And fortunately, we've come to a time where we can make a step change in that. And that's what you've seen and that's what you've seen us do. The exceptional you see is really related to the setup of some of that, and we're able to take advantage of things like new technologies, like shared services centers, process improvement and continuous improvement.

And we'll continue to do that, and we have the opportunity to continue to grow that. And that's no different for any of our regions or even in Central.

And so as we look forward, in a lower RevPAR environment, we still have the system growth that will come in -- that we expect to come in. And then we still have the cost savings that will continue.

So we said in there that we expect costs to be down 1% to 2% in the full year, so a little less than where we are here at the half. So we still expect to see really strong margin growth as we get to the full year.

I think what's even more important though is, first of all, we are being very efficient about our costs while we're growing the business and putting more resource and investing more in high-growth opportunities. We're integrating Ruby and building it out around the world. We're investing more in high-growth markets like India, the Middle East, Southeast Asia.

We're investing more in high opportunity markets for us like Japan and Germany. We're developing all of our brands around the world. We're investing more in the technology stack that Jolie took you through.

So this is not sort of a cost management that's leading to business retrenchment. Actually, we're finding this exciting opportunity to still grow, to amplify our business around the world and do it prudently. That's the leverage that we're getting from technology, from artificial intelligence, from our shared services centers, from process redesign. And I think that's the benefit of everybody, and the other thing is we're doing that while we'll be able to grow signings up 15%, openings up 75% and supporting all that growth in our estate, which adds to the operating leverage.

Brings me to your question about operating leverage in the Americas. And yes, we're pleased with the improvement. Last year, the operating margin went down a little bit, and there were a lot of questions about had we topped out in the U.S., and we said, no, there are some moments, where we're digesting certain investments and that we would resume the operating leverage growth, and we're pleased to show that we are doing it.

On the groups, there was, I'd say there was an inflection from Q1 to Q2 in all business in the Americas, particularly in the U.S. We attribute some of that to the Easter shift, and some of that, as we said earlier to the turbulence that occurred in March and April due to trade tensions, policy, tax questions, financial market drops. I mean when the financial markets in the U.S. dropped double digit, probably close to 20%, that probably created some pause in consumers and businesses.

But we also said in May after Q1 that we're past the peak of that turbulence and that we saw things subsiding and attenuating and creating more certainty since then.

And that's what we've seen. We've seen more certainty, more certainty on trade, more certainty on tax, financial markets have fully recovered. Job market is still strong. Investments -- corporate investments are strong.

Corporate profits, through the second quarter, here they're being -- that are coming through on S&P are still pretty strong. So we think that's a constructive more stable, more certain outlook. And so whether it was business leisure or group, you saw a downshift from Q1 to Q2, but we think the outlook is more constructive going forward.

The next question is from Muneeba Kayani at Bank of America.

I wanted to start firstly on net system growth in the first half, which was 4.6% and then if we adjusted The Venetian, it's 5.4%. I wanted to hear your thoughts on net system growth, right? Because we've seen -- we've been in that 3%, 4 % range, I'd say, for a while, like do you think this is a sustainable tick up to a 5% level?

And how are you thinking about that, given where you're looking of signings, openings pipeline are right now? That's the first question.

Secondly, if you could talk about China, what are you seeing there? When do you think RevPAR trend could be flat or even positive? And anything on the development environment as well?

Thank you, Muneeba. I'll take a shot at your questions and then Michael, if you want to add to it, feel free.

So look, we are pleased that -- within this context, which is -- I think we acknowledge it. It has not been the most certain and clear context for the last 6 months.

There's been a lot that's given people concern and pause and uncertainty and all that. Despite that, we're able to earn the confidence of our owners, who have powered our openings up 75% year-over-year.

I mean, that is a demonstration of the confidence that our owners, our investors have in IHG's brands, IHG's enterprise to not only sign 15% more hotels for the future, but to open 75% more hotels. And that occurred across all of our regions. It was not just one region. It was Americas, it was EMEAA. It was Greater China.

We are confident in reaching the consensus of net system size growth for this year. But look, we're always aspiring to do more. We're not saying that's the ceiling. We're not saying it couldn't be more. We hope to do more. I'm confident that over time, we will do more as our pipeline continues to grow, as our signings grow and openings grow.

And our brands -- many of our brands are really early in their journey. They have pipelines that are not just at the minimum of 20%, which is at least the pipeline to open ratio of our brands. We have -- many of our brands are multiple times in pipeline or new ones of what's open. So they have decades of growth ahead of them and many countries to penetrate.

We still, in the first half of the year, penetrated over a dozen countries with brands from our existing portfolio that had not been -- so that is growth. It may not be a brand launch, but it's a new brand launch for that country. And it's a new start and it's a new set of opportunities.

So we're excited about where we can go and you look, you see how we're doing in conversions. Nearly about half of our openings and signings are conversions. That's double what we used to do. That's demonstration of the power of our enterprise, drawing brands to our enterprise, other hotels to our enterprise, and the introduction of the new brands that are more conversion friendly. So we're confident with this year, and we're confident we can do better going forward.

On China, look, we -- I think have been consistent in our [indiscernible] China, that we are constructive and optimistic about China in the long term. And in the short term, we see China bottoming out in our industry. In fact, look, there are some sectors, some industries in China that are having a really good go right now, whether you're in electric vehicles, you're in artificial intelligence, you're in data. They're doing very well.

The other sectors, we know the residential real estate is still in digestion of the over building, the overhang, but that is occurring.

So I think that China, overall, we think the economy is bottoming out and improving. You have GDP growth over 5% in the second quarter. You saw export results today surprising people to the upside over 7%. So despite all these trade tensions, the economy still manages to increase exports.

But in our industry, Q2, and in our company, Q2 was better than Q1 in RevPAR. Q2 was better than Q2 last year. We think the back half of the year is going to be better than the back half of the year last year as we continue to bottom out, flatten out. Whether we get to 0 this year or not, I think it's a possibility for the rest of the year.

I don't think it's something that changes our outlook. We will turn the corner again in RevPAR given the undersupply or the underpenetration of hotels per capita, given the strong travel demand. So we're confident that we will get there sooner, maybe than later. We're not sure exactly when, but we are in the bottoming out phase.

Meanwhile, would pay -- I would call your attention to the record development progress we're having. Record signings in the first half, and we expect that to continue for the full year. Record openings, and we expect that to continue on top of records last year. And we're holding occupancy, which means that although we're adding and taking share in supply, and I emphasize taking share. We are still maintaining occupancy, so the market is still absorbing the supply we're bringing.

And we're still seeing that dynamic of -- the Chinese are traveling. I mean, as Elie mentioned, our occupancy was basically flat in the first half, up slightly, and even broadly flat in the second quarter. And we still saw the same dynamic happening of a lot of travel outbound.

And so if you look at those countries around Southeast Asia, Japan, Korea, Vietnam, we all saw a double-digit RevPAR growth in there within our business. So we're seeing those Chinese travelers still travel. This is still the same dynamic of more outbound travel. As Elie said, we still feel confident about where that can go.

And we benefit from that outbound travel when they go to Korea, to Japan, to Vietnam, to any of those places where we've got hotels and sometimes at higher rates with IMFs in those markets. So it's not a disappointment for us.

The next question is from Richard Clarke at Bernstein.

Three, if I may. Just the first one, last quarter in Q1, you gave some very helpful directional commentary on the books revenue, I think, flat in the Americas, strong level of growth in EMEAA and heading better in China. Just wondering maybe one the philosophy of why you've not given that again? And has anything meaningfully changed on the book revenue?

Secondly, closure is a bit higher. You gave a few explanations of that and said it doesn't change your view of 1.5% in the longer term, but are higher closures going to linger for a few quarters? Or is this just 1 quarter effect.

And then lastly, just on Garner, just an update on how that brand is going. It feels like an interesting battleground where yourselves, Hilton and Marriott have all launched quite similar brands at the same time. So how are you competing in that? I know Marriott has gone with an innovative fee structure on City Express? Is there any desire from the owners to want to match that? Just an update on how Garner is progressing.

Richard, let me start from your third question on Garner. Look, we're very pleased with the progress of Garner. I mean we opened 28 Garners in the first half of the year.

We've got 17 of those Garners came with the NOVUM deal, 8 openings in the U.S. So altogether, we have 51 open Garners. Globally, we've got another 80 or so in the pipeline. So you've got -- actually the pipeline is 138 hotels right now, 13,000 rooms across 10 countries. So I mean, the brand is powering ahead of our expectations.

And the interesting thing is it's reaching international demand ahead of our expectations. We thought we'd be in a few international markets by now.

We honestly think we would be in over a dozen. And that's exciting because we're seeing demand from owners across. So we -- there's enough territory here for more than one global company to be successful. I would not -- we don't look at it as sort of -- yes, of course, we're always competing with the others, but the opportunity is large enough, not just in the United States, but globally for several key players to be successful as you see in other segments.

I mean there are multiple segments where the top players are all successful and grow share at the expense of others and grow share from new supply. So we think there's -- there are decades of growth for Garner ahead of us.

And working sort of in reverse order, on the removals. I mean, first, I'd say they are more elevated than our long-term target, which we're comfortable with at 1.5%. But at the same time, we still had strong net system size growth of 5.4% and record openings.

You've got a couple of factors in that we mentioned. In China, the rules are a little higher than we'd like. And that, I think, is just a phasing as there's the post-pandemic digestion that started later.

We had, as Michael mentioned, a single large removal in the United States. But the good news is we have a replacement for it that is not in the brand system yet.

So I don't think it's a structural shift. And we think that long term or even in the midterm, we will normalize back to our trend, but we're very pleased with the overall gross openings, signings and powering our net system size growth further.

Let me turn it over to Michael to answer your question about on the books.

Yes. So Richard, when we gave out that Q2 on the books kind of guidance there, we really did that because we were trying to help explain that Easter timing. As we look into Q3, I think we've mentioned that Q3 could be similar to Q2.

The booking windows are still very short. If you look at our booking windows there, roughly 60% of our bookings are coming in within 7 days of arrival. So the booking windows are still very short. So even for us right now, it's a little harder to have some of that visibility out longer term into kind of the fourth quarter and beyond given those booking windows.

Though you'd have to take some note of the fact that in looking at our business overall and where we stand today, early August, that we're very comfortable with consensus profit and consensus EPS and net system size growth. So that -- yes, we're looking at everything in the round. And look at RevPAR is 1 point more or 1 point less than expectations today. I don't think it makes a difference to where we land.

The next question is from Estelle Weingrod at JPMorgan.

The first one is on cost savings again around the H1-H2 phasing of this more specifically. I mean does it imply an acceleration of operating costs in H2 year-on-year? And also, can you give us more color on what are the key cost buckets that contributed to your good margin performance in H1? Is that mostly your overheads.

And on that point on fee margin expansion, is that right thinking that the fee margin upside in H2 will likely purely come from ancillaries?

And the last question, the third one, can you give us more color on EMEAA? It was a little bit behind. I mean not a complete surprise, but can you go through what dragged the slowdown, please?

Estelle, I'll take the cost.

Let me take the third one on EMEAA, and then Michael will pick up on cost savings and fee margin.

Look, we're very pleased with our performance in EMEAA year-to-date and quarter-over-quarter. Of course, when you've got -- when you've got strong RevPAR last year and also in Q1 of 5%, at some point, you're probably not going to comp exactly like that.

You had a significant number of onetime events last year in Europe. You had Olympics in Paris, European football championships in Germany.

And of course, Taylor Swift, right, going around Europe. We can joke about that, that was probably more important than the Olympics or football championship. I mean, you had Americans flying into Europe, and I know quite a few, to go to Taylor Swift. Even Stuart sitting next to me here, he said he went down in Madrid because he couldn't get tickets in the U.K. It was a phenomenon.

So we're lapping over that, but look, 3% in EMEAA is something we're pleased with in terms of performance, especially given some of the uncertainties. And so -- but -- you got to look more broadly in our business in EMEAA with very strong openings up 136%, signings up 36%. You got to look at the totality of our business, it's going in a very good direction.

Okay. From a cost savings perspective, I think you can from my presentation, IHG has really maintained a highly disciplined approach to cost management for a very long time now.

This is a continuous mindset, which underpins how our business operates. And Elie and I have been looking at efficiency and effectiveness in our business since really day 1 on the job.

And there's always ongoing action. And really through process redesign, greater leverage of centralized support and enhancing our use of technology, particularly AI, we are driving an even more highly efficient and scalable space with savings that are sustainable through the long term.

Now we've got a little bit of cost, as I mentioned earlier, to set this up, but that's really setting this up so that we can take advantage of this for the long time.

And obviously, we've seen these actions to deliver 4.5% cost savings in the first half. We mentioned that we felt like it would be about 1% to 2% in the full year. And so that would probably -- that would mean you're kind of flattish in the second half of the year. There's a bit of timing in that in the first half of the year as well.

So we still expect to see margin accretion as a result of the cost savings in the full year. We definitely have the ancillaries. We still expect to have about 130 basis points of margin accretion associated with that.

And so we still expect operational leverage due to growth of our system size and then to cost savings as we move into the rest of the year. So still, I think I'm going to be at the full year, a really solid result in terms of margin expansion.

The next question is from Alex Brignall at Rothschild & Co Redburn.

I'll do 2, if that's possible. Finally, just on costs, I'm really sorry to ask it again. I went through whole this morning with the IR team, but just the final piece of it.

If we look at $57 million difference in the full year, we've got $32.5 million in credit card and loyalty and then the $15 million from the Central costs that you've taken out, which you sense that it's going to be is obviously H1 weighted. There's obviously another little bit in there. Could you just tell us where that's coming from and whether that's part of the ongoing improvement in the contribution of that central line or whether there's some timing?

And then on net unit growth. A lot of your peers have talked about an expectation that conversions will add a greater proportion of their growth in the future than they have in the past, Marriott, specifically going from sort of 10%, 15% to 30%.

And obviously, that's necessary in an environment where there's new construction growth. But can you just talk about how that will work? It's obviously very competitive and conversions are somewhat of a zero-sum game given it's not new supply.

So how you think that will work in the context of key money, which has obviously been going up and some of the sort of bigger mass conversion deals where the fees for certainly your peers have not been anywhere near as high as the sort of normal group fees.

Okay. Let me take the Central question there. Yes, you explained some of that, but I'll just recap for everybody on the phone.

We did say that our point sales at the beginning of the year and when we did this change, that it would drive $25 million of incremental revenue last year and then an incremental $25 million again this year for a total of $50 million.

So you are seeing that $25 million come through this year, and we fully expect to realize that, and is a really strong revenue stream for us.

The other side of that is the credit card. And you may remember that we did say that this year, we would double the credit card revenue that we had in 2023.

And that was approximately $40 million. We've also said that continues to grow into 2028 up to 3x what we did in 2023. So we continue to grow those, and we feel like those are really strong growth revenue streams, and feel very confident about delivering that at this moment.

Within Central, we also have always had revenue that comes through as well related to technology fees. And that also moves with RevPAR for the most part around -- for parts of the world, and also grows with system size as we add more units.

And so you're seeing a bit of that come through. And then, of course, we've got cost savings within that central line that has -- we always had overheads in there as well.

And so you're seeing some of that cost savings. That's really the 4 areas that are driving that central revenue line potential area to a profit now.

To add to that, the underlying fundamentals of the ancillaries, credit card and point sales are very healthy. You heard us report that we had credit record, very strong additions to our loyalty plan, very strong additions to our credit card, and that's ultimately the membership and the engagement of the membership is what leads to point sales, what leads to credit card applications, what leads the credit card spend. And so -- and of course, also the strength of the portfolio and the strength of our distribution. So with strong openings, strong signings and continued delivery in our Luxury & Lifestyle sector, too, which powers the loyalty plan too.

So you got to look at those fundamentals and see, are those fundamentals underpinning the growth in the ancillaries? Because we got to this point in ancillaries and co-brand and point sales not just by doing that, but by building out a Luxury & Lifestyle collection and portfolio and getting distribution out there, by building out IHG One Rewards membership and engagement and replatforming the app and getting better benefits in there.

And that's led to that ancillary growth, which is now no surprise, although we've been telling people, is in the numbers, and that is the biggest year-over-year inflection in the central in addition to the cost savings, which are all sustainable. We've got to look at the -- then of course, as Michael said, there are a lot of other little bits and pieces, but those are the fundamentals, and their underpinnings are healthy.

On net unit growth conversions. I think you also there have to start with the fact that everybody is going to have a different story perhaps on that. We today have a broader conversion portfolio arsenal with our conversion brands at Vignette, voco, Garner. And we still do a lot of conversions in our established brands, but it was only those in the beginning.

Now we got these brands that, as I was speaking earlier, richer, especially in Garner, it is doing very well. Voco is over 100 open and over 100 in pipeline. Vignette, well ahead of its projection to get the 100 open hotels in 10 years. And so that gives us more arsenal to go after conversions.

And we are -- yes, we report and we discussed the proportion, which in the first half of the year, when you exclude Ruby, openings was 57% and was 39% in signings. But we're less focused on the proportion. What we're focused on is on growing both new-build and conversion. And new build, especially -- well, frankly, in the whole world, but expert in China, is still below its potential.

It's improving. Our new-build signings are growing. Our new-build openings are growing, but our new-build signs are up 9% for the year. So it's improving, but it's still well below its potential.

So I would not be unhappy if we grew our openings and signings even more than they're growing today. If we had more new build and the proportion of conversions was lower, but it was still more conversions. So it's not really a positioning or an articulation of proportion, it's about growing both, but we have more arsenal, more tools to grow conversions today.

In terms of a couple of comments that you made that it's a zero-sum game. We look at it differently. It's a very big addressable market. I know you have recently published something talking about the addressable market. We just have a view that the addressable market is much bigger. It is not just the independents.

The addressable market, in fact, most of the conversions we do are not from independents. We do from independents. Most of the conversions we do are from other brands. That is a big addressable market that, first, it continues to grow because new build feeds it, but also is addressable by our stronger brands and stronger enterprise system, which -- you may call it as your zero-sum game.

We think it's actually healthy for the industry because it's not only not adding new supply there for support of our RevPAR, but it's improving the existing supply for guests and for owners and demonstrating the strength of our system.

I just have one follow-up on the loyalty contribution. That's a really, really helpful slide in the presentation about loyalty enrollments plus 22, but then Reward Night is going to plus 5, which is pretty much your net unit growth. So are we to read from that, that the 22% -- the number of loyalty members have grown a lot, but the percentage that booking has not really changed as percentage of the total because -- I'm just trying to tally that with the comment you made on high engagement from loyalty numbers.

I don't think that's a direct read across. After people enroll, it takes time for them to accumulate a balance, reach status and then redeem. And we're in a point right now where we have fast enrollment growth, that will translate into engagement into redemption growth, but it takes time for people to build a balance because had our enrollment growth not accelerated, you might see more of a one-to-one relationship, although it's not going to be like that quarter-to-quarter, year-over-year because different things leads people to behave differently, whether they want to use cash or points.

But it does take time for people to build status, build their milestone rewards, build their points. But once they get in, they get engaged, they stay as we see and they reach that point of converting into redemptions.

And then we actually -- what you see is really strong growth in member penetration. And if you look at that, that rose to 65% in half 1, up 5% an increase from half 1 '24. The Americas region, the contribution level is reaching around 70%, and that's really up there a best-in-class contribution from the loyalty programs around the industry.

So I think we're seeing really improvement everywhere across all 3 regions, but that just shows you the value of the platform and what we've built and the app that we built and how we relaunched it back in, what was it, 2022, half year 2022. And it's really been growing, and that contribution level is really great.

I mean, 5 years ago, our global loyalty contribution was around 50% -- loyalty being at 65%, 70% in the U.S. shows you that there is value to the work we've been doing. It's delivering for owners and delivering a better value proposition. So to us, that's a very important measure of engagement and success of the initiatives we've launched.

[Operator Instructions]

Next question comes from Leo Carrington from Citi.

Two questions for me, please. Firstly, it probably ties into that last answer. But in the release, you noted 2 percentage points, I think, improvement in direct digital bookings. The drivers are outlined well, but I'd be really interested to know what you see in the other channels and presumably some of these have been giving share away to your channels.

And then secondly, on the new-build signings, which you mentioned are up 9%. Is that still mostly driven by China? I'd be interested in hearing what developers are saying in the other regions and whether the other regions can also consistently grow new builds from here?

Okay. Can you repeat your second question, please, again?

Sure. Just around the new builds trajectory by region. China is still below its potential but presumably contributing more to that growth. I'd just like to know some more about what's happening in EMEAA and Americas with new build specifically.

Talk about your -- talk about the digital bookings. Now we're pleased with the growth in our digital bookings. I think we're -- from time to time, you see changes from -- for example, the voice channel is one that probably isn't growing anymore. People are shifting to digital channels, whether it's web or app.

Our GDS channels are still doing well. We're not losing share to third-party channels, if that is your question. No, we're not losing share.

If anything, we're gaining share from third-party channels, although we work very constructively with our third-party travel agencies, whether they're online or not. And we have a constructive relationship to bring the right inventory at the right price for the right customer and the right channel, but overall, digital has been on a consistent growth trajectory year after year as people's behaviors and device usage changes.

Elie, I'll start off maybe some of the new builds, just to give some additional facts and then you can give some color on that. If you look at our signings in the Americas, actually only 3% of our signings in the Americas were new build signings.

In EMEAA, 51% of our signings in the half were new build. And that was actually up 45%. And as you then go so to Greater China, 67% of our signings were new build, and that was up about 4%.

And as a group, we're up 9%. So overall, you really see there's still a lot of new-build signings coming. And that's great because we've got great brands for new-build signings in brands like avid and Atwell and things like that will really drive strong growth in those new build signings over time.

At the same time, we've introduced great conversion brands, whether that be voco, Vignette, Garner. And then even our Holiday Inn Express brand continues to be one of the highest conversion brands that we have.

So we have a really nice mix between new builds and conversions, and we feel really good about that. And to be honest, we want all signings, whether that's new build or conversion. And so we're out there trying to win everything.

We have no further questions on the call. So I will turn back to management for any closing comments.

Well, thank you, everyone. It's been great to connect with you today. We're very proud of what our teams have accomplished in the past 6 months, and we remain confident in our ability to continue delivering on our strategy and driving shareholder value creation going forward.

Our next market communication will be our third quarter trading update on Thursday, the 23rd of October. Thank you for your time and interest in IHG, and I look forward to catching up with you soon.

This concludes today's call. Thank you all very much for joining. You may now disconnect.

Hello, and welcome to IHG's 2025 Half Year Results Presentation. I'm Stuart Ford, Senior Vice President and Head of Investor Relations at IHG Hotels and Resorts. And shortly, you'll be hearing from Elie Maalouf, our Chief Executive Officer; Michael Glover, Chief Financial Officer; and Jolie Fleming, Chief Product and Technology Officer.

Before we proceed, I'm obliged to remind all viewers and listeners that the company may make certain forward-looking statements as defined under U.S. law. Please refer to the accompanying results announcement and the company's SEC filings for factors that could lead actual results to differ materially from those expressed in or implied by any such forward-looking statements.

In addition, the presentation will refer to certain non-GAAP financial measures. Once again, please refer to the accompanying results announcement and SEC filings for reconciliations of these measures to the most directly comparable line items within the financial statements.

The results announcement, together with the usual supplementary data pack as well as the presentation slides accompanying this webcast, can all be downloaded from the Results & Presentation section under the Investors tab on ihgplc.com.

Now over to our H1 2025 highlights reel, followed by Elie.

[Presentation]

Hello. I'm Elie Maalouf, Chief Executive Officer of IHG Hotels & Resorts. Welcome to IHG's 2025 Half Year Results Presentation. I'll kick things off in a moment by sharing highlights from the first half, a period of strong financial performance and excellent execution against our strategic framework. Michael Glover, our Chief Financial Officer, will then provide a financial review, after which I'll cover some important areas of strategic progress. We'll then hear from Jolie Fleming, our Chief Product and Technology Officer. Jolie will provide an update on the outstanding progress we're making in the development, evolution and deployment of our leading connected technology ecosystem across our global hotel estate.

The first half of 2025 was another strong period of financial performance and important progress against a clear strategy that is unlocking the full potential of our business for all stakeholders. Global RevPAR grew by 1.8%, reflecting the breadth of our geographic footprint, the strength of our brands and the resilience of our operating model. We had an outstanding period of development activity. We added over 31,000 rooms to our system, a record, taking our total estate to 999,000 rooms across more than 6,700 hotels. And in the week since, we have reached 1 million open rooms. This significant milestone demonstrates the enduring appeal of our brands and the strength of our enterprise platform.

With record openings, gross system growth was 7.7% year-over-year and net system growth was 5.4%. We signed more than 51,000 rooms across 324 hotels. This was 15% higher than 2024 levels when excluding M&A and large portfolio conversions. This takes our pipeline to nearly 2,300 hotels, up 4% year-to-date. Our fee margin grew 390 basis points, contributing to a 13% increase in EBIT. Adjusted EPS grew 19%, supported by our share buybacks. We are pleased to declare an interim dividend of $0.586, consistent with our 10% growth rate in each of the last 3 years. Dividend payments, along with a $900 million share buyback program, are expected to return over $1.1 billion to shareholders in 2025.

Altogether, we delivered another period of excellent results, demonstrating the strength and resilience of our model and the power of our growth algorithm. 1.8% RevPAR growth, 5.4% net system growth, margin accretion from positive operating leverage and the step change in ancillary fees collectively drove a 13% increase in EBIT. And with the strength of our cash conversion, which funds our share buybacks, we delivered adjusted EPS growth of 19%. This performance is above the top end of what we laid out as the compound average that we are targeting over the medium to long term. And we are confident we will continue delivering on this growth algorithm going forward.

Now let me hand over to Michael, who will take you through the details of our financial results.

Thanks, Elie. I'm Michael Glover, Chief Financial Officer for IHG Hotels & Resorts. Let me take you through some more detail on the great set of results delivered for the first half of 2025. I'll start, as usual, with our reportable segments, which is the fee business together with the owned and leased portfolio of 17 hotels.

Revenue was $1.2 billion and EBIT was $604 million, growing 6% and 13%, respectively. Within this, fee business revenue increased 7% and fee business operating profit increased 14% on an underlying basis, which adjusts for a $7 million liquidated damages received and is at constant currency. Fee revenues were up 6% and profit was still up 14%. Fee margin increased by 390 basis points to 64.7%. I'll touch on this outstanding performance in more detail shortly. Adjusted interest increased to $91 million, putting us on track for our full year guidance range that we've narrowed to between $195 million and $205 million.

Our effective tax rate was 26%, down 1 percentage point. This was predominantly due to the timing of certain items, such as nondeductible foreign taxes in the U.S. We still expect a full year effective tax rate of 27%, unchanged from previous guidance. Earnings per share includes the accretion benefit from the $900 million share buyback program for this year as well as the annualization of the previous year's $800 million program. Through this combination of strong revenue growth, fee margin progression and accretion from the buybacks, adjusted earnings per share increased 19%. The interim dividend is increasing by 10%, consistent with the growth rate in each of the past 3 years.

Moving on to a summary of RevPAR performance. Americas RevPAR for the half grew 1.4% with occupancy up 0.1 percentage points and rate up 1.3%. After strong RevPAR growth of 3.5% in Q1, the region moved to a decline of 0.5% in Q2. This was expected given the impact from the shift in timing of Easter between March and April and the broader impact on certain types of business and leisure travel in light of macroeconomic developments.

In EMEAA, RevPAR for the half grew 4.1% with occupancy up 0.8 percentage points and rate up 2.9%. Strong growth of 5% in Q1 eased to 3% in Q2, in part, due to fewer international events compared to the prior year. By major geographic markets, half 1 RevPAR range from being down 0.8% in the U.K. to growth of over 5% in each of the Middle East, Continental Europe and East Asia and Pacific. The latter continued to benefit from higher levels of inbound leisure travel from Greater China on top of very strong increases last year.

In Greater China, RevPAR for the half was down 3.2% with occupancy up 0.3 percentage points and rate 3.6% lower. The RevPAR decline of 3.5% in Q1 was followed by 3% in Q2, helped by an easing in the strong comparatives. Half 1 RevPAR was down 1.1% in Tier 1 cities and down 6% in Tier 2 to 4 cities due to lower groups and business demand and increases in international outbound leisure trips.

This slide presents the business, leisure and group demand drivers showing a breakdown of booked revenue split by room nights and ADR. In the half, global rooms revenue for business bookings grew 2% on a comparable hotel basis driven by a combination of room nights and rate. Groups revenue also increased 2% predominantly due to rate, and leisure bookings grew by 1% driven by room nights with rate held flat. So on a global basis, all three demand drivers showed positive rooms revenue growth.

Turning to system growth. Openings produced 7.7% gross growth year-on-year as we added 31,000 rooms in the first half of 2025. This was 75% more than last year, a record level of openings, and that's still the case even when adjusting for the nonorganic Ruby additions. 20,000 rooms left the system, equivalent to a 2.3% removal rate when adjusting for The Venetian. This is a little higher than the 1.5% average we generally expect, but we do not consider this an indicator of a longer-term trend.

A temporary higher removals rate in China, reflecting the lagged effect of some hotels exiting post-COVID, combined with the somewhat lumpy nature of hotel exits elsewhere, has resulted in this fluctuation above the mean. Taken together, year-on-year net system growth was 4.6% or 5.4% when adjusting for The Venetian.

We signed over 51,000 rooms in the half, up 15% when excluding the initial signings from the Ruby acquisition and last year's NOVUM agreement. Conversion activity predominantly drove this performance with signings up 27%. Pleasingly, new build signings were also up by 9%.

Normally, at this point in the presentation, I move straight into our margin performance. But before I do that, I want to touch on the strength of our cost control. As you can see from the slide, IHG has maintained a highly disciplined approach to cost management for a long time now. This is a continuous mindset which underpins how our business operates. Elie and I have been looking at efficiency and effectiveness in our business since day 1 in the job, and there are always ongoing actions. Through process redesign, greater leverage of centralized support and enhancing our use of technology, particularly AI, we are driving a highly efficient and scalable cost base with savings that are sustainable in the long term.

Set up expenditure to realign our business in this manner resulted in an exceptional cost within the fee business of $3 million in the first half and which we expect to be over $10 million for the year as a whole. These costs are expected to have a cash-on-cash payback within 12 months with savings building further beyond that. We have seen these actions as well as those taken in previous years already yield results. Our fee business overheads of $318 million in the first half of 2025 was $15 million less than 2024, a reduction of 4.5%.

Moving to fee margin, which was up a very pleasing 390 basis points. This has been achieved through a combination of improving our core operating leverage, which includes the type of discipline on costs I just illustrated as well as step-ups in ancillary fee streams. As a quick reminder, on those step-ups, we announced last year that revenue generated from the sale of loyalty points would come to IHG. Initially, 50% of these revenues were recognized in 2024, representing an incremental $25 million to IHG with 100% of revenues and, therefore, a further $25 million step-up to be recognized in 2025. We are on track and, therefore, this is equivalent to a margin uplift of 50 basis points.

We've also seen a step-up in co-brand credit card fees. When we announced the new arrangements in November last year, we said that we'd expect to see an incremental $40 million of co-brand revenue in 2025. Again, we are on track, and this is equivalent to a margin uplift of a further 80 basis points. It's worth pointing out that historically, IHG central costs had always outweighed central revenues and there had always been a central loss. The step-ups in revenue from point sales and co-brand credit card arrangements now mean that this segment generates a net profit after other central overheads. So there was the combined 130 basis points of margin improvement from the step-ups in ancillaries and our operational leverage and cost actions drove the other 260 basis points of margin improvement. Pleasingly, improvement was seen in each of the Americas, EMEAA and Greater China.

Moving on to cash flow. Adjusted free cash flow was $302 million, an increase of $171 million in the first half of 2024. This was driven by progress in trading performance in ancillary revenues and improvement in working capital and a $41 million swing in the System Fund result. As you may recall, cash outflows for the System Fund were higher last year due to the planned spin down of its prior cumulative surplus. Across the year, IHG typically converts approximately 100% of adjusted earnings to free cash flow, though it is usual for cash generation to accelerate in half 2. The year-to-date conversion rate of 80% is therefore very much in line with where we would expect it to be at this point in the year, and conversion on a trailing 12-month basis has been over 100%.

A quick look now at capital expenditure in more detail. Key money spend of $86 million was the same as 2024. As we explained at our full year results announcement, increased development activity, particularly in the Premium and Luxury & Lifestyle segments as well as the NOVUM conversion portfolio means that key money in 2025 is expected to be in line with last year. We therefore continue to expect key money and maintenance CapEx of $200 million to $250 million annually, and our guidance for gross CapEx remains at up to $350 million a year. Our strategy for uses of cash remains unchanged.

After investing to drive long-term growth, which is the foremost priority, we look to sustainably grow the ordinary dividend. After that, we then look to return surplus funds to shareholders. This year's $900 million buyback program is 47% complete, which has repurchased a further 3.8 million shares or 2.4% of the share count. The dividend payments to shareholders in 2025, together with the buyback program, will have returned over $1.1 billion, which is equivalent to just under 6% of IHG's market capitalization at the start of the year.

On a prospective basis given consensus expectations for growth in EBITDA and cash generation in 2025, together with the share buyback program and the cash outflows for the Ruby acquisition, leverage at the end of 2025 is expected to be around the middle of our target range of 2.5 to 3x net debt to EBITDA. Our guidance remains unchanged from what was communicated at our 2024 full year results back in February, except for a slight narrowing of the forecast range for interest costs. For reference, this slide also shows a summary of our growth ambitions over the medium to long term.

With that, let me now hand back to Elie.

Thank you, Michael. I'll now share an update on our strategic progress in the first half of 2025. I'll group these into five areas. First, we continued to drive excellent development activity across our brands. Second, we expanded further into priority growth geographies. Third, we strengthened hotel owner returns. Fourth, we delivered a step change in ancillary fee streams. And finally, as Michael has covered, our success in each of these four areas delivered increased profits, dividends and the return of further surplus capital to shareholders.

So let me start with excellent development activity for our brands. Over the last decade, we have doubled our number of brands from 10 to 20, capturing more guests at more price points than ever before. At the top end, our ultra-luxury brand, Six Senses, is delivering exclusive one-of-a-kind experiences in sought-after leisure destinations and driving average daily rates that are roughly 10x higher than our Essentials brands. Our recently acquired premium urban lifestyle brand, Ruby, further enriches our portfolio with an exciting, distinct and high-quality offer in popular city destinations. And our newest Essentials brand, Garner, is rapidly scaling and further broadening our presence in the affordable mid-scale space.

This expanded brand ladder not only diversifies our customer mix, it also brings more owners and property types into our system. Ten years ago, our brand ladder consisted solely of hard brands. More recently, we have introduced three conversion-friendly brands, Vignette, voco and Garner, that allow greater flexibility while still leaning into brand hallmarks loved by guests. These three brands alone represented 1/3 of our conversion signings in the first half of 2025 with the remaining 2/3 across our other brands. Our expanded brand portfolio, which builds on our industry-leading established brands, is diversifying our system mix and our growth opportunities. And we continue to consider options to further develop our portfolio in the future.

In the first half of 2025, our established brands still drove the majority of our development activity. Among these 10 brands, we opened 126 hotels, representing 65% of total room openings. We also signed a further 199 into the pipeline, representing 59% of total room signings. The Holiday Inn brand family alone opened an impressive 72 hotels during the period and a further 119 were signed into the pipeline, as owners continue to invest behind these industry-leading brands. While our established brands continue to drive system growth off a large base, our newer brands are scaling quickly. These 10 newer brands account for 9% of current system size but 22% of the pipeline. During the first half, we opened 81 hotels across our newer brands and signed a further 125 into the pipeline.

Within these newer brands, Garner, our mid-scale conversion brand, reached 138 open and pipeline hotels across 10 countries less than 2 years since launch. Vignette Collection, launched in 2021, is ahead of its goal of reaching 100 hotels in its first decade. Our versatile and flexible voco brand focused on premium conversions has now exceeded 100 open hotels across almost 30 countries since launching in 2018 with a further 102 in its pipeline as signings continue to accelerate. Ruby has also contributed to the signings and opening strength across our newer brands. At the time of acquisition, Ruby had 20 open hotels, and we added the first 16 into our system in the second quarter. The second phase of the integration, including transitioning the hotels on to IHG's guest reservation system, is expected to begin later this year. And we expect the remaining open hotels to join our system by early 2026.

We are pleased with the brand's growth momentum in recent months. In addition to the 10 pipeline hotels at the time of acquisition, a further 4 hotels in sought-after destinations, Geneva, Copenhagen, Berlin and Malta, have been signed. We see excellent opportunities to not only expand Ruby's strong European base but also take this exciting brand across Asia and to the Americas, where we are on track to have Ruby franchise ready in the U.S. this year.

Turning to our Luxury & Lifestyle and Premium brands. These higher fee per key brands now account for a greater share of our system size and openings. In 2019, Luxury & Lifestyle and Premium rooms represented just under 1/4 of our openings. Over the most recent 12 months, this rose to 45%. Luxury & Lifestyle and Premium represent 29% of current system size, but they are 43% of our pipeline, representing future growth of 52%. So these higher fee per key brands will continue to account for a larger share of openings and system size growth relative to history.

Beyond the fee revenue accretion that comes from these hotels, the brands also enhance the value of IHG's masterbrand, enrich the loyalty proposition of IHG One Rewards and drive incremental high-margin ancillary fee streams through point sales, co-brand credit card fees and branded residential opportunities. We also continue to invest behind our powerhouse Essentials and Suites brands. For our world-leading Holiday Inn Express brand, we recently launched a new marketing campaign. A new bean-to-cup upgraded coffee service already rolled out to over 1,000 hotels and the fifth generation of the product model and lobby design. This gen 5 format is more efficiently constructed for optimized operational management, boosting both investment returns and guest satisfaction.

Now let's turn to priority growth geographies, where impressive signings and openings activity is powering strong development across our well-diversified footprint. With more than 6,700 hotels in over 100 countries, we are well positioned to capture guests wherever and whenever they choose to travel. The U.S. and Greater China, our two largest markets, account for 65% of our system size and roughly 60% of our global pipeline, highlighting the scale of future growth still to come from these large and growing economies. We also have a sizable and growing footprint in the rest of the Americas, Europe, India, the Middle East, Africa and East Asia Pacific. These markets together account for around 35% of our system size and around 40% of our pipeline, as we continue to deepen our presence in existing markets and expand into new ones.

Now taking a closer look at our largest market, the United States. Development momentum continued to pick up in the first half as franchise applications, ground breaks and openings all increased on last year. We opened 70 hotels driven by further openings momentum across our Premium, Essentials and Suites brands. We also signed a further 85 hotels into the pipeline. And more than half of these openings and signings were delivered in the second quarter, highlighting owners' continued confidence in investing behind our brands despite uncertain macro conditions earlier in the year.

In Greater China, we delivered another record period of hotel development activity in the first half with 55 hotels opened and a further 93 signed. On top of strong new build activity, conversion momentum has stepped up, as owners recognize the strength of our brands and the benefits of joining our enterprise platform. Conversions represented 40% of room openings in Greater China, up from 29% in the first half of 2024. And higher conversion activity means we are taking even greater share in this vast market. We expect our record development activity in the first half of the year to continue for the full year, and we remain confident in the long-term structural growth drivers of Greater China, which are underpinned by technological innovation, a rising middle class, continued appetite for both business and leisure travel and the underpenetration of hotels per capita.

Turning now to EMEAA and focusing on four of our largest markets where we are also rapidly scaling our footprint. Together, Germany, Japan, Saudi Arabia and India represent 28% of our system size in EMEAA and 37% of our pipeline. In the first half, we opened 36 hotels across these four markets and signed an additional 54 into the pipeline. This included the launch of Candlewood Suites in Europe, our first signing for EVEN hotels in the Middle East and further expansion of our conversion-friendly brands in Japan.

Over the coming years, we aim to double our presence in each of these large and growing markets. This not only brings more hotels into our system, but also drives outbound travel and scale benefits across our entire enterprise platform. Now turning to the important progress we're making in strengthening our commercial engine to deepen guest loyalty and drive hotel owner returns. Starting with IHG One Rewards. Record enrollments grew 22% versus the same time last year and were 64% higher than 2019 levels. Globally, loyalty penetration is now approximately 65% of all room nights booked. And this figure is even higher in the U.S. and Americas at around 70%. Reward Night redemptions, a key indicator of member engagement, increased 5% year-over-year and are 65% higher than 2019 levels. The strength of IHG One Rewards and our IHG-managed channels is driving increased total enterprise contribution. This is generating more high-quality revenue for owners and lowering their costs.

Our enterprise across all the channels and sources we manage for our owners is now providing hotels with 83% of all the rooms revenue booked. We're also laser-focused on driving more direct contribution to our hotels through the strategic marketing of our IHG masterbrand. In the Americas, IHG's masterbrand awareness reached its highest level ever, rising approximately 5 percentage points from the same time last year. We're also better leveraging all customer touch points, including rolling out the By IHG endorsement for our hotels across digital channels and physical signage. This endorsement increases IHG's masterbrand awareness and drives greater direct contribution, which is key to reducing hotel owner costs.

Beyond improving owner returns, IHG One Rewards members are also an essential driver of valuable ancillary fee streams. We've said before that our loyalty members typically spend 20% more in our hotels than nonmembers and are around 10 times more likely to book direct. Our co-brand credit card holders stay even more frequently and spend more in our hotels. The number of card customers rose at a double-digit rate. And total card spend continued to grow. We also recently expanded the IHG Chase partnership to give IHG One Reward status to Chase Sapphire Reserve customers. And a new co-brand card is in discussion for the U.K. as we actively work towards expanding our co-brand offering to other priority growth markets.

This continued growth in the program, together with the new agreements between IHG and our U.S. issuing and financial services partners, is driving the step change in co-brand credit card fees that Michael spoke about earlier. We are also very pleased with the growth in ancillary fees from loyalty point sales. This is driven by consumers actively engaging with IHG One Rewards and buying and redeeming points across our global estate. We expect this fee stream to continue growing in the future as our loyalty program and system size expand further.

Finally, we continue to see meaningful fee growth potential for branded residential developments. The number of properties in this industry segment is forecast by Savills to double by 2031. And our industry-leading Luxury & Lifestyle brands give us an advantageous position to capture that growth. We currently have more than 30 open or selling projects in the market across 15-plus countries. More properties are in the pipeline and several of these projects are expected to launch sales later this year.

I will now hand you over to Jolie Fleming, our Chief Product and Technology Officer. Jolie has spent more than 25 years as an experienced and inspiring leader in technology-first businesses spanning multiple industries. Jolie joined IHG in 2021 as Senior Vice President in Guest Products and Platforms, where she was instrumental in leading the tech design and development of IHG One Rewards as well as the new mobile app and hotel websites. In 2024, Jolie was promoted to her current position, leading the Global Products and Technology function. Jolie, over to you to share more about your team and the outstanding tech evolution underway across our global business.

Thank you, Elie. Today, our global technology team manages a powerful and highly complex ecosystem. We manage hundreds of applications 24/7 across 20 brands for 6,700 hotels in 20 languages and in more than 100 countries. Our team is dedicated to running a secure and stable technology environment. And at the same time, we are committed to evolving our products and solutions to drive business growth, value for our owners and memorable experiences for our guests.

As we review the technology strategy today, I want to try and strip out some of the complexity of the actual technology and instead talk in terms of the business value we're driving through that technology. When we think about our technology, we think about it in 3 simple areas. First, how is our technology helping to promote our hotels. We need to do all that we can to show the breadth and depth of our hotel portfolio to our loyalty members and prospective guests. Second, how are our technologies helping hotels to optimize their operations and commercial performance. We want to ensure that our owners have the best technology in place to run efficiently and to generate best-in-class ROIs. Third, how is our technology helping hotels engage effectively with their guests. Enabling high-quality personalized connections with guests and delivering memorable experiences drives loyalty, which keeps guests coming back.

These are the three core ways we think about our technology, technology that promotes hotels, technology that optimizes operations and technology that enables engagement with guests. That is the simple framework that frames our thinking, guides where we spend our time and where we choose to invest, and it reminds us every day about why we're building technology. We are here to solve real business challenges for guests, for owners and for IHG.

Now that we've shared the framework, let's discuss our actual technology solutions in each of these areas and highlight where we're making significant upgrades. Starting with promoting our hotels. We have our award-winning IHG One Rewards mobile app. We also have our websites. This includes ihg.com, each brands' website and thousands of individual hotel websites. And we have the technology supporting our other distribution channels, such as the customer reservation centers and our distribution partners and then to meta providers like Google and Facebook.

Together, these IHG-managed channels drove enterprise contribution to represent 83% of all room revenue booked, as Elie mentioned earlier. Now we are taking it to the next level to further elevate how we promote our hotels. We're working with a third-party supplier to overhaul our digital content platform over the next 18 months. This new platform will enable us to quickly and effortlessly add compelling content for each of our hotels and showcase them in new and exciting ways. I'll come back to this in more detail shortly.

In the optimized space, when you look at the core mechanics of what it takes to run a hotel, there are many different systems. But the three largest are the guest reservation system, or GRS; the revenue management system, or RMS; and the property management system, or PMS. These three platforms work together to optimize pricing, take bookings and manage check-ins, check-outs and hotel operations. You've heard us speak for some time about our GRS and our long-standing partnership with Amadeus. This partnership has been a great example of IHG acting as a first mover to bring leading technology to our hotels at a lower cost to owners ahead of peers. The rollout of the GRS system was completed in 2018, and now we're evolving it to further unlock new revenue streams for our hotels. Alongside that work, we're now laser-focused on scaling a new revenue management system and rolling out the new property management system across our global estate.

On the engage side, we're building from a very strong foundation with IHG One Rewards. We are also building upon our robust WiFi network and our award-winning WiFi auto-connect capabilities. From that strength, we're developing and investing in a new loyalty and customer relationship management platform in partnership with Salesforce. This new CRM will give our hotel colleagues greater insight into guests before they arrive and serve them when on property. Our goal, to drive more memorable moments between our hotel colleagues and guests while enhancing the guest experience from check-in to check-out. It is this highly connected technology platform that we are building in partnership with best-in-class providers that will position us to accelerate our growth and portfolio expansion.

Ultimately, our aim is to ensure our hotels have modern AI-enabled cloud-based technology to run their hotels. And by leveraging our scale, we are delivering these solutions cost effectively to our hotels. Now let's go a bit deeper on some of our key initiatives. As I mentioned, in the promote area, we are well underway in building a new digital content platform. In partnership with a third party, we're building a modernized content platform that's simple, easy to use and unlocks new capabilities for owners. It will enable more engaging content types, such as videos, 360-degree views and floor plans to really bring a hotel to life. It will also be faster for our hotels to upload that content to our channels, making it easy to keep the content current and compelling.

And it allows us to leverage AI to drive commercial performance and enhance the guest experience. For example, we will support AI and machine translations for all hotel content, allowing us to promote hotels to even more global guests. This, in turn, will create new and exciting ways for guests to discover and book IHG properties while enhancing operational efficiency and supporting our direct channel growth. The new platform is being finalized, and we will be rolling it out across the estate in 2026.

Turning to our optimize pillar. There has been significant investment in this area which we are now leveraging and further evolving. As mentioned earlier, our guest reservation platform has been fully deployed across our global estate for several years. This means that now we can continue to evolve and enhance that core system to drive incremental high-margin revenue growth for our hotel owners. These advancements have increased the number of guests seeing upsell offers while booking an upcoming stay. Remember, approximately 3 years ago, our hotels had little to no upsell capabilities beyond offering certain room categories. Last year, 25% of guests were seeing upsell offers for larger rooms and better views at some point as they move through their booking journey.

Today, that figure has reached approximately 50% and we are working on extending upsells even further throughout the travel journey. And we're not stopping there. We continue to expand GRS capabilities, making it easier to book one room, multiple rooms, different room types and add-ons, all to further generate commercial advantage for our owners. At the same time, we've rapidly deployed a new highly sophisticated revenue management system called N2Pricing across our global estate. This product was developed in partnership with a specialist revenue management firm and is proving to be a game changer for our hotels.

You've heard us say before that the platform uses modern data science, forecasting tools and machine learning to deliver advanced insights on pricing and distribution channel recommendations to our hotels. But more importantly, the platform has delivered results. The system is having an immediate and positive impact on top line commercial performance through revenue uplift and market share gains. User feedback has been strong, and N2Pricing is enabling our hotels to focus more time on strategic planning, on guest engagement and on operational efficiency. As of June 30, N2Pricing is live in over 5,000 hotels, an impressive achievement considering only 1,700 properties had N2Pricing this time last year.

This is a clear demonstration of our commitment to deliver solutions efficiently and at pace. With the rollout already 80% complete, we expect the system to be fully deployed across the eligible estate by the end of 2025, and we will continue to optimize going forward. Turning to the property management system. We're moving from an on-site hotel property management system to a new modern cloud-based platform that is highly efficient, portable and easy to use. So what does the new PMS unlock for IHG? The new PMS allows hotels to manage operations from anywhere, meaning guests can be checked in from a mobile device. The new PMS is intuitive and easy to use, making it simpler to onboard and train hotel colleagues and complete routine tasks like night audits. The new PMS is also in the cloud, which enables better above-property technical support, rapid centralized system updates and additional security measures. And it will connect seamlessly with other systems, unlocking further capabilities such as our new CRM system.

All of this takes work off of a hotel and enhances the guest experience. And lastly, the new PMS moves the relationship from the hotel owner and the third party to IHG and the third party. This means we can leverage our global scale to negotiate on behalf of our 6,700 hotels to deliver cost-efficient and, in many cases, cheaper solutions for our owners over time. So far, we've partnered with two PMS providers. They are HotelKey in the Americas and EMEAA and Shiji for hotels in Greater China. We are also currently piloting additional global solutions. It's important to note that generally, we aim to deploy enterprise-wide solutions that could be standardized and adopted across all IHG hotels. However, we also have to recognize the breadth of our global footprint and the depth of our brand ladder.

By partnering with a few leading providers, we are ensuring we have the right technology solutions in place for the right properties. And here's another delivery proof point. As of June 30, the new PMS solutions are live in over 1,200 select service hotels around the world. More than 600 hotels have been deployed this year alone. We are targeting to be at 2,000 by the year-end, and we expect to continue this accelerated pace until full rollout. An additional solution is currently in pilot and, if successful, we expect to begin rolling it out to the estate in 2026.

Ultimately, these three cloud-based solutions, GRS, RMS and PMS, provide our hotel owners with industry-leading core technology to achieve best-in-class returns. This will ultimately drive greater owner satisfaction, unlock future growth opportunities for IHG and bolster our asset-light fee-based revenue streams. Last but not least, there's engagement. Today, we are working to reimagine our loyalty and customer relationship management platform to deliver a unified view of each guest, create elevated guest experiences and drive faster loyalty benefit delivery. A new AI-enabled platform will empower our hotels to know each guest before they arrive and provide more personalized experiences and offers.

This will make their stay feel more personal and more memorable. The new CRM tool will seamlessly connect into our overall tech ecosystem so that hotels can easily access a guest's stay preferences, recognize milestone events and more easily celebrate loyalty with gestures like room upgrades and welcome amenities. Our reservation and customer care colleagues will also be able to see guest information when a guest calls, elevating how we service them in those moments. The automated tooling will also make it simpler and more intuitive to use for our hotel colleagues, another example of the many ways in which our solutions are not only unlocking commercial value and better guest experiences, but also driving better operational efficiency. The platform is currently in development and we aim to launch in 2026.

We believe elevating our core platforms will further strengthen IHG's leading position. Our focus on cloud-based technologies removes operational burden from our hotels. Our focus on AI across our platforms will help colleagues work more efficiently and effectively while unlocking new areas of growth. Our focus on value-based solutions will create upside for hotel owners and will contain costs along the way. And our intentional shift from homegrown solutions to best-in-class third-party solutions will ensure IHG stays at the leading edge in technology for our guests and for our owners.

Collectively, the developments that I've talked through today will transform how our hotels operate, how we deliver more direct bookings, drive deeper guest loyalty and enhance owner returns and how we widen the competitive moat. We are incredibly proud of the delivery to date and we are excited about the next phase in our evolution to promote hotels, optimize operations and drive guest engagement.

Thank you so much. With that, I'll hand it back to Elie.

To conclude, we are very pleased with the strength of our financial performance, the growth of our brands and the progress made in the first half of 2025 against the clear strategy that is unlocking the full potential of our business for all stakeholders.

The strong performance in H1 went beyond the growth algorithm, delivering RevPAR growth of 1.8%, net system size growth of 5.4% and 390 basis points of fee margin expansion. We're on track to return to shareholders over $1.1 billion this year. And this culminated in adjusted EPS growth of 19% in the first half of 2025. We remain confident in our ability to continue delivering the growth algorithm over the medium to long term, driven by high single-digit fee revenue growth, 100 to 150 basis points of margin expansion per annum from operating leverage, approximately 100% adjusted earnings converting into free cash flow, sustainable dividend growth, surplus capital returned to shareholders while targeting financial leverage between 2.5 and 3x and, ultimately, delivering 12% to 15% adjusted EPS growth as a compound annual growth rate.

And with that, we thank you for listening to our first half 2025 results presentation.