InterContinental Hotels Group PLC

Good morning, everyone, from me, and welcome to IHG's conference call covering the third quarter of 2023 trading update. So I'm Stuart Ford, Head of Investor Relations at IHG, and I'm joined this morning by Elie Malouf, our Group Chief Executive, 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 US 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 two of this morning's R&S 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. I'll now hand the call over to Eli.

Well, thank you, Stuart, and good morning, everyone. As Stuart said, I'm here this morning with Michael. I'll pass over to him in just a moment, and he will review each of the regions for you in more detail. But before that, I would like to thank our teams and colleagues for all their support in delivering what has been another strong trading performance. You will have seen that we are still providing monthly RevPAR data in our release, as well as giving you both the year-on-year movements and the performance relative to 2019, given the impact that COVID was still having, particularly in Greater China this time last year. On a group-wide basis, RevPAR was up 10.5% on last year, and up 12.8% versus 2019 levels. You will recall that we first saw Group REVPAR exceed 2019 in the third quarter last year. The 12.8% we are reporting today therefore marks the fifth quarter of sequential improvement ahead of pre-pandemic highs. Our Americas region was already ahead of 2019 from April last year, with EMEA also moving ahead a year ago In this last quarter, the excellent rebound in Greater China means that it too has now completed its post-COVID recovery. In terms of the component parts of Group Rev Par for the quarter, pricing remained very robust with average daily rate up 4% versus last year and up 15% on 2019. Occupancy of 72% was four percentage points better than last year. And at just one percentage point lower than 2019 is a further reflection of the near complete return to pre-COVID levels of demand. In terms of the split of stay occasions between leisure, business, and groups, each of these saw rooms revenue ahead of last year. Leisure was already well up on 2019 levels in the third quarter of last year. So it was very pleasing to see that this year, we've exceeded that high benchmark. Business revenue is also above 2019 levels, and the further normalization of global working habits has seen the return of more meetings, conferences, and events. Groups revenue, which lags bookings, is up 16% on last year, and it's just now 2% below that 2019 level. More importantly, the forward indicator of booked revenue for groups and meetings globally has accelerated to be 37% of 2019. So we've got very good visibility of a more than full recovery of this activity. Now turning to net system size, nearly 8,000 rooms were opened in the quarter, which is similar to the same quarter last year. Year to date, we've opened 29,000 rooms, which is 25% more than last year. This has led to net system size growth of 4.7% year-on-year. Iberistar has contributed 1.8% of it, so our net growth excluding Iberistar is 2.9% year-on-year. Net system size growth year-to-date is 2%. The fourth quarter is seasonally our biggest for delivering net growth, and we have good visibility of the hotels that are due to open in the next three months which should get us close to 4% for the year. Turning to signings, we added 17,000 rooms into our pipeline in the quarter. That's 27% more signings than the third quarter last year. And it's the same amount of rooms signed as in each of the last two quarters. Year to date, this means signings are ahead by 16%, and it takes the total pipeline to 292,000 rooms, which is an increase a 5.1% year-on-year. We are making good development progress across our brands and categories of suites, essentials, premium, and luxury lifestyle. For the latter, our six luxury lifestyle brands continue to grow to be a larger proportion of our business. They are now 14% of the current system, 22% of the pipeline, and 26% of all signings year-to-date. Our investor relations team have released the next episode of the ISG Checks On today. And this latest teach-in is all about ISG's presence of luxury and lifestyle across more than 800 open and pipeline hotels. You can find it on the investor section of our website. Now, coming back to the bigger picture for development activity for a moment, despite some economic uncertainties and challenges to financing across the wider commercial real estate sector, that are holding back new development in the short term. Our industry is fully expected to return back to prior levels of new supply growth, as it has always done in past cycles. The combination of higher room rates and a period of lower supply are stimulants to new development further down the line. In the meantime, ISG's ability to increasingly capture conversion opportunities is an important highlight. Conversions are obviously quicker to market in terms of delivering system growth. And they have increased this year to represent over a third of both openings and signings, as well as being a higher proportion. The 125 conversion signings so far this year represent a record level in absolute terms and almost double the level over the last decade. In September, our new mid-scale conversion brand, Garner, became a veil ready for franchising, and we are very excited about the levels of owner interest, and we are receiving congratulations. and its growth prospects, and further accelerating the number of conversion deals for ISG. We expect the first Garner hotels to open by the end of 2023. And now, I'll hand it over to Michael to provide more detail at a regional level.

Thank you, Ellie. Starting with the Americas, Repar was up 4.1% year-on-year and was up 13.8% versus 2019. For the U.S., Repar grew 3.1% year-on-year and was up by 11.8% on 2019 levels. Occupancy of 72% was 0.7 percentage points up on last year and just 0.6 percentage points away from 2019 levels. Pricing power remained robust, with average daily rate exceeding last year by 3% and up 15% on 2019 levels. Leisure rooms revenue in total was up 3% year on year, driven in part by another strong summer vacation period. The pricing powers of our hotels was already robust in this segment a year ago, and it continues to be so. Business revenue was up 6% year on year, while group demand, which has been the final area to recover, has shown an even more marked improvement of 8% on 2022. If you look at this performance on a 2019 basis, group revenue still lags, but now just by 9%, while business revenue is up 3% and leisure revenue is ahead by 22%. In terms of system size, 2,000 rooms were opened in Q3, This included 13 more Holiday Inn Express properties, while the most recent AVID openings included its first in New York. As with all regions, we expect a significant step up in openings in the fourth quarter. We've signed over 5,000 rooms across the Americas. Mexico, Latin America, the Caribbean, and Canada had another strong quarter, demonstrating our growing appeal beyond the U.S. core market in our increased development efforts in these locations. Year-to-date, they represent a quarter of the signings in the region, compared to just about 7% last year. Signings for the region as a whole included eight AVID hotels, 16 across the Holiday Inn brand family, and another particularly strong quarter for our extended stay brands with 26 signings. In luxury and lifestyle, another two fantastic properties were signed for six census, one at a private island and harbor resort location in coastal Carolina, and the other at an exclusive beach location in Mexico. Year-to-date, total signings for the Americas region are up by nearly 10% on last year. Moving on now to our Europe, Middle East, Asia, and Africa region, where REPPAR exceeded last year by 15.9%. Compared to 2019, REPPAR was up 17.5%, as the region now pushes on past the level of recovery already achieved by the Americas, which is a reflection of the greater amount of rate uplift. Whilst occupancy is still four percentage points behind 2019 levels, rate is up by 24%. There's a greater amount of inflationary pressure in a number of the EMEA markets when compared to the Americas. But there's also a mixed effect given how our growing estate of luxury and lifestyle hotels have achieved the highest increases in average daily rate. 2,000 rooms were opened in EMEAA during the quarter, a seasonally low period which is expected to be considerably exceeded in the fourth quarter. Signings in the region added almost 5,000 rooms to the pipeline, with conversions representing around 40% of these. Luxury and lifestyle also accounted for 40% and included three intercontinentals, and three sixth census properties. In what is proving a strong year overall for the EMEAA pipeline, signings are up by almost 40% year-to-date on 2022. But before we move away from the EMEAA region, just to note to say that all of us at ISG are deeply saddened by the tragic loss of life in the Israeli-Gaza conflict, and our thoughts are with those affected. Of EMEAA's just over 1,200 hotels, we have five that are in Israel, three of which remain open. And we're monitoring the situation closely and alongside of our hotel owners. Our colleagues and guests are safe and accounted for. We continue to prioritize their safety and have increased security measures in and around our hotels. Finally, moving on to Greater China. Since the lifting of COVID restrictions at the end of 2022, trading has significantly improved. This latest quarter, as Allie mentioned, is the first that we've seen in the region exceed 2019 levels, with growth of 9.3%. Year-on-year, Repar was up 43%. Occupancy was 67%, which was up 14 percentage points on last year and was up 2 percentage points on 2019 levels. Rate was up 13% on last year and 6% on 2019. There was particularly strong domestic leisure demand, which is also reflected in July being the strongest monthly performance in the quarter, easing back to more modest performance REPAR growth by September. This is also a factor of why the strongest REPAR performance was across the Tier 2 to 4 cities, which saw REPAR up 13% versus 2019. Tier 1 cities were still down 3% due to the more gradual return of international travel, which has a stronger bearing on performance in these locations. The start of October is also an important leisure period in China, given the national holidays. Recently published data has shown that domestic travel volumes were ahead of 2019, while the hotel industry saw domestic tourism revenues even further ahead of pre-COVID levels. Aligned with this, IHG saw repars strongly ahead of 2019 through the eight-day holiday period. Development activity is also coming back as the region moves on from the prior COVID-related restrictions. There were 37 hotels signed into the pipeline, or nearly 7,000 rooms, which is the highest quarterly signings performance since 2021. In terms of openings, there were 21 hotels added in the quarter, but reflecting the seasonal step-up, we expect a considerably greater number to open in the final quarter of the year. Going back to the pipeline, it was another strong quarter for Holiday Inn Express with 16 hotels signed, as well as for Holiday Inn with a further eight. There were also eight new signings across our luxury and lifestyle brands. The opportunity for conversions continued to grow in the region, with these representing over 30% of the hotels signed so far this year compared to less than 20% in previous years. Finally, just to update you on the share buyback, we are currently 94% of the way through the $750 million program for 2023. To date, this has reduced our share count by 5.7% on top of the 5% share count reduction from the 2022 program. As we've stated in this morning's announcement, our priority uses for cash generation remain the same, as does our target range for leverage, which is 2.5 to three times net debt to EBITDA. Because of the strong growth in profitability and strong cash generation in 2023, leverage at December 31st, 2023 is likely to be below 2.5 times. The Board will continue to evaluate the potential for future returns, doing so next in early 2024. What's important to note here is that our highly cash generative model should enable regular annual returns of surplus capital, such as through annual share buyback programs. Having already returned $500 million in of surplus capital in 2022 and $750 million in 2023, we expect to have significant ongoing capacity to return further surplus capital to shareholders, both in the ordinary course and as we look to move leverage into our target range over time. we would expect consensus to routinely model the return of surplus capital in future years aligned to our capital allocation approach. The 2023 share buyback program of $750 million, combined with the ordinary dividends, will have returned $1 billion to shareholders in 2023, equivalent to 10% of our market cap at the start of the year and equivalent to more than 8% of our current market cap. Now back to you, Eli.