InterContinental Hotels Group Aktie

Good morning, ladies and gentlemen, and welcome to InterContinental Hotels Group plc Q3 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, and good morning, everyone, and welcome to IHG Hotels & Resorts conference call covering the 2026 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 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 third quarter can be downloaded from the Results and Presentations section under the Investors tab on ihgplc.com. Now, over to Elie.

Thank you, 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 third quarter. I will then hand over to Michael to go through the performance in each of our 3 regions in more detail, and he will also cover the share buyback and financing updates. I will then provide some brief concluding remarks, and we will open up the call for Q&A in about 15 minutes or so.

Let me start by thanking our teams around the world for their hard work and dedication. We have delivered another strong performance with RevPAR growth accelerating in the third quarter and our development momentum continuing. The quarter once again demonstrated the benefits of IHG's strategic diversification across geographies, brands and stay occasions.

Turning first to trading. Global RevPAR grew by 5.3% in the third quarter, taking growth for the year-to-date to 4.6%. The U.S. performance was very strong with growth across every brand, every demand driver in every location type. This reflects the ongoing strength and breadth of the U.S. economy and of IHG's enterprise platform. The EMEAA region also saw very good growth overall, particularly in Europe and East Asia Pacific. The wider Middle East subregion improved to broadly flat, though there were still declines in the GCC countries. And in recent weeks, there have been escalations of the conflict in the Kingdom of Saudi Arabia, and we hope for a speedy and lasting resolution right across the region.

In Greater China, RevPAR eased in this last quarter, impacted by adverse weather and changes to public holiday timings. RevPAR growth remains positive year-to-date, and we remain confident in the strength of the outlook. At a global level, both rate and occupancy contributed to the 5.3% RevPAR growth with average daily rate up 3.9% and occupancy increasing by 0.9 percentage points. By demand driver, rooms revenue on a comparable hotel basis was up 10% for groups, up 5% for leisure and up 4% for business, further demonstrating the benefit of strategic diversification.

Turning to development activity. We expect 2026 to be another record year and the fifth straight year of accelerating net system growth. In the quarter, we opened 12,900 rooms across 92 hotels, taking our year-to-date total to almost 300 and expanding our global system to 7,200 hotels. Net system growth was 4.9% year-on-year. Among openings in the quarter, we celebrated our 1,000th opening in Europe and globally, our 200th for Hotel Indigo and our 150th for voco. And there were plenty more opening debuts to new countries. For example, the first Vignette Collection hotels into each of Spain, Germany and the Dominican Republic.

We signed 21,100 rooms across 164 hotels in the quarter, almost twice the number of hotels we opened. With that momentum, year-to-date, signings have already topped 500 hotels. Our pipeline is more than 3% bigger than a year ago and equivalent to growth of 33% on our current system size. Development is split roughly evenly between new builds and conversions, the latter, of course, moving more quickly through the pipeline.

Each of our collection and conversion-focused brands, voco, Vignette, Garner and -- Noted Collection continue to expand around the world, demonstrating the breadth and attractiveness of our brand portfolio. With that, let me now hand over to Michael to run through the regions in more detail for you.

Thanks, Elie. Starting with the Americas, where RevPAR growth accelerated to 6.8% in the third quarter, taking year-to-date growth to 5.6% rate grew by 3.9% and occupancy increased by 2.1 percentage points to 73.9%. You have to go all the way back to 2017 for a higher level of occupancy. In the U.S., RevPAR grew by 6.9% in the quarter and 5.4% year-to-date. The tail end of the FIFA World Cup in July added 40 basis points to the region's RevPAR growth in the third quarter. The quarter also had within it a small benefit from the timing of public holidays and events, which supported a further uptick in travel rather than any sort of shift from the prior or following quarter.

So aside from those small benefits, the vast majority of the strength of the performance in the U.S. is a reflection of the ongoing strength and breadth of the U.S. economy as we noted. That is also reflected in the growth of all 3 demand drivers. Groups was strongest with comparable rooms up 12% compared with 2025, followed by leisure up 7% and business up 6%.

Turning to development in the region. Gross system growth was 3.6% year-on-year and net system growth was 2.1%. We opened 4,000 rooms across 39 hotels in the quarter, 1,300 rooms more than the same period last year. Notable openings included the InterContinental Presidente Mexico Miyana, the new flagship Crowne Plaza in Times Square, New York, 11 Holiday Inn Expresses and 8 more Garner properties.

Moving to signings in the quarter. We signed 5,700 rooms across 65 hotels. These included 24 hotels for the Holiday Inn brand family, 22 across our extended stay brands and 14 across our conversion-focused brands. Highlights included signing InterContinental Bogota, further expanding the brand's presence to one of Latin America's most important gateway cities as well as signings to take the voco brand into additional markets in Central America and the Caribbean.

Moving on now to Europe, Middle East, Asia and Africa region, where RevPAR grew by 5% in the third quarter, a significant improvement on the 0.6% growth in the prior quarter. This takes the region to 3.9% for the year-to-date. In Q3, rate grew by 4.1% and occupancy increased by 0.6 percentage points to 75.5%. Looking at the major geographic submarkets, RevPAR increased by 3% in the U.K., 4% in Continental Europe and grew 8% in East Asia and Pacific.

A number of other markets were even stronger, for example, India and Africa, both growing in the mid-teens. The Middle East improved to be broadly flat in Q3, having been 19% lower in Q2. Within this Q3 improvement, Egypt and Turkey performed strongly, though countries closest to the ongoing conflict continue to experience declines. Across the 6 GCC countries of KSA, the UAE, Qatar, Kuwait, Bahrain and Oman, there was a RevPAR decline of 12% in Q3.

Turning to development in the EMEAA region. Gross system growth was 7.1% year-on-year and net system growth was 6%. We opened 3,600 rooms across 23 hotels in the quarter. We also signed 7,000 rooms across 47 hotels. These included 21 conversion deals and further signings for Noted Collection, which has already secured hotels in 5 countries since its launch in February. Elsewhere, we signed 2 further Vignette Collection properties in France, additional Kimpton hotels in Thailand and Italy and a Ruby in Greece.

Finally, moving on to Greater China. Year-to-date RevPAR has grown by 1%, although the third quarter, it eased by 3%, with rate down 0.8% and occupancy decreasing by 1.6 percentage points to 62.3%. A number of adverse weather events impacted domestic travel during the first 2 months of the quarter, while changes to public holiday timings supported more international outbound leisure travel in late September.

However, we did capture the benefit of that outbound travel in EMEAA during the quarter. So these factors contributed to RevPAR declining by 7.5% in Tier 2 to 4 cities, while Tier 1 cities grew by 0.2%. There was very strong growth in Hong Kong and Taiwan. We continue to remain confident in the attractive long-term fundamentals of the Greater China market, underpinned by strong economic development, a growing middle class and the continued underpenetration of hotel rooms per capita.

Because of these strong fundamentals, development activity in the region remains excellent. Gross system growth was 12.1% year-on-year and net system growth was 10.3%. We opened 5,300 rooms across 30 hotels in the quarter, taking year-to-date openings to 20,500 rooms. A particular highlight was the opening of Holiday Inn Shanghai in NECC, which brought the new Holiday Inn Design to Shanghai and became our 90th hotel open in a city with a population of some 25 million.

We signed 8,300 rooms across 52 hotels in the quarter, including 20 Holiday Inn Express and 14 Holiday Inn properties. Increasing demand for conversions comprising both hotel rebranding and adaptive reuse projects have grown to represent approximately 40% of openings and signings in the year-to-date. A notable conversion example was the Hari Hotel in Hong Kong, which was both a signing and an opening within the quarter and is part of a portfolio of 3 luxury hotels joining our Vignette Collection.

Moving on next to update you on the share buyback. We are currently 74% of the way through this year's $950 million program with $707 million spent to date and 4.7 million shares repurchased. This has reduced the total number of voting rights in the company by a further 3.1% to 147 million. Together with the $285 million of ordinary dividend payments, the program will take total shareholder returns in 2026 to more than $1.2 billion, which is equivalent to 5.8% of IHG's market capitalization at the start of the year.

As previously stated, leverage at the end of 2026 is expected to remain within our net debt to adjusted EBIT target range of 2.5x to 3x. And finishing with a quick update on financing. In September, we issued EUR 850 million of bonds across 2 tranches. And following the maturity of a GBP 350 million bond in the prior month, we now have $4.6 billion of bonds outstanding and a blended cost of 5.1%. The next scheduled maturity is the EUR 500 million bond in May 2027.

As previously described, our expected range for adjusted interest expense for 2026 remains $230 million to $240 million. Given the increase in our gross debt as well as the modest increase in our blended borrowing rate following this year's refinancing activity, the adjusted interest expense expected to increase $40 million to $60 million pretax in 2027. This is an expected feature of operating our growth algorithm, which includes returning surplus capital to shareholders and maintaining leverage within our target range as part of targeting EPS growth of 12% to 15% annually on average over the medium to long term.

To conclude then with some comments on consensus for this year. Our strong performance for the year-to-date and the continued positive outlook for demand gives us confidence in achieving consensus expectations for 2026. We would expect consensus to increase modestly further given the successful Q3 we are reporting today. Consensus as it currently stands for the 2026 full year is global RevPAR of 3.5% and the stronger-than-expected Q3 would flow through to EBIT accordingly. For net system growth, consensus for the current year is 4.8% and our continued development momentum underpins that view. You can find the full detail of our current consensus on our corporate website. With that, I'll hand back to Elie for closing comments.

Thank you, Michael. And to wrap up, RevPAR growth accelerated in the third quarter to 5.3%. Net system growth was 4.9%. We expect 2026 to be another record year for development activity and our fifth straight year of accelerating net system growth, and we are confident of achieving consensus expectations for the year, which would mark the third consecutive year of delivering adjusted EPS growth around the top end of our growth algorithm of 12% to 15% annually on average over the medium to long term.

This once again shows the power of IHG's enterprise platform and the benefit of our scale and strategic diversification around the world. And with that, Michael and I would be happy to take your questions. Operator, can we open up the lines and take the first question?

[Operator Instructions]

And your first question comes from the line of Jamie Rollo from Morgan Stanley.

Three questions on net system growth, please. First, just on China, a very strong figure, again, 10%, but that was a bit of a slowdown from the 12% at the first half, some rounding in there, of course. But do you see that slowdown continuing? Or is sort of 10% a fair run rate for the next year or 2? Secondly, on the Americas signings down a quarter in the third quarter. I know it's only 1 quarter and there's probably some phasing, but anything you would call out in particular there?

And then, finally, sort of looking into 2027, I know you don't guide, but consensus, I think, is on 4.8% again for net system growth. I think DAF is not in that number. That should add about 70 basis points. So do you think somewhere in the mid-5% is right for next year? Or is there any risk from that China question or indeed from the Middle East situation?

Okay. Thank you, Jamie. So on China, no, we're very confident that we're going to keep building upon the record year upon record year of signings and openings that we have and strong net system size growth. We don't give guidance on exactly what the number will be for next year, but we don't see any indication that there's a slowdown in development. Our brands are in strong favor. Our signings are strong. Our hotels are performing. The market is expanding. We're delivering for owners over there. And our team is optimistic about continuing the current trend.

We're not going to give you a number, but it's going to be -- continue to be a very strong contributor, not just to our net unit growth, but also to our profitability. I mean, you saw at the half year, our profitability was up 25%. So these are not just keys, but they're keys with fees in China, and we are confident in continuing that trajectory. So we don't see a slowdown coming.

And we're confident in Americas signings continuing to power our business. This will be, I think, the third year in a row of Americas net system size growth accelerating from beyond the pandemic. We had a strong first half of the year. I think signings can be lumpy from time to time. We think we'll finish the year with good momentum. So we're confident in that momentum over there.

And year-to-date, we're up 7% on signings in the Americas. So as Elie said, there can sometimes be some lumpiness there.

And for '27, you rightly include the Air Force deal. But setting that aside, I think we have good momentum going forward. We're doing better. This is our fifth in a row accelerating the system size growth. We think that momentum continues and Air Force will build on that. We're not putting a number out there for next year. But yes, we're very confident in consensus next year. We'd say that at that 4.8% number for next year, there's definitely more upside than downside.

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

I'll go for 3 as well. You've just announced you've got over 1,000 rooms in Europe. So I just want to get any views on what's been happening in Europe with the riots and how you see that impacting your business? It looks like potential for further protests, et cetera, coming up. So any color there, if you do have any color?

Secondly, just again, I don't know if you want to say anything on fee triangulation between NUG and RevPAR. I guess, Q3 would have again seen a bit of lag there. So just if there is any comments on the triangulation. I think probably we've spoken about it too much, but I'll ask that anyway.

And then, Elie, Michael, just one looking a bit forward. I mean, it's a kind of time of year where you're talking to corporates about their travel plans for next year. Just getting an idea if you've got any color on what they're saying about volumes of corporate travel and your indications potentially of what room rates will do across your network. Again, I don't know if you've got anything to add there.

Sure. Thank you, Jarrod. Yes, we're very proud of our teams growing our business in Europe. I mean, Europe is the broader definition of Europe, including U.K., is roughly 25% of global GDP. It's over 50% of global inbound travel. It punches way above its weight in inbound international travel. We'll continue to do so. It has unequaled destinations, culture, gastronomy, climate, geography, history, all the things that people come to Europe for.

This year, it's going to be another record of Americans traveling to Europe despite higher airfares and higher temperatures and whatever. It's just a long-term trend of people, especially the more affluent wanting to travel and wanting to travel to Europe. I think Europe is 4 out of the top 6 destinations in the world with the highest inbound travel. So that's not changing. And of course, we're growing with that trend. And we're growing in a lot in Southern Europe, which is Portugal, Spain, Italy, Greece, all the way over to Turkey.

There's a lot of demand for the enterprise strength that we bring for our brands, for the international travelers, especially U.S. travelers that we bring. I personally meet with a lot of the investors and owners in Europe that are delighted to see the performance. I just walked over with our Board this week to our new voco in Bloomsbury conversion from another global brand and how delighted the owner and the general manager were about the immediate and significant improvement in performance, rate, occupancy, IHG One Rewards, visitors, travelers, decrease in OTA, and we've already done multiple hotels we're going to do more.

So this is the trend in Europe. One of continued strong inbound travel, international travel. Number two, opportunity for conversion of not just independent, but other branded hotels to our brands and expansion, mostly, I would say, in Southern Europe. So we're very pleased with that. Look, we're, of course, disappointed with everybody to see some of the tensions in some cities, particularly in France. France is only 1% of our system size. So we hope and we think it's -- it will pass as it has passed before. By the way, it's not the first time there have been disturbances in France. We hope it's the last time, but it's not the first time, and it's passed before and France continues to be one of the strongest, I think, #2 destinations in the world for inbound tourism, and we're confident it will continue to be so.

In terms of fee triangulation, if you want me to take that one, Elie, as you know, we don't -- as this is a trading update, we don't get into the final details of the fee revenue triangulation. But as that said, as our view remains unchanged from the half year results, and we should still expect the triangulation gap to narrow over time. And the main driver of that is the increase in our system growth as we discussed at half year. There's always going to be a slight lag when you're accelerating net system growth as we have really since 2021.

Newly opened hotels take some time to reach stabilized occupancy, room rate and overall hotel revenue levels. And most agreements also have some fee structures that step over the first -- over the first few years of the operation. And so as a result of all that, the full fee revenue contribution from recent openings only partially reflected initially, but builds up over time as the hotel matures and the fee structures move up. There will also always be some noise in any given period.

This include differences in liquidated damages, hotel renovations or hotel closures. Of course, at the half year, the triangulation included the impact of the war in the Middle East and the impact on our incentive management fees and things of that time. As we said at the time, neither of these should be viewed as permanent as recently hotels mature and contribute to a greater proportion in the period. And so I think we still feel very comfortable that it's going to continue to narrow over time.

It's driven mostly by our accelerating the system size growth fifth year in a row, which is a good thing to have. And I'm not eager for that to discontinue, by the way. So your question about business travel, look, it's been strong, strong globally at 4%, stronger even in the Americas at 6%. That's a reflection on the strength of the U.S. economy. Look, what's happening in the U.S., you have strong corporate profits. S&P profits have been very strong, up double digit year-to-date. GDP growth over 2%, employment is still at record levels.

Corporate investment, not leaving aside government investment, but corporate investment in technology, data centers, energy, pharmaceuticals, manufacturing, construction. And then you have government investment in the defense. All those sectors are growing, and we're very exposed to the industrial segments -- travel segments in the U.S. I would also look at our group business, which is up double digit, 10% globally, 12% in the Americas. Half of that business is also corporate travel, meetings, events, conferences.

Your own research, I think at UBS, we looked at recently shows that 2027 expectations are nearly double-digit higher for travel budgets. I think it was 9.9%, right, Jarrod, 9.9% expected growth year-over-year for corporate travel.

That's correct.

Yes, we do read your material and remember it. So there's a general positive sentiment around corporate travel, and we're benefiting from it.

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

I had 3 questions as well. The first one is on FY '27 and your interest guidance. It's very helpful that you quantified that. From where you sit today, does the wider algo of high single-digit fee growth, 10% EBIT growth and 12% to 15% EPS growth still hold for next year despite the increase in interest costs?

Second question is around Q4 specifically. I mean the news flow around geopolitics and Saudi Arabia, France, the risk of protests in the wider European region. Are you seeing any cracks in demand there? Or is the booking curve slowing in any way in Q4?

And then very last question on net unit growth, really helpful comments earlier from Jamie's question. I guess one of your peers last night lowered their net unit growth guide for this year. It sounded like they were flagging higher interest rates, fewer transactions and that kind of impacting conversions. Can you say a few words on why you at IHG feel so confident this year and next year and maybe why you're less impacted from the higher rates business than maybe some of your peers?

All right. Michael will take the first question on interest. But the quick answer is, yes, the algo still holds. Over to you, Michael.

Yes. I mean, let's just take a step back and remember the growth algo we laid out in February of 2024. And as Elie said, there is no change to the 12% to 15% earnings per share guidance in the algo. And through this algo, we aim to deliver high single-digit fee revenue growth per annum on average over the medium to long term, and we do this through a combination of RevPAR and system growth. Given the highly scalable nature of our business model, we expect this high single-digit fee revenue growth to translate into 10% -- approximately 10% EBIT growth per annum on average.

As our business continues to grow and compound, we generate more and more cash each year, which we then allocate first towards reinvesting in the business and driving future growth, then second towards sustainably growing the ordinary dividend; and then third, returning surplus cash to shareholders in the form of buybacks. And importantly, while maintaining net debt to EBITDA in our 2.5x to 3x leverage range. So as a business, we continue to grow. And as we continue to deliver on our growth algorithm and as we aim to keep leverage in the target range, our overall debt balance and interest will grow each year.

This is more than offset, however, by increasing EBIT and cash flow and then returning capital to shareholders via the share buyback as we replace higher cost equity with lower cost debt. So while we've said in the stock exchange this morning that we expect our adjusted net interest expense to increase between $40 million and $60 million pretax next year, it is also important to remember that this assumes another year of growing the business and executing on our growth algorithm, which aims to deliver that 12% to 15% adjusted earnings per share growth per annum on average over the medium to long term.

While most analysts have appropriately noted an expectation of further buyback in 2027, I think consensus as it sits today is around $980 million, which is in line with our growth algorithm and balance sheet targets. Consensus also needs to reflect the interest cost and the assumed reduction in the share count in order for this to be appropriately reflected in the algo. And that's why we gave out that interest expense number today. But I think it's important to put it in the context of everything else that's going on. And as we said, there is no change to that 12% to 15% earnings per share guidance in the algo.

Now, I mean, RevPAR grows, fees grow, EBIT grows, cash flow grows, that allows us to invest in the business, also do more buybacks. That has to also keep us within -- staying within our leverage ratio also means leverage grows. Therefore, interest grows, but it's all within the algo of 12% to 15%. Your second question on Q4. Well, we're in Q4. We don't give guidance. What we did say and what we're saying clearly today is we're confident in, in consensus and that we can see consensus moving up a little bit given the strong performance we've had year-to-date and especially in Q3 with the strong RevPAR.

So -- and we're comfortable with that, too. So that's about all the guidance we're going to give about Q4. Sure. Look, there is -- there are disturbances around the world. There's -- of course, the Middle East conflict hasn't resolved yet. It is not at the level of tension that it was in March or April, but it's not resolved yet. If it gets resolved sooner, that's better, but it's only 5% of our business. And if it doesn't get resolved as soon, we're still happy that the 95% of our business is doing very well and making up for that in the near term.

We're highly confident that as soon as there's a resolution, the Middle East will continue to go back to its trajectory of growth and success. It bounces back very quickly. You already saw that. In this year, in the third quarter. As soon as there's a little bit of resolution, the business bounces back very quickly, and we're confident that will happen. You might have seen the news in the last day or 2 that there's already more oil going -- coming out of the Gulf now than there was before the conflict. So while there is still some tension, there are ways to also continue the economy around the world despite the tension.

So I think there are workarounds that are resolving some of the issues. So we are confident in the fourth quarter globally despite there are some tensions in some parts of the world. And on Q4, we are not, by any means, a read across to what you might have heard last night from some other hotel company. And it's not always a read across, right? There are other hotel companies earlier this year that downgraded their net unit growth, and we've actually been upgrading it.

We started -- I think consensus was 4.2% at the beginning of the year, and now it's 4.8%. So maybe others have been downgrading, ours has been upgrading, and we're confident in where consensus is today. We say we're under -- we feel underpinned at that consensus, and we're not putting a ceiling on it. We feel like -- and our teams are working very hard throughout the end of the year to open up every one of the many hotels we have in pipeline. So we're not putting a ceiling on it.

The other side as we go into 2027, we have great visibility into the progression of our pipeline and especially now that you have more conversions in that pipeline. So that gives us confidence that '27 can continue to accelerate, but that's also then underpinned by the Air Force and what we're doing with the Air Force. Now, we don't know exactly how all those are going to come in and when they're going to come in, in all those rooms, which and how many rooms that's going to be, which is why we haven't given you the clear numbers on that. But we will when all that gets finalized. So that's what gives us confidence on where we sit today, both on '26 and '27.

Your point about interest rates and interest rates are a bit higher. Historically, if you go back long term, they're not at rates at levels that they haven't been before. In fact, the 10-year is probably where the 30-, 40-year average is plus or minus, and the industry has had many good years before. But what you start to see when interest rates do rise in some cases, you start to see some selectivity. Owners start to move to the stronger performing brands like ours. That's why you see our conversions continue to increase.

Now, roughly half of our openings and half of our signings around the world and more than half of our openings in the U.S. are from conversions. We're converting from independent. We're converting from other brands. So there are winners and losers in these times, and we are definitely feeling on the winner side of it. We have more conversion brands. We're signing more conversions. We're opening up more conversions. Most of them are coming from other brands in the U.S. and around the world. You can call it a flight to quality in these times, but we think we're benefiting from it.

Your next question comes from the line of Leo Carrington from Citi.

If I could first ask just on the Americas region, you highlighted the strong growth in [ groups ]. I mean given your visibility for this demand type is potentially a bit better than others, is there any reason to expect that this kind of outperformance won't persist into the rest of Q4 and also Q1?

Secondly, in the quarter, I noted in the trade press a few larger signings or a few findings of hotel groups like in Australia and Japan for you and a smaller one for Vignette too. Is this a normal tempo that I've just picked up on? Or has there been an acceleration in these kind of opportunities?

And then lastly, away from the quarter, can you just give an update on how the -- Noted Collection brand has been received among owners? I can see it now in your pipeline. And I suppose you've had almost a year out in the market with this.

I'm going to start from your last question. Yes, we're very pleased with the reception for Noted Collection. We're getting the first signings. We've got a lot of interest. I don't think it's been a year. We launched it this year. I don't think it's been anywhere near a year, and we're pleased with the momentum that it's having. Look, all of our conversion brands have really reached rapid success. I mean if you look at -- Noted has already got half a dozen signings and a couple of openings. You look at Vignette, we've got over 88 hotels open and under development in just a few years.

Garner is over 230 hotels open under development, way ahead of our projections in over a dozen countries. voco, nearly 300 hotels open under development around the world, well ahead of our projections when we launched it. So our collection and conversion brands have been successful, and that's given us the confidence and following owner demand to launch Noted. So it's -- we haven't taken it to the U.S. yet. It will be there at some point, but it's in Europe, and it's moving east from Europe where there are even greater conversion opportunities. So we feel confident about the trajectory that it will have, consistent with the success of our previous and successful collection and conversion brands.

On our signings, look, yes, we're pleased that year-to-date, it's another year of signings acceleration year-to-date. We're ahead of last year when you adjust for the Ruby deal that we did last year. And it's pretty broad-based. We're pleased with the success we're having in Asia, in Europe and the Americas. We've got a broader portfolio of brands, a stronger enterprise, a loyalty plan that's delivering 67% of room nights around the world, 73% in the U.S., great technology ecosystem that we reviewed at the half year. All of those are value proposition for owners that they appreciate.

And by the way, strong RevPAR performance is something they really appreciate, too. That's driven by the strength of our enterprise. Yes, our markets have been favorable in general, except for a few that we discussed. But I think we're outperforming the market and delivering strong revenues at low cost of distribution to our owners that they benefit from. So our whole enterprise is creating value for owners and they respond by partnering more with us for growth.

Leo, if you want me, I can maybe just talk a little bit about groups. As we look at groups, obviously, we've had an incredible performance. And I think over our past periods, we've talked about how group performance on the books has been really strong. As we sit here today, if we really look on a total basis for revenue on the books, we do have a little more visibility with groups. It's still up mid-single digits. So still looks like groups are going to continue to come in, feel really good around that. And really, that's across the board and across all regions. So yes, we're feeling really good around how groups are coming in.

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

I'll do 3. So the first one I'll do is [ AI ] just because I'm astonished no one's asked it so far. A few travel companies and sort of other wider companies have blocked it on fears of sort of the idea that it goes and just tries to find you the cheapest option and keeps checking for you. How would you kind of think about agents that sort of self book out and how you might work with them?

And then the second on similar topics have been mentioned already. In terms of key money expectations, you don't give full quarterly results. So is there any change in where you are for this year? And then, for next year, how should we think about modeling key money? And then, in terms of what you've talked about in terms of this ramp-up in contract signings and NUG, can you just talk to us about the proportion of contracts or new signings on which you've offered ratcheting contracts? Because I think that, that's the piece where the royalty rate change is coming from. If you can talk about where -- how -- what proportion of contracts had ratchets in them previously and where that is now because that might help with the modeling.

Okay. On [ AI ], look, we're in conversations with all the platforms, the hyperscalers, the frontier models as this -- and we have our own, of course, artificial intelligence strategy and models and agents and on our website and our app, we already have conversational search. So we're in conversations with everybody. We're in conversations with Meta. We haven't come to any conclusions on what an eventual collaboration could look like, if any.

I think what others have decided to do is really down to them, but we don't have really an update on that. But I'll tell you one thing is we're very confident in our artificial intelligence strategy to make sure that our channels are the preferred ones for our travelers, for our guests, for IHG One Rewards members that we continue to take share of bookings for our direct channels, while working with other players, other distribution partners because we've always said that for the hundreds of millions -- hundreds of millions of bookings that we need every year to drive the best RevPAR and the best yield for our properties, we need multiple distribution partners while always favoring and strengthening our direct channels.

On key money, no, there's no change either in the outlook for this year nor in the capital guidance for next year. We're comfortable that our capital allocation is the right one to make us competitive and also drive the shareholder returns that we aim to do in our growth algorithm.

Just to be clear on those numbers, Alex, I mean, we've said $200 million to $250 million for this year, and we'll continue that guidance for 2027 and up to $350 million in capital. And as always say, no change to that for either year.

On the ratchets, as you call them. It's not a term I'm most familiar with, but let's use that one. There's nothing new there. I joined the company in 2015. We did these fee ramps for opening new opening hotels so that there will be some glide path as occupancy starts from 0 and builds up for a couple of years. There's nothing new there. And so we will not disclose for competitive reasons, I'm sure you understand exactly how many deals we do in what form it would be inappropriate for us to do so. But it's no more, no less than where it used to be, and it's -- there's nothing new there. We brought it forward in the last few periods of discussions to explain how when we are opening up more hotels, when our net system size growth is accelerating for the fifth year in a row, that is one feature, not the biggest feature.

The biggest feature is the revenue ramp-up in hotel, but that is another feature that can create that deferral of fees in what's called the triangulation. They're not fees that are lost or anything. It's just a deferral as the hotel ramps up. But the introduction and deployment of these ratchets or fee ramps, as we call them, are nothing new, nothing greater, nothing less than they've been for over a decade and probably longer because I only joined 11 years ago.

Thank you, Alex. Look forward to having you join us with our senior leaders meeting here next week.

I'm looking forward to that.

Your next question comes from the line of Kate Xiao from Bank of America.

I also have 3. The first one, can I just confirm on your commentary on EPS? Obviously, you said you're very confident in achieving this year's consensus EPS. You also mentioned that the better RevPAR should lead to a bit of uptick in EBIT numbers flow through. Can I just confirm that, that should also flow through to EPS, hence, there could be a bit of upside to consensus EPS numbers as well? Is that understanding correct?

The second question is on NUG. Obviously, you've done 3.3% year-to-date, which is 20 basis points better than last year. Any seasonality in particular for this year you could share with us, especially into 4Q? Anything that could be positive or negative on a year-over-year basis? Any color there would be appreciated.

Question number 3 is on credit cards. A couple of weeks ago, we saw the announcement from Chase that they are launching a new card with you guys, and I think that's the highest annual fee card. And if I'm not mistaken, they're raising the annual fee for your existing cards as well. I just wonder if that's something that's already kind of in your plan, in your 10-year agreement with them? Or was that based on kind of your performance, hence, could be incremental to your guide of $120 million by 2028? And what's your expectation of the first year ramp of these cards and programs and spending?

All right Kate. Thank you for your questions. I'll turn it over to Michael for your EPS questions, and I'll take NUG and credit card.

Okay. So, yes, sorry, I thought you were going to do the credit card first. On the earnings per share question, yes, absolutely. We've actually talked about where consensus sits today. And we've given an indication that we could see in my prepared remarks, some improvement in that given kind of where full year RevPAR consensus sits and what we've delivered today. If you look at where consensus for profit sits, it's what $1.403 billion. Obviously, there was a Q3 RevPAR beat.

We feel like that will continue to flow through. And then, of course, that flows through into earnings per share as well as we could see that tick a little bit higher. And certainly, we've talked about 2027 and the interest cost. But -- but also remember, as we plan for that and we look at what interest cost comes into, it also assumes some rolling share buybacks. And of course, therefore, your one will also continue to reduce and earnings per share will accrete on top of that. And remember, importantly, leverage stays the same. We're not relevering this business to do that. It stays in that 2.5x to 3x range.

Thank you, Michael. So your question on net unit growth for this fourth quarter and this year. Let me first, I start by saying, look, we're very pleased that this year, 2026 will be another record year of development and the fifth straight year of accelerating our net system size growth. That's what we're trying to do is be consistent, grow our system growth sustainably, keys with fees and do the right deals to get the right growth that drives the algorithm. It's keys with fees that drive the algorithm, so driving EBIT and eventually driving EPS.

At Q3, we were at 4.9%, as you know, 3.3% year-to-date. So last year, at the same time, we're 3.1%. So we're growing faster, and we're already on a stronger track. Consensus, as I mentioned earlier, has already moved from 4.2% to 4.8%. So we're going upwards in expectation, not downwards as others may have been noting.

Q4 is always our biggest openings quarter proportionately, and this year is headed for another typical strong quarter of openings. We don't need to do anything extraordinary in Q4 to reach consensus or even go ahead of consensus. It just needs to be and it's shaping up as a strong quarter of openings proportionately similar to other years. So we're confident that this underpins the current consensus, and we're not placing a ceiling on it, as I said earlier. Our teams are out there pushing for every hotel, for every room working with every owner to get quality hotels opened by December 31, and we feel very good about it.

Underpinning the future also are strong signings that are ahead of last year, strong openings are ahead of last year, and that gives us continued confidence in our momentum to accelerate net system size growth. On the credit card, it's been a successful launch altogether since we entered into a new agreement with Chase and Mastercard a couple of years ago. Expanding our credit card portfolio has been on our road map, not just in tiers of cards as this new Select card is, but also across countries.

We're now in the U.K. with a debit card. We announced a deal in Japan with a credit card. There will be other launches in other countries. Yes, the new IHG One Rewards Premier Select credit card has gotten off to a great start. It's a $350 annual fee. It is already getting strong initial customer interest. It's performing much better than we expected in the proportion of card selection among people are signing up for IHG One Rewards co-brand cards. I personally just got approved yesterday. It was probably a close call, but I got through.

And I would not characterize this as anything new in our strategy. We always plan to expand the credit card portfolio geographically and by tier. But as we premiumize IHG One Rewards, as our portfolio goes further into luxury and lifestyle, as we enroll more high-spending customers, there's more demand for higher benefit cards that also sometimes come with a higher fee, and we're very pleased with its initial uptake.

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

I got 2 questions. The first one, are you worried about where air fares are heading, which in the context of all the geopolitical tensions and inflation not easing could weigh on the consumer going forward? And just another question on China. Talking about the RevPAR, you mentioned weather and holiday timing. I guess it's not easy to quantify, but should we expect RevPAR to return to a more sort of flattish to slightly positive territory in Q4? And how do you see China evolving into next year?

Thank you, Estelle. Okay. Airfares can be volatile. A lot of the airfare increases obviously are related to the oil price increases. And so the bad news is that the airfares are up for airlines and for travelers perhaps. But the good news is that it's from a -- what we would consider a visible and temporary factor when we see a resolution to this conflict, we'd hope that there will be resolution soon to this conflict. You'll see the airfares. You'll see the oil price come back down. There's already, as I mentioned earlier, improving oil supply.

And then when the conflict subsides, you probably will see lower oil prices, which will lead to lower airfares. And so there's nothing structural about the higher oil prices. It's conflict caused. And so we think that, that reverses at some point. The more important thing is that we are not as exposed to airfares as you would think. I mean most of our travel at IHG is domestic travel, is drive-to travel. Most of our travel in the U.S., 95% of our travel in the U.S. is domestic. Most of that is drive to. A lot of our travel in Europe is drive-to

travel -- 80% over probably 90% of our travel in China is domestic.

A lot of that is drive and train. So yes, air travel is part of it, but it's not the majority part of it. The other thing is that the travelers have shown a lot of resilience to these higher airfares. Despite the fact that they've been higher, demand has been very strong. I was just talking to the CEO of a U.S. airline, I name who and they said -- and many of them probably are in the same place, but this one CEO, one of the major 4 airlines was saying, it's going to be a record year in demand, a record year in revenue. People are paying for the fares. It's the oil price that might affect their results differently.

And that's what they're saying publicly that demand is strong. Front cabin, back of cabin demand is strong. We don't see that being a long-term issue because what's causing the higher airfares is a short-term issue with the conflict. So -- and we're not as exposed to that as destinations and maybe groups that are much more indexed to air travel than we are. We're much more indexed to domestic and non-air travel customers.

On China, we -- yes, we're confident, one, not just in the long term in China, but also that some of the anomalies of Q3 will reverse in Q4. I don't -- we're not giving guidance on what Q4 could be, but it's shaping up as a better quarter than Q3 was definitely, and we see no scenario under which we're not in positive RevPAR territory for the full year in China. Beyond that, the fundamentals are strong in China. I know not all the headlines are as positive as they can be. But if you look at things in totality in China, it's still a GDP growing at 4% to 5%.

They announced last week record exports again, strong technology industry, probably only rivaled by the U.S., whether it's in artificial intelligence, renewables, batteries, automotive, electric vehicles. Not every sector is doing very well in China, but many sectors are. You have a growing middle class with a population that isn't growing, but GDP is growing. GDP per capita is growing. That means the middle class is growing. And travel is growing. We are -- in China, we are double digits ahead in domestic travel in 2019 already by 2025, not even 2026, that's 2025.

We are double digits ahead in international travel in 2025 and even more in 2026 than 2019. So travel has recovered and continues to increase. What affected Q3 in part, we're not saying it's the only effect was also the strong outbound travel, which we benefit from. We were double-digits growth in RevPAR in Vietnam and South Korea and most of our Southeast Asian countries where people are staying at IHG hotels at strong rates. So we do benefit from the China outbound, which you have to see as part of our strong network and investment in the future.

China will be the largest domestic and international travel market in the world at some point. It's already #2 or #3 in international outbound, and it feeds the rest of our network, whether it's Southeast Asia, Middle East, Europe, not so much the U.S. today, but the rest of the world, yes. So it is an important market for us, not just in China for China, but in China for the rest of the network.

[Operator Instructions]

And your next question comes from the line of Tim Barrett from Deutsche Bank.

I had a couple of things left, please. Just going back to that refinancing balance sheet question. I guess what wasn't asked was the strategy behind the bond issue and your strategy. Clearly, a bigger business means more net debt. But I guess, why did you go so early on the refinancing? And does that mean there's just some dual running in the new guidance?

And then, second question, Continental Europe, we haven't talked about very much. It looks like you've lagged [ STR ] a little bit in Continental Europe. So I just wondered if you could give some color on your exposure there.

Yes. I'll take the refinancing question. Yes, we did refinance those bonds earlier this year. Now, that we do that in advance to derisk some of the payments as we go into 2027. We have done that as a practice for the past several years. We also look at kind of where EBITDA is and where we want to -- and the kind of leverage we want to maintain. And so we had really a great result, a great interest in the bonds and also pretty much a great timing. Our next bond comes due in May of 2027, which will obviously use the proceeds of the bond as we do that, the carrying cost in the short term is pretty narrow because you have the cash, of course.

And then, of course, as we go in, we use that next year to fund all the different things we talked about, including share buybacks and repaying expiring bonds as well. So yes, it puts us in a -- we're well placed. As we look at this year, we're heading to be in the low end of our net debt-to-EBITDA range. And then, as we get into 2027, we're in good shape as well. So I think we're -- we've done a good job there, and our balance sheet is really strong at this point.

Michael. On your question about Continental Europe. So look, we're very pleased with our performance in Continental Europe. I mean, RevPAR up in Q3 at 3.8% year-to-date at 3.7%, reflecting the strength of international inbound into Europe. I think you must be comparing -- you may be comparing our results to STR Europe data, which I believe includes Turkey. Now we did very well in Turkey. But for us, Turkey is in the Middle East. And so when we look at our Middle East results, which we said improved to broadly flat, we did very well in Turkey, which helped improve to broadly flat in the Middle East despite the GCC being down double digit, right? So yes, we benefited from a strong season there, but that counted somewhere else. But I think in like-for-like in Europe, we're very pleased with our performance and believe it's very competitive.

Your next question comes from the line of Simon LeChipre from Jefferies.

Two questions, please, on Middle East. First of all, we are hearing that many hotels are cutting rates in order to protect volumes. So how do you feel about...

Can you speak up more closely? We're not picking up everything you're saying.

Okay. Sorry, hopefully, that better now. We are hearing that many hotels in Middle East are cutting rates in order to protect volumes. So how do you feel about that? And what would be your thoughts in terms of potential recovery? How long it can take for RevPAR to recover to levels given rates being cut?

And secondly, just on the pipeline in Saudi, can you remind us of your exposure specifically to the country? I have 8% in mind, but if you can confirm or rectify. And given the recent attacks, do you see risk in terms of opening, but also in terms of signing of new projects for the coming quarters?

Okay. On -- I mean, firstly, -- the market, as we said, in the Middle East and the GCC, I think that's probably where you're most focused on. We said it was double-digit down in Q3. And given the recent escalations, probably could continue to be down until things get resolved, but it's very resilient. And I think the rates will just follow. When demand is down, you're going to see some hotels, and we don't set the rates for hotels, as you know, we make rate recommendations, but every property sets its own rates.

They're going to compete in the best way they can. But we're pleased with how our hotels are competing in the market. Actually, looking at our market share, our revenue index penetration index has been very strong in the region, and we're competing very well. But you're going to see it's dynamic pricing. They'll price appropriately to draw in more demand when demand is softer as it is now and price up when demand comes back. It's what they need to be doing to capture the share that they need within a certain market environment. So we think that the market is behaving rationally and economically at this point in the region.

Our pipeline in Saudi is something we're very proud of. We've been growing our business in Saudi. I think it will continue to grow. Of course, there are going to be probably some delays to some projects. We are not aware of any cancellations right now in the market. I'm going to be actually in the region later next week, meeting with partners. And we are interestingly still in serious conversations on many new projects, many new deals that we hope to be announcing and concluding soon. So it really hasn't come to a standstill as some people would think. It continues to grow. There could be some delays in some projects, but we're confident that all of our projects in Saudi and in the broader Middle East will open.

[Operator Instructions]

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

I have 3, if that's all right. Sorry to labor the point on EPS, but I see EPS of $5.79 in your company compiled consensus, which is already above 15% growth. So I just wanted to clarify when you say towards the top end of 12% to 15%, do you mean 16.5% Otherwise, it seems in line. Related to that, and I promise it's a more interesting question after that, related to that, on the net finance cost guidance for '27, as you correctly said in your prepared remarks, this is a feature of the model. This is what you do every year, literally for the last 3 years in exactly the same format. You give us a number for the buyback, but you also tell us how much the finance costs are going to increase.

The refinancing, if anything, has been exactly the same timing as in the previous 3 years. So I'm very curious what led you to do this ad hoc update in October because you usually wait for February and give us both parts of the equation at the same time. How big is the buyback, but also where are the finance costs going? Do you think it's a bit bigger than usually? Do you think consensus is a bit ahead of itself this year, for example?

And lastly, just in terms of the room openings, the brands that the group has been launching organically have had very good traction, started by your predecessor, but then more under the current team. If I take all of them together, about 1/3 of your openings are Garner, voco, Vignette, et cetera. They're less than 20% of your pipeline. And I know some of them are reliant on openings, so the pipeline may understate the growth potential. But yes, just curious if those can continue to ramp up. Some of them would look like they are starting to plateau, not the most recent ones, obviously. Do you need to launch more? Do you see new segments where you can fill the remaining gaps in your portfolio, please?

Yes. Thanks, Jaafar. I'll take the earnings per share question. Yes, the current consensus sits at $5.79. And what we've been consistently saying is that should tick up a bit as RevPAR gets funneled through all the models as most of consensus RevPAR is kind of below where we feel like the full year will come in, certainly as folks put that through their models and then we would expect EBIT to come down through that -- and we haven't indicated a very large increase in earnings per share, but that would -- that additional earnings that come through would flow through into earnings per share.

So -- and then, as we look at the timing of why we announced the additional interest expense, we probably were maybe a little late last year in doing that, and we have visibility of how that's going to come in. If we look at where consensus sits today, it's almost for '27, almost at the same rate as what you have for 2026, just a slight uptick. So we wanted to make sure that folks had that. There's nothing really other reasons or meaning behind that. As you said, we've been very consistent. We just wanted to give you that new number as we know it today.

A question about the growth of our conversion brands. And I think what you have to keep in mind is, first, they're all doing very well. And I went through the statistics earlier, so I won't belabor them, but they all have very strong pipelines. But what happens with many conversion brands and conversion deals is they come in and come out of the pipeline very quickly. I mean some -- not many, but some don't ever hit the pipeline because we sign them and they're in such a good condition, they'll open up in that quarter.

I think the Garner in Shanghai, the first Garner in Shanghai signed and opened in that quarter because they had just been opened as another brand. It just was a brand-new hotel really. And so it never hit the pipeline. So you will see the opening, but you don't see it in the pipeline, and therefore, you might get that impression that there's not enough in pipeline. But in general, many, many of them will open within the year. They will sign and open within the year. And so from beginning of year to end of the year, they won't be reflected in the pipeline at the end of the year, but you'll see the opening. But that's actually not a bug. That's a feature of conversion and collection brands is they're quicker to open, and therefore, you won't get the same much higher pipeline than openings feature, which you do with new build.

Now yes, it's nice about new build because you see the pipeline growing, but it takes more years for them to open and more years for the fees to come through. conversions are solving for a different issue, right, for properties that are in very good condition that can join IHG One Rewards without having to adapt completely to one of our hard brands to one of our much more prescriptive brands, but that can also open more quickly, require less investment and bring fees faster to us and performance quicker to the owner. So it is not sort of a distortion. It is more of a feature that you may not build up the same pipeline because they're opening up more quickly and not staying in the pipeline as long.

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

Well, thank you, everybody. Many thanks to everybody on the call and to remind you that our fourth quarter update and financial results for the 2026 financial year will be announced on Tuesday, 23rd of February 2027. Thank you all, and goodbye.

We will now begin the Q&A session, participants online.

[Operator Instructions]

I would like to remind all participants that this call is being recorded. I will now hand over to Elie Maalouf to introduce the Q&A session.

Hello. 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. this time this morning. It featured myself and Michael Glover, our Chief Financial Officer. We also released the latest episode of IHG Checks In On, featuring Heather Bosley, our Chief Commercial and Marketing Officer; and Joey Fleming, our Chief Product and Technology Officer. The episode provides a closer look at how we are leveraging artificial intelligence to get closer to the guests, transform the search and discovery process and further enhance the overall guest experience.

Before we open the line to take the first question, I will briefly summarize our strong performance in the first half of 2026. Our global RevPAR grew by 4.1% with growth across all 3 regions and underpinned by the breadth of our geographic footprint, the depth of our brands and the resilience of our operating model. We delivered gross system growth of 6.5% and net system growth of 5%, driven by record development activity with openings and signings both up 8% year-on-year on an organic basis. We expanded our fee margin by 120 basis points and grew EBIT by 10%. Adjusted earnings per share grew 13% and supported by our share buyback. In summary, we made excellent progress in the first half 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.

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

Three questions, please. You've obviously delivered very strong net system growth in China again. But also, we've seen some market, weak market data continuing through Q2 into Q3 on RevPAR. So could you talk a bit about why you think RevPAR slip back in China? And is there any risk that impact owner economics and annual net system growth going forward? Secondly, just a question on the sort of fee algorithm at the group level. Your helpful Slide 47 shows constant currency fee growth for the 3 regions combined at 5.2%, well below the sum of 4% constant currency RevPAR, and 5% available rooms.

And there's quite a few items on the slide, you're giving behind that. Could you please talk through those items and when you think that sort of regional fee algo sort of picks back up again? And then finally, just a sort of general industry question. Some of your U.S. peers had been reducing charge outs to help on the economics, somewhere under pressure to share credit card income. Now I know you're an early move a couple of years ago on your reward night reimbursement. Are you considering any future changes to charge out? And would that be system from P&L? Or would that be IHG P&L?

Thank you, Jamie. Let me start with China. So we were very pleased with our performance in China and our growth in China in the first half of the year. We had very strong RevPAR growth in the first quarter of 5.7%, as you noted, 8% in Q2. So for the half, it was 3.1%, which is very pleasing. If you recall, for a number of years, I've been saying that China would bottom out, and it did in the fourth quarter last year, and I think it's just turned up. We said it would not be sort of a vertical V-shape turn up, but it's been gradually turning up.

So what happened in the first quarter you had a very strong Chinese New Year that had additional days added to it. And then they also threw in -- the government threw in some new school holidays in the first quarter. So we think the combination of those hold some business, some travel, some leisure forward from Q2. We still printed the positive RevPAR in Q2. We're confident in the long-term potential in China. If you looked at it by tiers, Tier 1 and Tier 4 did very well. Tier 1 is major cities, and then you got Hong Kong and Taiwan, Tier 4 is leisure and resorts, and they did very well. Tier 2 and Tier 3 saw some softness in business transient, but that's not new. It's been going on for quite some time. And I think that Overall, China has been doing better. As you noted, we've had record development activity in China for a number of years now. And every year, we're hitting new records. I think this year will be another record of signings and openings. We have reached 900 hotels.

I believe we're going to reach 1,000 open hotels by the end of the year with roughly another $600 on our development, taking share in the marketplace. So why is that happening? Consistent. It's happening because you still have a large economy, $20-plus trillion, growing between 4% and 5%, not as much as it used to grow, but on a bigger base. You have record exports, different products that are exporting, it's EVs, batteries, technology. They are leaders now among the leaders in artificial intelligence. It's a different economy but still growing well. You have a middle class that's still growing. And importantly, while not every sector of the economy is doing very well, like the residential sector is still in a slow but certain turnaround, but it's slow. In the residential sector, travel is strong domestic trips are up, international inbound, now that China is a growing segment. And what you see is the travel among the sectors is still a favorite thing our occupancy continues to actually improve in the first half of the year after being flat during the negative RevPAR years.

So we don't see signs of oversupply. We're adding a strong level of new openings, but it's being absorbed in our system, and we actually saw some rate growth too across the full China business. So we're confident that the midterm to long-term China outlook is good. I mean look at the profit performance in China. It's up 25% year-on-year. So for us, China is not just a growing and large market. It's a profitable market and getting more profitable. Now on the fee algorithm, let me turn that over to Michael, and then I'll pick up on the industry question you had.

Jamie, thanks for the question. You might expect we'll have a similar answer to what we've had the past. The vast majority of the fee triangulation difference that you raised is really around the development activity and the record level of openings and the growth in system size that we've seen. Newly opened hotels typically take time to realize stabilized occupancy, room rate, overall hotel revenue. and most agreements have a graduated fee structure that steps up over the first few years of operation.

As a result, the full fee revenue contribution from recent opens openings is only partially reflected initially in builds over time as the hotels mature and fee structure step up. We said in the past that, that will begin to narrow with time. And actually, at the group level, you've actually seen about a 40 basis point improvement year-over-year in that fee triangulation. And in some markets like the U.S., you've seen 110 basis points of improvement year-over-year as that has happened. And we do believe that will to continue to improve. There's always some other noise in there. But really, that's what's driving that. And that's a good problem to have because we've been driving the system size growth. We want to continue to drive that growth. As it stabilizes, it will normalize. And I'll pass it back to Elie on owner economics.

Yes. Thank you, Michael. Look, this is our fifth year in a row of increasing net system size growth gradually with a focus on ease with fees with a focus on high-quality estate. And so we're building a sustainable model of higher net system size growth, and you can see it building. We'd rather have that going on and some lag in when those fees come in. But the good news is there are more fees coming -- we're not putting a ceiling on where our system growth would reach. But at some point, in theory, when we reach a cruising altitude and level off that cruising altitude, then the lag will -- the closing of the lag accelerate. But I'd rather continue our growth and have the lag catch up with us as more fees come in.

On your industry question, so I'm not going to comment on what others have said and done. I would first say to you, as you would know, Jamie, some things are read across as to other businesses. Some things are not. Let's not assume that everything is a read across. Let's not assume that every situation is different. We have a different distribution in the Americas and some competitors, different system fund arrangements. So we have a slightly different situation. Overall, I'd say not just in the Americas but globally, we have a very competitive owner value proposition and fee structure really designed to drive attractive returns for owners. And look, we are all aware that there have been cost pressures over the last couple of years across all industries, in our industry, too, and they've affected owner economics. And that's why we've been in front.

Starting in '24, you mentioned yourself, we lowered the loyalty assessments. We increased the reward night reimbursement rates. We reduced the cost of our Ignite program marketing program, all of which directly improved hotel level economics for owners. They're not theoretical. These improve the P&L at hotels by real basis points by real cash flow. On top of that, we've lowered the cost of our Fin B programs in our mainstream and our premium hotels. We've lower the cost of our new build prototypes or conversion packages now that we have more conversion brands. We broadened the categories offered by our procurement program to lower the cost across hotel construction and operations. And then today, in the SCA, you saw that we are -- we talked about a new commercial services program that we've been piloting in the Americas. I guess it's more on a pilot than 5 are hotels now, and it's expected broaden to the full region very soon. And it's been lowering -- it's going to lower the cost of that commercial services program, 75% of the participating hotels.

So we have a holistic approach to dealing on owner cost because book owner success is fundamental to our success. We can only be successful asset-light, if they're successfully asset heavy, we recognize it. We have an owner's association with representatives are elected by the owners with whom we discuss all these matters, get alignment and proceed with it. So I mean our relationship has been productive, constructive with owners, none of these improvements in costs that I mentioned earlier on our P&L. They're all within sort of the general system fund, looking to create value for owners. And look, where we are lowering the cost of these programs, it's not sort of just a straight discount. It's using the scale of our growing system fund, using the efficiencies that we're finding to new processes, technology, now artificial intelligence to create more efficiency from the greater scale. And as every good operator, sharing some of the efficiencies of that scale with your partners.

And so I think that I see benefits, but our owners have been benefiting from that scale. And I think we're in a pretty good place on it.

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

I've got 3 as well. Just on NUG, I see on your website, you've got consensus of 4.7%. Do you still see upside risk to that number given what's happening in the Middle East? And any risk from the Revo bankruptcy in Germany? And then secondly, also on NUG actually, Elie, you mentioned that the gap between RevPAR and NUG versus what you report on fee revenues or narrow as you hit the right as you hit cruising altitude of NUG. What's the achievable run rate here is mid-single digit the right run rate. So should it start to narrow in 2027?

And then very final question, just going back onto your owner relationships and what you were saying before. You mentioned not everything is read across. IHG obviously has the owners association. Just how differently does this position IHG in the market versus your peers?

Jaina, I'll take the first one. I'm sure Elie will come in on the next 2. You're right. Consensus does show NUG at 4.7%. And we wouldn't call any upside to that risk. We would call that opportunity. And so you may remember at the first quarter result, consensus was around 4.5%. And we said there was more opportunity to the upside than there was risk to the downside. And over time, consensus has moved up to 4.7%. And we've delivered 5% in the first half. And so as we look at it, we do feel like there's opportunity to do better than the 4.7% but it's in and about the right place, 1/10 of a point is only about 1,000 rooms on a system size of about a little over 1 million rooms. So we feel confident in where that is. And certainly, we wouldn't be expecting any number below that.

All right. Thank you, Michael. So your question was on when do we reach this cruising altitude and what does it do to the triangulation from there. So I think there are really 2 questions. I think there was actually one other aspect of your question that Michael didn't touch on the Revo bankruptcy. We have very little exposure to Revo. We're aware of when we have a few hotels with them. We have very little exposure to that. And so it's not going to be material fact.

Yes. Sorry, I should have mentioned we have 6 hotels, 820 rooms, and that's it. And so not really much exposure at all. Yes.

So on your second question. So first, we're very pleased that the fundamental health of our business is in great shape. Our signings are growing, our openings are growing, our RevPAR is growing. Our margin is growing, our operating profit, cash conversion, EPS the model is working. Takes a lot of hard work from the teams around the world. And it's a result really of the strategy that we presented to you in 2024 at the beginning, we talked about broadening the reach or brands, broadening our geographic reach, working on our cost working on our conversion, adding great technology and commercial platforms, all to make the model work even better for guests and for owners and for our shareholders, and it's working.

And so even in a time where you have some geopolitical conflict in the Middle East. The rest of the business is so diversified now. It can more than offset it and continue to grow, not just in earnings and profit but also in net system size growth. We're not putting a ceiling really on where we go in the system size growth. I think it's further clearly from where we are today, given the strength of our signings openings and the recognition that we're getting from owners the brands that we have either acquired and accelerated or we have launched an accelerated and you look at Garner. 3 years on, 220 hotels open pipeline, a dozen countries more than I would have ever imagined and more coming. And so noted collection.

We talked about it just a few months ago, 3 signings, actually the first 2 in the Middle East, despite everything going on there. So there's momentum there. And I don't know when we reach our cruising out there. I'm not eager to reach actable cruising gate because it just means that we've topped off. I just think there's more to go. And then the triangulation from there, well, is already narrowing, by the way, as Michael said, it narrowed 40 basis points year over 5 years. It will continue to narrow. But there will still be some lag as long as year-over-year, we're opening more than we did over the recent time. It does take especially in luxury lifestyle 2, 3 years to get to the full steady state revenues and steady-state fee schedule. So there will continue to be a lag even after you open the hotel, it's good. It just means that there are more fees coming from higher growth in the business.

Now on your last question, yes, we're all in the same industry, but we tend to be similar in some ways and different in others. So let me just give you a few ways where we're different than others. And then there are some things that were similar. Yes, we're all exposed to, say, inflation and interest rates. We're all exposed to macro events or that can happen. But then your distribution and the shape of your business matters. So in the Americas, for example, we are 85% of Essentials and Suites. That's Holiday Inn, Hon Express, our extensive state brands, Avito, 85% broadly distributed, not really concentrated in urban areas where you'll have higher union costs higher operating costs, higher taxes and really full-service hotels with higher just operating costs. So yes, we have some of those great properties, but we're 85% Essentials and Suite, which makes us different from others. I'm not saying there's anything wrong with their shape, but we just have a different shape, which over time has served us well. Now we're growing more in luxury and lifestyle, but on a huge base of Essentials and suites. So that's one difference.

Another difference is that we're much more indexed to industrial businesses in the heartland, much more industry energy to manufacturing to construction to technology than we are, say, to professional services, which again has other -- nothing wrong with those segments, but we're less indexed to that. We're more to traditional industries and manufacturing construction, which is actually having a pretty good moment now. So that's another difference. I'm not sure who of our peers have owner associations or don't. I wouldn't know. I know we do, and it's a very constructive relationship. I used to sit on the Board of that as our representative. Julian, my successor in America, does that now. And we have a constructive and we don't always agree on everything, but we find constructive outcomes, always in the interest of the health of the system and the health of our franchisees and owners.

So we have that dialogue and it works well for us. And there are other things that make each company different from the other. So just because we're in the same geography, doesn't mean that everything affects us in a similar way. Jaina, thank you for your questions, and we're ready for the next one.

Your next question comes from the line of Leo Carrington from Citi.

I have 3. Firstly, on RevPAR, I mean the growth has been primarily rate driven, probably also if you excluded the World Cup effect in the U.S. too. I mean how do you frame the ADR growth in the first half of the year? Is it pricing power? Is it yield management, really interested in how you see it? And secondly, on residences. As noted, I heard in the -- in your presentation, we're expecting the fee growth to be more substantial in '27 and beyond, I think. Can you just give us some color on the pipeline visibility for '27 and how material this ancillary fee can become?

And then lastly, on key money, I think it was broadly stable or even down year-over-year. is broadly stable, the outlook despite what I think is a little mix shift towards luxury and lifestyle in the pipeline.

So look, we're pleased with our RevPAR growth of 4.1% in the first half of the year, and it was broadly based. Every region grew RevPAR, every brand RevPAR, every segment grew RevPAR, so it was actually more balanced than in previous times. And so we're actually pleased to see some occupancy growth return. There are a lot of questions in the past from some participants about -- is it only going to be rate growth? Well, yes, we saw a healthy rate growth. We also saw a healthy occupancy growth on pretty high levels. So every region had occupancy growth and every region had rate growth.

So I think that in the long term, typically, the majority, not all, but the majority of RevPAR growth comes from ADR anyway, and this distribution that we saw in the first half is probably similar to historic distributions of overall RevPAR growth plus or minus a few basis points. And what's that down to? Look, the World Cup was we're saying it's going to be a 40 basis point factor in the whole year. So it's not the biggest mover, and we never talked about in the beginning of the year as being a big mover, and we're not saying it is now. It was great. I had a lot of fun. I went to match. I watch as many games I could. I think it was a great commercial success. I've met all of our expectations. But it's not the fundamental driver.

The fundamental driver are really 2 things: One, strong fundamentals in the markets where we operate, very strong fundamentals in the U.S. recovering industry in China, great attraction to people traveling into Europe. I mean just inbound to Europe is up again, expected to be up 5% from the U.S. this year, high spending and all that, as we said, more than offset the impact in the Middle East. That's one key thing. The second thing to take advantage of the strong fundamentals is a strong enterprise at IHG. Our brands are doing well. We've been really taking care of our brands, stronger cut through marketing, our loyalty program now 160 million people, greater room nights penetration. We said we had 67% room night penetration around the world, 73% in the U.S. We're right there in the leadership -- among the leadership of the industry now in penetration. That drives better RevPAR guys better economics, also at the bottom line for owners yes, in our commercial and technology systems, we think, are as good as they get. It's a global sales force that's driving groups and meetings and events you saw our group's business doing well and meeting and events doing well. And that's really something we're investing a lot in.

Our technology platforms, not just our revenue management system that we've put in place now 18 months across the whole estate, but are the new -- we have our new POS system PMS system in 2,000 hotels planning to be in 4,000 hotels. Our marketing programs are becoming a lot more efficient with AI, cheaper to produce, faster turnover, more marketing per dollar, more effectiveness per dollar. Our owner support is stronger. Our procurement service or owners are stronger. Our total value propositions for owners is stronger, which is translating in more signings and more openings, greater share of conversions. We're taking a strong share of conversions, which means owners are preferring our system, our platform to others. And so in a very competitive industry. So it's just not one thing that is driving the healthy RevPAR. It's -- yes, good fundamentals. I mean benefit like everybody else does in the industry. But then within that, we're taking share by having a strong enterprise across multiple fronts.

Residences, it's a small part of our business today, but it's a growing part of our businesses. When I was I've -- I think I said -- I don't know if I told you I've been to the Middle East twice already since the beginning of the year. We're already in conversations with owners there for more projects despite the conflict, our residences here at the successes in London are almost, I think, all saw that, but for 1 unit, if any one of you are interested, we can send you to the right people. And so we think that in 2027, some of these projects are already under construction today go into sales mode. And so from there, you anticipate more fees coming in, it will still be early, but it's a multiyear build up to what we think is going to be a material business in our total diversification of our fee streams.

I just would add on to that. We've got 35 hotels or branded residents open and selling around the world in 19 different countries and even more in early stages a double element as Elie talked about. There are some in the Middle East that could cause some delays or slower sales momentum. But we feel like that's going to normalize over time. But we've got projects across Southeast Asia, Europe and the U.S. that are progressing very, very well. We did talk about a full year result that we were somewhere in the $5 million to $10 million range last year.

And we've been saying that, that could be multitudes of what it was then. And that is still how we believe and can get and be substantial in 2017 and beyond. I'll move into key money there. Yes, our key money was down slightly in the first half. I don't think there's anything systemic or anything that I would call out specific around that. And we continue to say that we'll be -- our key money and maintenance capital will be in the $200 million to $250 million range. We see no reason to change that right now. We did have the big step up a couple of years ago, certainly, as we moved into luxury and lifestyle. That continues to be case. But we're good at the $200 million to $250 million range as we've laid out.

And I just want to add to sort of combining your last 2 questions. The reason residences has really opened up as a new business line and fee opportunity for us is because of the strength of our luxury and lifestyle business is because of the strength of our ultra luxury in region and in Six Senses. So these things kind of build on each other. It's never really one thing, but part of our strategy to go further and lager and lifestyle was to open up not just our loyalty opportunity and our co-brand opportunity, but to open up residences in addition to in of itself, the great business case of higher fees per key and luxury and lifestyle, but there are incremental lateral benefits that come with in residence is 1 of them. Thank you, Leo. We can go on to the next question.

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

Maybe we come back to Estelle if somehow her audio isn't working. We'd love to hear from you.

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

I guess, a few follow-ups from what we've been asked so far. So just on the key man point, I guess another theme of Q2 earnings has been a sort of step up in key requirements to grow mid-scale conversion brands. Have you seen any of that trend for Ghana in the U.S. that you're being asked for key money a little bit more regularly? Secondly, very really very strong unit growth. I think the only one of the other -- the major hotel groups, maybe where the pipeline is growing a little bit slower then the unit growth looks like a couple of fairly meaty terminations InterContinental and Crowne Plaza in the first half? Just anything to call out are those sort of Middle East projects that have been perpetually delayed?

And then just you called an important development to this new commercial delivery model. Just anything you can give us around what is the scale of that? How much money are you saving for owners? What exactly is that? What are those additional specialized commercial services that owners are buying? And what changes have you actually made on that front?

Thank you, Richard. Just to your first question, no, we are not seeing -- we're not seeing more key money or really key money at all for Garner. I mean in mainstream, if there ever is key money for us, it's where it's say, an urban property that's in a high bare to entry, much higher RevPAR. So it's kind of working like a premium to not full service, but a premium property at that point. But -- but no, I mean Garner is growing very well in the Americas, growing now in another dozen countries. Very pleased with this pace.

And we've done it thoughtfully also by maintaining a very high-quality estate, but really key money to speak of there. I think we mentioned in one of the scripts that we actually have signed our first -- we actually opened the first Garners in Japan last year, and now we have another portfolio of which 12 are going to be Garners in Kyoto. That's a really high-value market. I mean it's very exciting to go in with such a distribution into quota. So now on that. And I think we're -- we're about in the right place on key money, continue to grow our system and staying efficient and capital-light and asset light. On the pipeline, look, the biggest reason the pipeline did not grow as much it could have is because of record openings. I mean you had 52% openings in China. And that was -- it was really strong openings. And so I think that's really the main reason. It's -- we're not seeing any out of the ordinary exits in the Middle East whatsoever. And there might be a delay of some of the projects per quarter or 2, not that we've registered that yet. Certainly, we haven't heard of any cancellations. Keep in mind, our pipeline in the Middle East, 90% of it is in Kingdom of Saudi Arabia, Egypt and Turkey.

We do have some of it, of course, in UAE very little in the other countries, but 90% in KSA, Egypt and Turkey, which are far less affected it in the front line of where the conflict is today. So we feel pretty good about our pipeline there. Commercial Services. So today, not just America, but globally, but starting in Americas, we have, in addition to the commercial benefits that our owners get as part of their franchise or management agreement. We have premium commercial services program that offers field marketing, digital support, web support additional training group efforts, just a whole menu of things, web design on and on a whole menu of things that hotels sometimes choose to outsource or leave with us, and we're happy to do it.

We have use technology, efficiencies, new processes. We spent over a year redesigning this to provide an even deeper and greater package of support at a lower cost, and we rolled this out. in this year to 500 hotels. It's performing very well, saving the hotel is money. We'll come back with some statistics but there's also confidentiality and competitive advantage that we want to maintain. Everybody is working hard to make sure their owner offer is the best out there. We think ours is, but we're going to not give anybody any clues on how to make this better. But it is a material benefit because it's one of the things that we don't just develop this thing in isolation. We work with owners every time we develop something like this. They tell us what they're looking for. We respond.

They tell us what a meaningful savings a benefit would be, and we respond and work in collaboration today. So it's material for them. Thank you, Richard. Let's go to next question. Maybe Estelle is back.

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

Everyone can you hear me?

Yes, we got you.

Okay. Great. do know what happened. I've got 3 questions, please. The first one on current trading. You did speak about China. I wanted to ask on EMEA as well, how do you think H2 evolve in the Middle East with what we know now? Second question, it looks like business was comparatively weaker in Q2. Is there anything to flag, I guess, group remains strong, leisure got better. It could be partly held by the World Cup, but business seems to have decelerated overall and the last 1 on cash. Any phasing to be aware of? I mean, H1 was quite solid. -- and you're now targeting the lower end of the range for interest expense and a slightly lower tax rate. Does it mean cash conversion this year should be better than initially anticipated, perhaps.

Okay. I'll take the first question on EMEA trading and hand it over to Michael about our segment's business leisure growth by region, which I think we're all -- we're pleased in general about. We know that there's an impact in the Middle East, but other than that, it's been a pretty good trend. And I'll leave cash conversion, Michael, too. So we're not making projections and of course, we don't give guidance and it's not easy to project trading in an area with conflicts and some tensions. But I think the general sense is a few things.

First, that we're past the peak of the conflict, which was March, April. I mean there's not a sense whether when you're there, and I've been there twice meeting with our teams, meeting owners, investors, government officials, a whole range of people and, of course, observing from here and from the U.S. is not a sense that we're going to go back to that level of conflict. So since the conflict peak has subsided, we've seen a recovery, not a B ship because we've seen a recovery on a rolling monthly basis. And if things kind of stay where they are today, where there's tension but no hot, hot conflict as March and April as it was then, I think you're going to continue to see that gradual recovery and occupancy. You're going to continue to see a lot of domestic business as we saw the station, the domestic business picking up and more flights coming in, more people transiting through and more people traveling there.

Actually, I mean, when you're on the ground there, stale, I was in Doha, I was in Dubai. It feels very normal. I mean you don't feel like there's a conflict going on whatsoever people don't talk about, people go out their business, go to office, go to work or shopping, go here, go there are fewer people moving around in airports but the airports are still pretty busy, I feltActel, but it's probably -- probably is definitely lower than the peak, but it's recovering. And frankly, the airfares are pretty attractive to drop people through. So I think that in a scenario where things kind of stay where they are today, which, frankly, for the Middle East is not uncommon. I'm from the region sort of dealing with tension and conflict is not a new thing. So if they kind of stay where they are today for some time, say, for the rest of the year, I think we'll continue a gradual recovery, and we believe that we can fully offset any impact that comes from that environment through the end of the year and beyond.

Now yes, it will give us probably good comps next year when we get to Q2. But setting that aside, we actually do hope that there's a clear and near-term resolution to the conflict. But even if there isn't it stays like this for a while, we do think there's a gradual recovery. It's a very resilient region, very resilient people, courageous people. They're not sitting still. We talked about new deals, new projects, new signings, opportunities when I was there, there wasn't a sense of pulling back among a broad range of players in the marketplace. That's Middle East. Over to you, Michael.

Sure. As we look at the demand drivers, Estelle, I mean, it was very pleasing to see that actually all 3 of the demand drivers were up globally in terms of the first half. And so business was up 2% and ledger up 3% and groups up 6%. And even in EMEAA, with all the conflict and noise, you saw all 3 demand drivers up in the half. And as you go to the U.S., at least talked a bit about China, business was up 3%, leisure up 4% and groups up 10%. So we're seeing strong growth across really all those demand drivers. And it goes back to -- it's not just all related to the World Cup. The World Cup we said in the quarter was about 100 basis points of impact in the U.S.

And so when you look at what's going on in the U.S., actually, underlying is pretty strong growth. You still have the unemployment levels at all-time highs. The economy is still growing. Wages are generally keeping up with inflation and consumers are still spending. And to the business side, corporate profits are still strong, and there's a lot of -- I mean, significant levels of private investment going into the economy in building. And that's not just around AI, that's energy, manufacturing, chips, pharmaceuticals. And so all of that really creates an environment where we see business demand continuing to be strong as we go forward in the U.S. So we feel good about where we sit in terms of all of our demand drivers

I remember that group is probably half business and half leisure. So maybe business meetings, business conferences, business get together. So that is business travel. Maybe at a different time, but still business travel and actually may be more profitable for our hotels because you get F&B and you get bank when you get a catering with it, and it tends to be longer stays.

And our cash conversion on your final question has been really strong into the first half. If you look at it on a trailing 12 months, we're over 100%. As we look into the full year, we still think it will be around 100% cash conversion. So we feel really good about that. No change to kind of our model and what we would say there. And so really, really pleased on how we can move and bring in that cash.

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

Great. Probably 3 for me as well. Elie, you talk about keys with fees. And just if you can give some color in terms of U.S. military contracts, how competitive it is to win such a contract, how the economics look potentially any other conversations just to give some color there. Secondly, obviously, you continue to do really well in terms of fee margin improvement of $100 to 150. I mean Americas is getting close to 85% now. I mean how much longer -- do you think you can actually drive this when you look over the next 3 to 5 years?

Is that going to continue to go on upwards? And then you've spoken a lot about owners this morning. But just interested to get your thoughts on how much AI can take out costs for your owners. I mean, a competitor was kind of hinting at double-digit reduction in cost rates. Did you have any views on that?

All right. I'll take the first and last question. leave the fee margin improvement in the Americas to Michael. But I'll say we've been getting that question for as long as I remember, and we keep making improvements. So I hope we keep getting that question because we're making improvements in the Americas margin. So look, in terms of the Air Force deal, -- we're in advanced negotiations to conclude that agreement, which I have high confidence will get signed. We've been the lodging partner along with Sentinel for the U.S. Army on their U.S. basis for over a dozen years now and a very successful arrangement that's brought high-quality branded lodging to the U.S. Army men and women and to their visitors on base.

In general, the economics are similar, not the same sort of configuration, but they end up being the similar in terms of net fees per key a typical off-base franchise. Just a different structure because the demand drivers are different and how they can for things are different. But it's a good business, let me put it this way. We don't disclose the economics -- it's a very good business. It's totally asset-light for us. Sentinel as a development company. They will do the development and the ownership. We will do the management. There's no key money involved and they're very long agreements. And so we're actually very proud that have been selected. It was a very competitive process with the best in the industry competing and not just on economics. I think economics was one, but not the primary aspect, not the primary factor. It's your track record, your capabilities, the strength of your brand, the strength of your platforms, your technology, your service, your reputation.,your hotel opening and support structures to get all these conversions and new builds done, it's a very wide range of factors that get assessed over multiple months and serious due diligence.

And so I think it's actually an assessment, an external assessment a very disciplined actor of the strength of our enterprise and of our capabilities. And I'm very pleased with the team effort that we made to get there. Are there other opportunities? I guess you can just kind of do the do the math yourself, there are 3 main services in the U.S. military, the Air Force, the Army, and then maybe the Marines kind of follow the Navy in lodging. So I'm not going to make any predictions, but there is one more. These things are very long term. We're going to be very busy with the Air Force project for a number of years. And the good thing is yes, a positive sign for the strength of our business in the Americas and overall, but it's also further underpins our confidence in growing the system size growth and fees, let me underline.

So on AI hotel cost reduction, as we said in the presentations today, our artificial intelligence strategy and priorities are focused in 3 areas: one, guest acquisition. Number two, hotel performance and number three, corporate efficiency and effectiveness. So your question is really around hotel performance, and we work hard to use artificial intelligence to improve the hotel performance on multiple fronts. First, the top line. We always have to start with the top line because that's really the strongest driver of hotel profitability. And that's why our commercial systems, our new revenue management systems, our loyalty, our marketing, all of which are being infused with AI today. The new content manager system that is going out this year that you heard about overall here about if you listened to the check-in episode is AI driven.

Our new CRM system is AI driven. The trip planning that we just announced a conversational search on our website and app. So you can use natural language to specify and design and customize your trip and your experience with IHG is helping the top line. Yes, we're using AI to help your middle line, your cost. And so that will work across the full P&L. There's more to come. We're not going to attach a percentage to it. Frankly, I would say it's too way too early for anybody in the industry to put a percentage on what it could be because it's an evolving technology. And when you start to get to the middle of the P&L in operations, there is a lot of -- there are a lot of things that aren't common across regions, across brands, across jurisdictions, but there's definitely an opportunity. In the end, I would say that we -- all of this is really their designed to help owners be more effective and more profitable, which goes to the whole owner economic conversation we started earlier today.

I'll pick up on fee margin, if you want, Elie. Before I do that, I just want to make sure I clarify on my answer to Estelle, I might have said record levels of unemployment. I really meant record levels of employment. Just to be clear there, it's a big difference, but I want to make sure that, that was taken the right way. In terms of fee margin and how far this can go. I mean, if you look at where we've said you've actually seen Americas continue to grow their fee margin, EMEAA and Greater China saw really strong growth of fee margin. We put it in the medium- to long-term algorithm because we do believe there is further growth in that fee margin, and I think you got to go back to the fundamentals of this business and what's great about our unit growth is we can add those units without adding cost.

And you may go back to the slide I showed what we call it the jaw slide, where revenue is growing and costs are basically remaining pretty low or muted. And that is what we can do as a business. And so I think over the medium to long term, we can continue to still grow that 100 to 150 basis points of margin. And really, we wouldn't put a time limit on it at this point. So there's still lots of opportunity to continue to move forward.

Your next question comes from the line of Kate Xiao from Bank of America.

I've got two. The first one, in terms of your portfolio, specifically in China. One of your peers recently talked about kind of pressure of heightened removals, especially in lower chain scale brands in China. Just wondering -- obviously, we don't see that in your numbers, but just wondering whether you're seeing similar dynamics in recent periods. The second question is a follow-up on owner service programs. I was just wondering whether you currently would provide services such as, I don't know, IT, software, procurement to nonowners, like independent hotels that's not in your system. Do you think that could be a fee revenue stream for the group?

Thank you, Kate. So in China, I think this is one of those questions in circumstances, goes back to a comment made earlier that some things are read across and some things are not because businesses have different shapes, different situations that may create idiosyncratic particular circumstances upside or downside that aren't necessarily translatable to others. So in China, we've built a fully controlled IC business with no partners or JVs or master franchisees.

Not saying that's the bad thing or good we're saying it just isn't what we think has worked for us or will work for us. And I think that has made sure that we have a high-quality estate, very close relationships with the owners where we are the direct participant with owners and partner strong governance over the quality of our hotels. We don't say yes to all deals. I mean, as incredible as may sound, the 12% of system size growth could be even more if we told our teams to sign the maximum number of deals. No, we want to sign the right number of deals, with the right fees per key in markets where we think the hotel will perform. And I'm not saying everybody does that. I don't know what they do. But if they're not doing that, they may expose them to heighten removals over time, we want to keep the right balance of growing thoughtfully, sustainably with the right fees per key, with the right performance in hotels and right economics to the owners because, look, we all know that when the hotel economics don't work eventually it's not a good situation for either of us.

And so we are -- having been in the business a long time, we have learned from that. We do have removals that happen in China. We talk about that being mostly today besides sort of the organic healthy rejuvenation of the estate. Some of that has been driven by post-covid properties that aren't really suited for the industry anymore, but that's been attenuating and then leveling off. that, we don't see anything unusual in the industry, and we're confident in the continued growth of our system in China and the health of it too.

So your second question is pretty short answer. No, we would not make our services available a la carte to anybody as a non-owner in our system. If you think about it, we, first of all, invest a lot to build the strength of our brands, the strength of our platforms, our relationships, the quality of our products, the strength of our marketing and then the owners through the contribution that makes to the system fund are investing to build other resources. And so those are things that belong to the 2 of us. And we that strength is something we share in common and people would love to rent the power by Sean Rewards. They'd love to rent, the power of some of our technology. But we're not a consulting firm or a services firm. We're a branded hospitality firm and franchise and managed with direct relationships with our owners and our services are specific and only for them.

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

I think going back to a couple of the points we've gone on already. So just on key money, it's been one of those topics, obviously, big in the industry, and there's been a bit of sort of drift on what hotel has been willing to tell us that's happening there. Marriott, I think for the first time of any admitted that half of that key money this year was going to existing contracts and also a lot more was going to mid-scale. Could you just talk that? I mean, I know you've talked about things that are read across as an on read across us, but the key money trend for all the hotels has been very, very similar over the last few years. So whether there's a risk that's contagion of that into the sort of rest of the competing hotels.

Then just on to the fee growth dilution. My understanding of the comments you've made, even in answers to me in previous quarters about the timing. But on -- in the U.S. specifically, your [indiscernible] has been decelerating but there is still a material gap hundreds of basis points between your fee revenue growth and your NUG RevPAR, even if I take sort of at reported RevPAR. So I'm struggling to reconcile why the acceleration in growth would be a factor in the U.S. because that's not what the rework is doing. And then the third one is just in terms of loyalty points. One of the issues in the Marriott owned letter, which has kind of raised the most concern was the point that they made about kind of forced member sign-ups on premise and then very poor economics on loyalty night sales.

And obviously, that might be specific. But you, a couple of years ago, took loyalty point sales out of the system fund or out of your group and for the month of the P&L. Has there been any pushback to that? Has there been any questions on the balance of economics? Or could you just give us a bit of detail on how the economics of loyalty nights work in terms of the split of it between yourself and the owners because obviously Marriott has faced a lot of questions on that.

Thank you, Alex. So as Michael said, our key money is stable this year. Our total capital guidance is stable. Our asset-light business model and algorithm is working, and we don't see any thing to alter that at the moment. we're very competitive, but we compete hard for the deals that we think are accretive to us, and we don't go after every single deal, too, which is the responsible thing to do. We have not disclosed what is the share of -- I think what you're trying -- what you're getting to is share of retention, key money versus completely new project key money, whether conversion or new build. But that bumps around. It's not going in a particular direction for us. And so we don't see a trend there for us.

It's not a number we're disclosing, but we don't see a trend. And we don't know what other competitors have chosen to say and for what reason at what point, that's for them to explain. But we don't think we see a trend between retention and new project. I would observe that our retention is getting better, as you see our removals reducing gradually overtime as I said we would, as a percentage of the estate. And while very focused on keeping the high quality estate. I mean it's not retention cost. We want to keep a high-quality estate, but you've seen our openings and signings go up. So we're more on offense I would say, we've been more and more, and increasingly on offense here, and that's where more of our resources and attention are going. And we're not seeing more going to midscale.

As I said earlier on the call, there are some projects that are urban high barrier to entry or end up being like in a great resort destination, but it's a Holiday Inn Express or it's a Holiday Inn an amazing locations can have a high RevPAR, that will have some level of incentive in it in many cases. But it's not a broad trend, and it's not indifferent than it used to be. There's like this when I joined 12 years ago. It's like this today. The numbers, of course, are different. RevPAR is higher. Costs are higher, everything is different. But on a percentage basis, proportionately the same. I'll let Michael talk about the Americas margin and triangulation.

I would just say one thing. It is not correct that our Americas and system size growth is not growing shrink. It's actually the opposite. If you go to this year, our year on year and year-to-date, that Systems growth Americas is higher than last year. It's not lower, it's higher. I just want to establish that factually first and turn it over to Michael for the rest of that, and I'll pick up on loyalty points, et cetera.

Yes, Alex, just to give you kind of the numbers there. If you look back at the half year 2025, we were at -- in the Americas, we were at 0.1% year-over-year system growth and today, this year, we're at 1.8%. And so you've seen a number -- you've seen that there is some acceleration there. Actually, if we go all the way back to full year '23, we were at 0.8% and then in '24, we were at 1.6 % in '25. We ended up at 1.6% again. We've done 1.8 % this first half. So it is accelerating. It is still going. I would also maybe also remind you that we did talk about some of the large exits that we had in last year as well.

You may have remember, we talked about a few hotels that exited in 25 that were large fee-paying hotels. And we do have some replacements coming in for those. They just haven't fully opened and fully ramped yet. So that will come back over time. But more importantly, if you look at the number and how it's improved and narrowed, it's improved by 110 basis points year-over-year. So we feel like we're on the right track in the Americas in doing that and accelerating that growth. Again, this is a good thing. Like I said, there's always some bits and noise in there, but we're definitely on the right track.

Yes. I mean the -- the net system as growth in America is ramping up. The triangulation is narrowing. And we're opening up more in luxury lifestyle, which is a positive thing, while still growing very strong in mainstream and everyday brands. On loyalty, I mean, there's a lot in your question, and we can talk a long time about that. We feel like we're in a very good place on the loyalty program on the owner economics. We redesigned it about 3 years ago, working with our own association to agree with them what do we think is an attractive offer for guests today, but also attractive economics for owners today.

And I'll tell you that almost invariably, what I hear more from our owners isn't that they think the loyalty plan doesn't work for them is they want more loyalty guests. They want more loyalty guests. When we, 5 years ago, we were at 50 or below room nights contribution around the world. What our owners wanted most I'm telling you about our IHG owners as they want us to be higher in loyalty contribution, not lower and they wanted a stronger loyalty plan. And that's what we've done over the last 5 years now. You fast forward 5 years, we're at 67% loyalty contribution 73% in the U.S. and overwhelming here from [indiscernible] , that's something they're proud or they're pleased with. And they're part of that. So you talked about sign-ups at the property. That's the only form of sign-up increasingly sign-ups sign-ups are digital or digital, but people at the front desk are proud of the brand they work for, are proud of representing IHG Hotels& Resorts. There are incentives for them to do it. It's not mandatory. It's something that they do voluntarily and they do with pride. And so that's just natural. It's been in the industry all the time. So I don't think we have any pushback on that.

We're not 160 million members around the world. Reward night penetration is up. Milestone usage is up. Engagement is up. and the contribution to our hotels is up, and that's really what our owners really wanted us to do. So I think that we have a program that we feel is working, not just for the guests, but for the owners and for IHG too. But it has to work for everybody at once, and it's taken the collaboration that we have to fine-tune it. Now it's different probably, and we don't sit in and have all the detail in everybody's programs, but it's probably different than the programs of others and everyone can design their program to suit their needs.

Maybe just coming back to the fee growth. Obviously, H1 had accelerated. But I guess my question ties to the longer trend. So in FY '25, you're again the U.S. is 0.2, but the gap widened to 310 basis points in terms of the shortfall of revenue growth. I'm just trying to triangulate that was a year where not decelerated and the gap widened, it's kind of go back the other way, which we wouldn't expect this because it's accelerated, so I thought it might widen and it widened last year. So I'm just trying to put the 2 together with the answer you gave.

Yes. I don't think we're seeing what you're seeing, I don't think we're seeing what you're seeing. And we're confident going forward, our triangulation is improving, but are [indiscernible] increasing, and we might need to have our team follow up with you on those figures to make sure that we look at it the same way you're looking at it, but we're not seeing what you're seeing. But we'll follow up just to make sure that any questions you have. Thank you, Alex, for your questions.

There are no further questions. I will now hand over to management for closing remarks.

Well, thank you, everyone. It's just been great to connect with you today. We are very proud of what our teams have accomplished in the first half of 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 22nd of October. Thank you for your time and interest in IHG, and I look forward to catching up with you soon.

Let's push on to earnings. IHG Hotels & Resorts said that the trading in the U.S. accelerated in the second quarter as it confirmed its outlook for the year. It comes as the company reported revenues of just over $2.6 billion for the first half of the year. I'm pleased to say Elie Maalouf has joined us, the CEO of IHG Hotels & Resorts. Elie, thank you so much for joining us. Great to have you back on board.

As we just wake over the trading that you've seen in the latest period in the second quarter, the line here was trading has accelerated in the United States. You just want to unpick that for us. How has trading been across the portfolio?

Yes. Karen, it's good to be with you. Look, as you mentioned, we had a very good first half of the year. Our RevPAR was up 4%. We had 10% growth in EBIT, 13% growth in earnings per share, and we confirmed our outlook for the year. We feel good about the rest of the year and really beyond. The United States was a standout, not just because of the World Cup, but actually because of the underlying fundamentals of the economy. Your callers earlier were talking about strong investment in infrastructure and AI and data centers, that's hundreds of billions of dollars, but it's really broader than that. It's manufacturing, it's energy, it's pharma. It's all the reshoring that's coming into the country. So we think it's pretty broad-based. You still have pretty high employment levels, wage growth, GDP growing at 2%. Consumers are still spending, especially on experiences, and that's the industry we're really in. So we feel good about the United States continuing to grow. We saw positive growth in China. We saw Asia Pacific do really well. Europe do really well. And all that really helped make up for some disruption in the Middle East, which is only 5% of our business. But the rest of the 95% of our business did really well, and we had a very good first half.

Elie, I want to touch on the Middle East because you've also brought it up. You mentioned 5% of the system, but almost 20% when it comes to the EMEAA portfolio. When we talk about the situation there, what are you seeing on RevPAR? Are you seeing that there's still very weak demand for some of these higher-end hotels?

Karen, I've been to the Middle East twice since the beginning of the conflict. I'm going back at least one more time before the end of the year, maybe more. When you're on the ground there, you see a sense of normality, things starting to get back to recover. We see it in our numbers. I think we're certainly past the peak of the conflict in March and April. And since then, it's been gradually improving. We think that continues. That's a very resilient region. People are very optimistic, and we're confident that when the conflict subsides, we're going to continue to momentum. But we continue to see improvement in the Middle East. That's 5% of our business. The rest of the 95% of the business did really well. We said in our statement today that we're confident that we can fully offset any impact if it continues in the Middle East for the rest of the year.

Elie, let's get to some of those growth areas because we spent some time together, the new Six Senses hotel that you launched. You showed me around the property. It was incredible. And it was a new move into some of the high-end urban estates. Let me just ask you about how that's going because you've had a record 443 hotel openings last year, so a very large pipeline coming through. What demand are you seeing in these new properties, the likes of Six Senses and more?

We're seeing very strong demand around the world. And Karen, it's part of really people's strong preference for experiences over goods. People that are rising in well-being, rising in wealth, retiring, doing well in their careers around the world, the growing middle class, they want to spend more on experiences they want to spend on goods. And we're at the heart of the experience economy. Last year, we opened over 440 hotels. Just in the first half of the year, we opened nearly 200. We signed another two new hotels into our pipeline a day, just about.

In Luxury Lifestyle, of course, we've done very well. It's about 13% of our system worldwide. It's 21% of our pipeline. So there's 50% growth. But we're still growing very well in everyday mainstream brands around the world, whether it's Holiday Inn, Holiday Inn Express. Every single one of our brands in the first half had growth, had RevPAR growth. And the 200 hotels that we opened around the world, we're still across all of our brands and our 21 brands in the portfolio. So travel demand was still very resilient in the first half of the year.

It's Ben joining the conversation here. I note from the commentary, you say there are ongoing impacts from the Middle East conflict, unsurprising there. We continue to expect these to be fully offset by growth in demand elsewhere, you said. I wonder, do we take that to mean that your strategy going forward is to pull back from the Middle East permanently and long term and really shift your focus to these other markets where you are seeing growth and things are more stable?

Ben, we're very confident that when the conflict subsides, we'll return to growth in the Middle East. We actually still signed quite a number of new hotels in the Middle East in the first half. We opened quite a number of new hotels. When I was there, I met with investors, with owners, with our team, with government officials. They're all optimistic. They continue to invest. We talked about a series of new exciting projects. So we're still very confident in the Middle East. We've been there over 60 years. We plan to be there for the long term. What I'm just saying is we're very broadly distributed.

Our strategy is to be very distributed, very diversified globally in 100 countries, very diversified by brand in 21 brands from ultra-luxury to everyday mainstream brands, very diversified by customer segment from business to leisure to group. So that's by strategy, by design. So whenever there's a disruption somewhere in the world, we usually make it up with the strength of the rest of the business. And that's what happened in the first half of the year, and that's what we think will continue in the second half. We're fully committed to the Middle East and to all the other regions we participate in, in the world.

Elie, it's impossible these days to conduct an interview without a reference to artificial intelligence. Lots of businesses are looking at it as ways to improve their margins or improve efficiency. I just wonder what ways IHG is using this technology? And can you give our viewers an assurance that AI won't be used by IHG to sort of add to the suspicions people have around dynamic pricing in order to effectively work out where people have a need for hotels and no other choice and they end up paying more because of the calculations this technology can give you.

I'd say, first of all, Ben, we're a people business driven by people to create real live experiences for people. We do use technology very well to help our people make better decisions, do their jobs better, meet the responsibilities and demands of guests and produce great returns for our owners. Artificial intelligence is one of the ways that we use technology. It's not the only way. We use it to reach out to our guests and customize their experience better. Just this first half of the year, we introduced conversational search on our app and our website, so they could use natural language search to have a conversation and find the right destination, the right experience, the right surroundings for what they want to do.

We use it to help our hotels operate better, be more successful. And we use it to be more efficient in our corporation to drive more productivity, to be more efficient. So it's really about making people more productive, making people have better experiences. We've been using all forms of technology, including artificial intelligence to do that. So that's how we're applying AI at IHG. We also, just in the last few weeks, launched a mini app on ChatGPT, which is another form of technology people are using to search and customize their experiences to reach them where they want to be, then they can book back on the IHG app or on our website, but they're searching on ChatGPT and finding their experiences there. So it's really to meet people where they want to be.

Super interesting around AI. Let me also just kick the conversation over to FIFA. Looking at the wash-up here, the implications for RevPAR growth for Q2, about 1 percentage points you say, but also kicking across into the July month as well. Any learnings from targeting FIFA because it's becoming such a big sports event and sports tourism certainly having its day at the moment?

Well, look, I mean, the World Cup has always been a major event, right? I'm a big football fan. I went to one of the games. I watched as many as I could while traveling around the world. I think it's very exciting. I think it was a great success. It brought people together in a friendly, peaceful, jovial way. People really got to experience the game in the tournament. I think it was a great success socially, athletically, and it was a great success commercially for us and for many in the industry. In fact, right here in the U.K. and in Ireland, you've got the Euro coming up in 2028, and we're very excited about that.

We have, I think, the largest distribution of hotels among international companies in the U.K. and Ireland. And I think that's going to be another great event. It goes back, Karen, to the broader theme of people loving experiences, wanting to invest in experiences and spend their time in experiences. It's sports, it's concerts, it's theater, it's restaurants, it's bar and hospitality is at the center of all that. So we do think that live sports will continue to power our business. I don't think it's just the World Cup. I think it's all the -- it's all the athletic events in between.

Just finally, let me get to China because I know the market is looking to see whether the stability has continued through this half. And the numbers look so lumpy, very strong first quarter. Second quarter came off a little bit, but still with some timing effects. But then we drill down into the cities from Tier 1, which looks strong to Tier 2 and 3, which looks weaker. It's hard to get a real handle on how China looks. So in your own words, how would you explain the demand and how sustainable it is in China?

Yes. Look, we're pleased with our progress in China. We've been in China over 52 years. We've reached 900 hotels in China with another 600 under development. We're going to reach 1,000 hotels, I believe, before the end of this year. The first quarter was very strong. It was favored by an extended Chinese New Year holiday, they added, I think, a day to that. Then you had some additional school holidays in the first quarter. So I think that pulled some demand out of the second quarter. We were still positive in the second quarter. That's 3 quarters in a row where our RevPAR has been positive in China, which is a reversal from 2 years before.

When we think about China, we think about a large population where the middle class is growing rapidly, where the GDP is still growing between 4% and 5%. They're among the global leaders in technology, including artificial intelligence, EVs, batteries, record exports. So we look at the Chinese economy over time, we see a vast underpenetration of hotel rooms per capita, somewhere like 1/5 of what it is in the United States. We continue to grow in the market. Our profits are up 25% year-on-year in the first half of the year in China. So yes, our industry can be lumpy in a fast-growing market like China, but the long term still looks very good.

Good to hear. Elie, thank you very much for joining us and describing the earnings and the background to us today. We do appreciate it. Elie Maalouf with us, the CEO of IHG Hotels & Resorts.

Hello, and welcome to IHG's 2026 Half 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 first half highlights reel, followed by Elie.

Hello. I'm Elie Maalouf, Chief Executive Officer of IHG Hotels & Resorts. Welcome to IHG's 2026 Half Year Results Presentation. I will begin with a short overview of our results in the first half, a period of strong financial performance, record development activity and a further progress on a clear strategy that's unlocking IHG's full potential. Michael Glover, our Chief Financial Officer, will then provide a financial review. After that, I will return to take you through the progress we are making on our strategic priorities.

IHG delivered a strong financial performance in the first half of 2026. Global RevPAR grew 4.1%. Net system growth reached 5%. Fee revenue grew 7% and fee margin expanded by 120 basis points, driving 10% growth in operating profit from reportable segments. Supported by strong cash conversion and our share buybacks, EPS grew even faster at 13%. Today, we are pleased to declare an interim dividend of $0.645, an increase consistent with our 10% growth rate since 2022.

Dividend payments, along with a $950 million share buyback program are expected to return over $1.2 billion to shareholders in 2026. Together, the results reflect the strength and resilience of our business model, the diversification and scale of our estate and the long-term value creation potential of our enterprise platform. They are a clear demonstration of how IHG is continuing to deliver against the growth algorithm we set out in 2024.

Let me now hand over to Michael to take you through the financial results in more detail.

Thanks, Elie. I'm Michael Glover, Chief Financial Officer for IHG Hotels & Resorts. Let me take you through some more detail on the strong financial performance delivered in the first half of 2026. I'll start, as usual, with our reportable segments, which includes the fee business together with our owned and leased portfolio of 17 hotels. Revenue was $1.255 billion and EBIT was $655 million, growing 7% and 10%, respectively.

Within this, fee business revenue increased 7% to $971 million and fee business operating profit increased 8% to $640 million. Fee margin increased by 120 basis points to 65.9%. I'll come back to the drivers of that performance in more detail shortly. Adjusted interest increased to $106 million, putting us on track for our full year guidance range that we've narrowed to $230 million to $240 million. Our adjusted tax rate was 26%, consistent with the rate in the first half of last year.

Adjusted earnings per share includes the accretion benefit from the $950 million share buyback program announced earlier this year, together with the annualized effect of last year's $900 million program. The combination of revenue growth, further margin progression and buyback accretion resulted in adjusted earnings per share increasing by 13% to $2.747. The interim dividend is increasing by 10% to $0.645, consistent with the growth rate in each of the past 4 years.

Moving on to a summary of RevPAR performance. Global RevPAR increased 4.1% in the first half with occupancy up 1 percentage point and ADR up 2.5%. Q2 RevPAR grew 3.5% and positive RevPAR growth was delivered in each of our 3 operating regions, both in Q2 and for the first half overall. In the Americas, RevPAR increased 4.8% in the first half. Performance accelerated through the period, increasing from 3.6% in Q1 to 5.4% in Q2.

Supportive trading conditions from a strong U.S. economy led to growth in all 3 demand drivers as shown on the next slide. The World Cup added approximately 100 basis points to Americas' Q2 RevPAR growth. Excluding that uplift, there was clearly very good and broad-based growth right across the region. In EMEAA, RevPAR increased 3% in the first half. After growth of 5.6% in Q1, growth in Q2 was 0.6%, reflecting the well-documented impact of the conflict in the Middle East. This subregion, which represents 5% of IHG globally or just under 20% of the EMEAA region, declined by 19% in Q2.

The rest of EMEAA grew by 4% in Q2, including growth of 3% in the U.K., 2.3% in Continental Europe and 6% in East Asia and Pacific. The breadth and diversification of the EMEAA portfolio, therefore, continues to be a significant strength. In Greater China, RevPAR increased 3.1% in the first half. Following stellar growth in Q1 of 5.7%, Q2 had an impact from public holiday timings. The RevPAR in this latest quarter still grew by 0.8%.

This slide presents the business, leisure and groups demand drivers, showing a breakdown of booked revenue split by room nights and ADR. At a global level, all 3 demand drivers delivered growth. Groups was again the strongest, up 6%, with particularly strong growth as expected in the Americas. Business increased 2% globally and leisure increased 3% globally. As we've highlighted before, this diversification remains an important strength of IHG.

Growth is being supported by a range of customer segments, geographic markets and travel purposes rather than relying on a single demand driver. Turning now to system growth, where we delivered record levels of development activity. We opened 31,500 rooms across 197 hotels during the first half, delivering gross system growth of 6.5%. Excluding rooms from the Ruby acquisition, openings increased by 8% year-on-year, continuing the strong momentum we've seen across the business in recent periods. This further demonstrates the continued attractiveness of IHG's brand and enterprise platform to owners globally.

The mix of openings remained balanced with 55% from new builds, 43% from conversions and 2% from Ruby. Just under 9,000 rooms were removed from our system during the half, representing a removal rate of 1.5%. Taken together, this drove net system size growth of 5% year-on-year, continuing the momentum we had already seen in the first quarter. This represents a strong outcome with increasing openings, a normalized level of removals and sustained net system growth across the portfolio.

Moving now to signings. We signed 49,200 rooms across 352 hotels in the first half. Signings on an organic basis also increased by 8% year-on-year, and the composition of signings was again well balanced with 51% from new builds and 49% from conversions. By region, we signed 12,500 rooms in the Americas, 19,500 rooms in EMEAA and 17,100 rooms in Greater China. Development activity remained strong with signings growth in all 3 regions, including in EMEAA, which continued to perform particularly well despite the disruption experienced in parts of the Middle East during the period. The strength of signings continues to support our confidence in IHG's outlook for future system growth.

Coming back to our fee margin progress. This increased by a further 120 basis points to 65.9%, in line with our medium- to long-term ambition of delivering annual margin accretion of between 100 and 150 basis points on average. Importantly, the improvement was broad-based across all geographic regions. The Americas delivered a 150 basis point increase in fee margin to 84.2%, driving operating profit growth of 7% to $442 million. EMEAA increased fee margin by 400 basis points to 69.8%, supporting 10% profit growth to $141 million, while Greater China achieved outstanding profit growth of 25% to $55 million, underpinned by fee margin expansion of 460 basis points to 62.5%.

The Central reporting segment had a revenue increase of 13%. The central margin came down slightly simply due to the planned timing of cost investment, which is a little more weighted to the first half, but fully consistent with our view for the year as a whole. The operating profit of Central, therefore, increased by 5% in the first half of the year. As I noted at our full 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, we continue to build a highly efficient, scalable cost base with step changes delivered in our recent programs that are achieving sustainable savings over the long term. As you can see from this chart, we have consistently increased fee revenues over time whilst maintaining strong discipline over our overheads, therefore, driving substantial margin expansion. And that's what we've achieved once again in the first half of 2026 with a 7% increase in fee business revenue delivered on a lower level of cost growth.

The 4% increase in fee business overheads in the first half included the timing of certain costs that were front-loaded in the year. There is no change to our view for the year as a whole. We remain confident of delivering an overhead increase within the range of 1% to 3%, reinforcing our commitment to disciplined cost management and achieving further fee margin expansion.

Moving on to cash flow. Adjusted free cash flow was $360 million, an increase of $58 million on the first half of 2025, driven by the increase in profit. Cash conversion on a trailing 12-month base has remained above 100%. The increase in net debt is a result of the ordinary dividend payments to shareholders, together with returning further surplus capital via share buybacks. As expected, financial leverage remains within our target range.

Looking now at capital expenditure in more detail. Key money and maintenance CapEx totaled $95 million in the first half with $83 million of key money and $12 million of maintenance CapEx. Recyclable investments were a net outflow of $40 million, comprising gross outflows of $42 million and gross inflows of $2 million. These support attractive development opportunities within IHG, recouping the outflows over time. And as previously described, these arrangements are often inherently lumpy.

Along with system fund investments, overall gross CapEx was, therefore, $158 million and net CapEx was $123 million. These align with our unchanged guidance for key money and maintenance CapEx of around $200 million to $250 million annually and for gross CapEx of around $350 million a year on average. Our strategy for the 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 $950 million buyback program is on track and was 42% complete at the half year balance sheet date, having repurchased a further 2.7 million shares or a further 1.8% reduction in the share count. For the full year, ordinary dividends of around $285 million, together with the $950 million buyback are expected to return more than $1.2 billion to shareholders, which is equivalent to just under 6% of IHG's market capitalization at the start of the year.

Over the 5 years from 2022 to 2026, IHG will have returned more than $5 billion to shareholders. On a prospective basis, given consensus expectations for growth in EBITDA and cash generation in 2026, together with the share buyback, leverage at the end of 2026 is expected to remain within our target range of 2.5 to 3x net debt to EBITDA. Our other modeling guidance remains unchanged from what was communicated at our 2025 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. We are pleased with our financial performance in the first half, which reflects the strength and resilience of our diversified business model. This model, which builds on years of strategic positioning, positions IHG to capture demand across geographies, price points, stay occasions and fee streams. This breadth also allows us to benefit from the structural growth drivers fueling our industry, including consumers' continued preference for experiences over goods.

So even in a period when there were geopolitical challenges in a subregion like the Middle East, which represents 5% of our global inventory, the other 95% performed very well against a favorable macro backdrop underpinning demand for travel. In the U.S., our largest market, economic growth in our industry are being driven by high levels of employment, rising household wealth, resilient consumer spending, strong corporate profits and huge amounts of investment going into technology, energy, manufacturing and other areas of the economy.

With this economic momentum expected to continue, we are confident in the underlying factors driving our U.S. RevPAR growth. In China, our second largest market, the economy is also growing well. The number of middle-income households is rapidly expanding. There is significant investment going into infrastructure in China's broad industry base, and the consumer has demonstrated a continued strong desire to travel. Against that backdrop, we made further progress in the first half across our 5 areas of focus: growing our brands, expanding in key geographic markets, developing our leading technology and enterprise platform, driving ancillary fee streams and as Michael already covered, delivering increased dividends and returning surplus capital to shareholders.

Together, these areas are unlocking the full potential of IHG for guests, hotel owners, colleagues and shareholders. Let's now take a closer look at the progress we are making in growing our brands. Over the past 11 years, we have expanded our portfolio from 10 brands at the start of 2015 to 21 today. We can now serve more guests across more price points and stay occasions in more destinations from remote resorts to urban hotels in major gateway cities, while attracting more owners and property types to our system. This broader portfolio is also creating a larger and more diversified revenue mix.

Since 2014, the total gross revenue or TGR, generated by our hotels has grown from $23 billion to $37 billion. A key driver of that growth has been our strategic expansion in Luxury & Lifestyle. This higher fee per key segment has doubled from $5 billion of TGR in 2014 to $10 billion today. Strong growth in suites and the introduction of exclusive partners have further diversified the mix alongside the continued strength and growth of our Essentials and Premium brands. This breadth of brands is translating into record organic development activity.

In the first half, we opened 197 hotels and signed a further 352 into the pipeline, with the number of rooms opened and signed both increasing 8% year-over-year on an organic basis. Our established brands continue to drive the majority of development activity on a large base, accounting for around 2/3 of openings and signings. At the same time, our newer brands are scaling at pace, accounting for around 1/3 of development activity. And our newer brands still have substantial runway for growth ahead.

Now taking a closer look at 3 of these new brands that are bringing us closer to a wider set of guests, stay occasions and owner types. Regent continues to build strong momentum and is resonating with guests and industry followers in upper luxury. When we acquired the first 51% stake in the brand in 2018, it had 9 open and pipeline hotels. Today, it has 25, including flagship properties in each region in Hong Kong, Cannes and Santa Monica. In fact, Regent Hong Kong received its first Forbes 5-star rating earlier this year and Regent Carlton Cannes received its second consecutive 5-star rating.

These prestigious accolades, among many others, reflect the quality of the Regent brand and the consistency with which our teams are bringing the guest experience to life around the world. We recently completed the next pre-agreed step to acquire the remaining stake in Regent, and we see strong growth potential ahead as the brand continues to deliver for guests and owners.

Ruby, our premium urban lifestyle brand acquired in 2025, has already grown from 30 open and pipeline hotels at acquisition last year to 42 today. Ruby's distinctive urban micro format and franchise-friendly model give us significant opportunities to expand beyond its strong European base. We have already signed the first 2 U.S. hotels in New York and Chicago, and owner interest is strong as Ruby becomes franchise-ready across East Asia and Pacific.

And then Garner, our fastest ever scaling of our brand globally, opened a further 23 hotels in the first half of this year and signed another 54 into the pipeline. This included further development activity across the U.S. and Japan and the first opening in China. The brand has already reached 17 countries across open and pipeline hotels less than 3 years since launch. A further example of the strength of our brands and enterprise platform is our selection together with our partner, Centinel for the U.S. Department of Air Force Lodging program.

This builds on the success of our work with Centinel since 2009 through the privatization of Army Lodging program. Finalizing the new 50-year agreement with the Department of Air Force is in progress and operational transfer of the hotels into IHG System will begin later in 2027. This is expected to initially include hotels on 23 Air Force installations across the U.S. and its territories. The prospective agreement would further underpin our system growth momentum. We are deeply honored and looking forward to supporting the U.S. Air Force community and continuing to proudly serve those who serve.

Let's now turn to our key geographic markets, where we continue to grow across each of our 3 regions and further diversify our global footprint. 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. Over the last 12 months, nearly 90% of guests staying at our hotels around the world traveled either domestically or from nearby countries. Therefore, shifting travel flows and pockets of geopolitical uncertainty, while impactful to certain markets and regions, usually have limited impact on IHG's overall global performance.

And with more than 7,100 hotels in over 100 countries, we are well positioned to capture guests wherever and whenever they choose to travel. Our pipeline of 2,400 hotels will expand our presence in the world's fastest-growing economies. Almost 60% of this pipeline is located east of Europe, where economies are expected to grow by around 4% annually over the next decade and the number of middle-income households is expected to expand by 6% per annum.

Let's now look at 6 priority markets where we are building strong growth momentum and taking share of future supply. In the U.S., our largest market, the strength and breadth of the macro backdrop not only supported very good trading, but also strong development momentum. Applications in Groundbricks increased year-on-year, and we signed more than 10,000 rooms, up 30% across more than 100 hotels. The strength in signings was led by strong activity from our Essentials and Suites brands, including 22 Garner hotel signings and 43 across the Holiday Inn brand family.

Given the record levels of investment going into the economy, greater clarity around tax policy and continued wealth creation, we expect recent development momentum in the U.S. will continue. In Greater China, we celebrated our 900th hotel and delivered another record period of openings. Growth was led by the Holiday Inn brand family and our conversion-led brands with more than 50% future rooms growth embedded in the pipeline and underpenetration of hotel rooms per capita, continued economic growth and a strong desire among consumers to travel, we remain confident in the long-term fundamentals of this vast market.

Across EMEAA, we continue to expand in both high-value and rapidly growing economies. In Germany, one of Europe's largest hotel markets, our combined open and pipeline hotel count now stands at over 250, more than doubling from the start of 2024. Japan, another example of high-value developed market now has 62 open hotels and 34 in the pipeline. Signings included a 14-hotel conversion portfolio in Kyoto, 12 of which will become Garner properties. In India, a rapidly growing market with significant potential, we signed a record 24 hotels in the first half of 2026, taking the number of open and pipeline hotels to over 160.

We expect momentum to continue accelerating over the next 5 years as we aim to reach more than 400 open and pipeline hotels. In Saudi Arabia, development activity continued in the first half despite geopolitical uncertainty in the region. In fact, one of the first 3 Noted Collection deals was signed in Saudi Arabia in the second quarter, a testament to our and our hotel owners' confidence in the country's long-term growth potential.

And with 77% future rooms growth embedded in the pipeline, we will be significantly growing our footprint in the coming years on top of an already industry-leading position. Importantly, across the other 5 markets, as you can see in the top chart, our pipeline shows we will be taking greater share of future supply through both new builds and conversions. Overall, the strength of our brands and global geographic positioning drove our strongest net system growth performance in 7 years, reaching 5%.

With 33% further rooms growth embedded in our pipeline, around 50% of which is currently under construction, we remain confident in the continued momentum of our system growth going forward. Now turning to the important progress we're making in developing our industry-leading technology and enterprise platform to capture demand, deepen guest loyalty and support hotel owner returns. Our connected technology ecosystem is the backbone of our enterprise platform and a key competitive advantage for the 7,100 hotels in our system.

It reflects years of strategic investment in our digital foundations, including the unification of our data in the cloud, the early adoption of a best-in-class guest reservation system and the rollout of our AI-enhanced revenue management system, which has unlocked revenue uplift and market share gains for our owners. Now we are in the final stages of upgrading and modernizing our core hotel tech stack as we roll out new best-in-class cloud-based property management systems across our estate.

This new PMS will help owners run their hotels more efficiently, transform their day-to-day operations and unlock further new tech capabilities. One such capability is a new digital solution that will create a more connected experience for our guests from pre-arrival messaging through to in-stay services like enhanced digital F&B ordering. We expect the new PMS to be in 4,000 hotels by the end of 2026, doubling over the year. We are continuously leveraging the strength and scale of our enterprise platform to deliver even greater value for owners.

In recent years, we have lowered our standard loyalty assessment fee, increased Reward Night reimbursements and reduced the cost of the IHG Ignite marketing program. On top of providing a leading tech stack, we have also enhanced many other areas of support, such as the growing depth and breadth of our hotel procurement services. In a further important development, where owners pay for additional specialized commercial services, we are piloting a new commercial delivery model in 500 hotels.

75% of owners are already seeing a price reduction while at the same time, benefiting from an expansion of services. Owner feedback has been very positive and further rollout across the Americas region will continue into 2027. Now turning to the ways we are weaving AI throughout our enterprise platform and supporting how we deliver on our growth algorithm. Our approach to artificial intelligence is grouped into 3 distinct areas: guest acquisition and loyalty, hotel performance and corporate efficiency and innovation.

Together, these capabilities are strengthening our direct channels, creating better experiences for guests, enhancing hotel profitability for owners and supporting an even more efficient and scalable cost base for IHG. In the first half, we made important progress across a number of priorities within the area of guest acquisition and loyalty. We launched new AI-enabled natural language search capabilities within our award-winning mobile app and our website, making it easier for guests to find the right hotel for their needs through a conversational search experience.

We launched an IHG plug-in within ChatGPT, giving users access to real-time hotel information while creating a seamless path back to IHG's app and website to complete the reservation. We also began piloting our new hotel content platform, which will amplify how our hotels show up across digital channels and AI-powered search. And we are piloting our new cloud-based guest CRM, allowing us to get closer to our guests and deliver more personalized experiences consistently across our global estate.

Together, these capabilities will make it easier for guests to discover the right hotel, experience more memorable stays and deepen loyalty. For hotel owners, these capabilities create even greater value, widen the competitive moat and unlock the full potential of IHG One Rewards from an already strong base. For a more detailed look at our advances in AI and the area of guest acquisition and loyalty, you can watch the latest episode in our IHG Checks In On series, which has been launched today alongside these half year results.

This episode featuring Heather Balsley, our Chief Commercial and Marketing Officer; and Jolie Fleming, our Chief Product and Technology Officer, is available on the Investors section of ihgplc.com.

Turning now to IHG One Rewards, which continues to be one of our most important competitive advantages and a key to strengthening hotel owner returns. At the start of 2026, our IHG One Rewards membership base stood at more than 160 million members globally. In the first half, loyalty penetration increased further to around 67% of room nights booked globally, and this figure was even higher in the U.S. at 73%. Member engagement has been strong with milestone rewards selected up 7% year-on-year.

Our loyalty members are also continuing to take advantage of our award-winning digital channels with 65% of Eliete members using the app in the last 12 months. App visits in total have increased 9% year-over-year. 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 our hotels with 83% of all the rooms revenue booked.

This is generating more high-quality revenue for owners, further lowering their costs and improving their returns. Now an update on our ancillary fee streams driven by the strength of IHG One Rewards, our powerful brand portfolio and our 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 the first half of 2026, the number of U.S. co-brand card members grew at a mid-single-digit rate and the total card spend continued to grow. We are on track with the previously described increase in this fee stream, which will also expand system fund capacity and our ability to invest on behalf of owners. We are also expanding our co-brand offer internationally. Our new U.K. debit cards with Revolut and Visa launched in June, and we recently agreed a partnership with Sumitomo Mitsui Card Company and Visa to launch co-brand credit cards in Japan in 2027.

Further co-brand opportunities in priority growth markets are targeted for future years as these partnerships deepen guest loyalty, bring more business to our hotels and create valuable fee streams for IHG and the System Fund.

Finally, we continue to see significant growth potential from branded residences. We now have 35 projects open or selling across 19 countries with additional opportunities in the pipeline. In the first half of 2026, we earned further fees from sales of branded residences at Six Senses Dubai Marina, building on the success of the previously fully sold development at Six Senses The Palm, Dubai and from the sale of further units at locations such as InterContinental Halong Bay in Vietnam.

Fee growth is expected to be more substantial in 2027 and beyond as additional residential units under development are sold and as we continue to leverage the global reach and potential of IHG's Luxury & Lifestyle brands. And to finish with a reminder of our growth algorithm. 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 2026 against a clear strategy that is unlocking the full potential of our business for all stakeholders.

This strong performance culminated in adjusted EPS growth of 13% within our medium- to long-term growth algorithm target range, and we remain confident in our ability to continue delivering on this algorithm over the medium to long term, which is expected to produce a CAGR of high single-digit fee revenue growth, 100 to 150 basis points of fee margin expansion, the ongoing return of surplus capital to shareholders and growth in adjusted EPS of 12% to 15%.

With that, we thank you for listening to our first half 2026 results presentation.

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.