InterContinental Hotels Group PLC

Good morning, everyone. Welcome to IHG Hotels and Resorts conference call covering the 2024 first quarter trading update. I'm Stuart Ford, Head of Investor Relations at IHG, and I'm joined this morning by Ellie Maloof, 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 do refer to this morning's announcement and the company's SEC filing for factors that could lead to actual results that 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, can 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 Q1 R&S 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 isgplc.com. This morning, we also released a separate announcement regarding changes to system fund arrangements, which is summarized in the Q1 Trading Update release. You'll also find that separate full release under the Investors tab on isgplc.com, or by following the link within the Trading Update release. Now, over to Ellie.

Thank you, Stuart. And good morning, everyone. I'd like to start today by congratulating our teams on what has been a very busy and productive start to the year across our business, and which has been another period that has really demonstrated the attractiveness and strength of our globally diverse distribution. RevPAR continued to grow and on a global basis was up 2.6% on last year. This was driven by both ADR, which was up 2.3, and occupancy, which was up 0.2 percentage points. In terms of performance by state occasion, leisure demand remained robust, with global rooms revenue on a comparable hotels basis up 7% on 2023. Groups performance also improved, with revenue up 5%. Business revenue is flat, but that reflects the timing of Easter being in March this year compared to April last year, as the week leading up to Easter always experiences a lull in business travel. In terms of system growth, we opened more than 6,200 rooms across 46 hotels in the quarter, leading to 5% gross growth year-on-year and 3.4% net growth. The number of rooms opened in the quarter was 11% higher than in 2023, adjusting for the Bear Star rooms, which were being added this time last year. It is worth reminding that we typically experience seasonality in our system growth with relatively fewer openings and more removals in the first quarter of each calendar year. Year-to-date net system growth was therefore neutral, and we expect net growth to ramp up through the rest of 2024. Turning to signings, we added nearly 18,000 rooms into our pipeline in the quarter, which was an increase of 7% on the same period last year. This contributed to the milestone of over 300,000 rooms in the pipeline for the first time, an increase of 6.6% year on year. Over 35% of openings and signings were quicker-to-market conversions, reflecting the breadth and attractiveness of our brands and the benefits to owners of joining ISG's enterprise. This was further reflected with the major conversion deal we signed a couple of weeks ago, we were delighted to announce an agreement with Novum Hospitality, which will double ISG's presence across Germany and add up to 119 hotels or 17,700 rooms over the coming years. This deal boosts confidence in the outlook for our system growth and underlines the attractiveness to owners of our brands and enterprise platform. We expect the agreement to bring significant benefits for ISG and Novum Hospitality, including higher brand awareness increased direct bookings, and excellent loyalty engagement. Germany is one of Europe's largest hotel markets, and so there's strong domestic consumption that ICU will capture. The country also generated the highest number of international outbound trips globally in 2022, around 100 million, which is a further attraction to this priority market for us. Of course, we also expect agreement to drive the development of more of our brands across more locations. And in a separate announcement today, you will also see that we have made changes to our system fund arrangements, which will further improve economics for our owners and grow ancillary fee streams. This change is consistent with the strategic priorities we shared with you a couple of months back, which are value for owners through our leading commercial engines, and grow ancillary fee revenue and drive margin improvements for iSheet as part of our growth algorithm. In 2024, we expect the change to incrementally add $25 million to iSheet's revenue and operating profit from reportable segments. Then in 2025, it should be double that amount and will also grow further as more points are sold and as deferred revenue recognition ramps up. Michael will talk you through more of the detail on these new system fund arrangements in a moment after he has reviewed each region for you. And with that, let me hand it over to Michael.

Thanks, Ellie. Starting with the Americas, red bar was down 0.3% year-on-year. The U.S. was down 1.9%, whereas in aggregate, Canada, Latin America, and the Caribbean was up 11.3%. Occupancy in the region was down 1.1 percentage points, though pricing demand remained robust, with rate growing by 1.5%. In terms of demand types, groups demand was the strongest, with comparable rooms revenue up year-on-year by 5%. Leisure revenue was also ahead by 1%, while business revenue was slightly lower than the first quarter of 2023, down 2%. For the industry as a whole, this was a quarter with some adverse calendar timing and other seasonal impacts. When we look at the last eight weeks' rolling performance, which obviously smooths out the shift of Easter that impacts not just leisure travel but also the timing of business travel, our U.S. RepR in aggregate over the last eight weeks was ahead of last year. The quarter also had some other small adverse impacts to deal with, For example, the location of the Super Bowl this February compared to last year was less helpful in terms of the geographic distribution of our rooms inventory. And there was also less hotel demand for accommodation related to weather events than this time last year. And if you take our overall performance for the first quarter compared to the U.S. industry, we are very satisfied when we look at it on a weighted change scale basis. Looking ahead, booking trends would indicate a move back into positive repart for the second quarter. In terms of system size, over 3,000 rooms were opened in Q1 in the Americas, an increase of more than 60% versus the same period last year, albeit, as we've noted, Q1 is a seasonally small quarter for openings. This included 13 hotels across the Holiday Inn brand family, as well as openings for Avid, Atwell, and Garner as we continue to build momentum behind these newer brands. There were also two Kempton additions, one of which, the Kempton Todos Santos in Mexico, was an example of a hotel signed and opened in the same quarter, demonstrating the speed in which ISG can deliver to market high-quality conversions to our brands. We signed over 5,000 rooms across the Americas, broadly in line with the first quarter of 2023. It was a great start to the year for our newer mid-scale brands with eight Avid properties and nine Garner hotels added to the pipeline. Similarly, the 25 signings across our extended stay brands shows their continued strong appeal to owners. Moving on now to our Europe, Middle East, Asia, and Africa regions. where WebPAR was up an impressive 8.9% versus 2023. Pleasingly, this was driven by both pricing and demand, with rate up 4.5% and occupancy up 2.7 percentage points. The dispersion of WebPAR performance across EMEAA continued to narrow. WebPAR was up 17% in Japan, 10% in Australia, 7% in the Middle East, and 6 percent in continental Europe. RepR growth of 2.4 percent in the U.K. was simply a reflection of the normalized growth in a market which fully recovered earlier than much of the rest of the EMEA region. This time last year, RepR in the U.K. was already 12 percent ahead of 2019 levels, and so now we are further 2.4 percent ahead of that. Just over 1,000 rooms were opened in the quarter representing growth gross year-to-day growth of 0.4% and gross year-on-year growth of 7.2%. Net system growth was a slight decrease of 0.2% in the quarter. We expect a return to net growth as we progress through 2024. 5,400 rooms were signed to the pipeline in the quarter, 4% more than a year earlier. These signings were well dispersed across all our segments. demonstrating IceG's ability to compete and win deals all through the chain scales. It was great to see the first three Gartner deals signed as the brand becomes available across the EMEA region, having only launched in the Americas back in September. And, of course, the Novum deal will add more than 50 further Gartner hotels. Finally, moving on to Greater China, where Repar was up 2.5% year-on-year, driven by occupancy improvement of 0.7 percentage points and rate growth of 1.3%. An increase in international travelers in the quarter contributed to a 7.3% rise in Tier 1 city REPAR. In Tier 2 to 4 cities, REPAR was down 2.1%, given tougher comparables from the resurgent demand this time last year. And outbound leisure travel, particularly to Southeast Asia, has also picked up, which is a benefit we've seen in our EMEAA region. Looking ahead, we expect to continue to see a tailwind through 2024 from the return of more airlift capacity into greater China. In terms of system size, over 2,100 rooms were opened in the quarter, driving gross year-to-date growth of 1.2%. and gross year-on-year growth of 10.4%. Net system size growth was 0.2% year-to-date, while net year-on-year growth was 7.9%. Development momentum continues to build, and the 7,200 rooms signed in the region is an increase of 22% on the same period last year. Now, to update you on the share buyback, We are currently 30% of the way through the $800 million program announced in February. To date, this has reduced our share count this year by a further 1.4%. Ellie has already noted the new agreement recently announced with Novum Hospitality that will double IHG's presence in Germany. Just to add some further color for you, we currently have just under 100 hotels in Germany, And this portfolio of 119 hotels would add a further 111 in Germany, and the remaining eight are in Austria, the Netherlands, and the UK. The increase in our global system size would be up to 1.9% over the coming years, with the majority of the convergence expected to take place over the next 24 months. IHG is contributing key money capital that will reflect the phase conversion and timing of openings of this major portfolio of hotels, which of course includes the European debuts of our Garner and Candlewood Suites brands, which we are very excited about. And then in terms of fees, IHG will receive franchise fees after the phase conversion of the existing properties and upon the opening of the hotels under development. The fee revenue net of key money amortization once all the hotels are in our system, would be in excess of $10 million a year. Additionally, standard assessments were received into IHG's system fund, including those to cover the operation of IHG-1 rewards and marketing and reservation services. Finally, to cover off for you the separate announcement regarding the changes to our system fund arrangements, under the new terms that govern the sharing arrangements with the system fund, a portion of the revenue from the sale of certain loyalty points and some other ancillary revenues will now be recognized by IHG within our results from reportable segments. Initially, 50 percent of this will be recognized in 2024, which is expected to deliver an estimated incremental $25 million of both revenue and profit for the year, before increasing to 100 percent from 2025 onwards which doubles the run rate of this incremental fee stream. The run rate is expected to further increase in subsequent years as the number of points sold continues to grow and also due to the ramp-up effect of deferred revenue recognition. As analysts and investors revisit their expectations for our fee revenue and operating profit from reportable segments, or EBIT, you'll want to bear this in mind in this for future uplift. As Ellie mentioned, it is important to recognize that the changes we are making are also improving the economics for our owners. We're able to do this because of the successful growth and development of the IHG I Rewards Loyalty Program and the efficiencies and scale of the system fund. For example, the assessments into the fund meant that the system fund revenues in 2023 totaled nearly $1.6 billion, which is $330 million, or 27% greater than five years earlier. ISG's hotel owners' benefit from the substantial scale and efficiency of the system fund will continue to do so as it further grows and as the overall enterprise achieves new levels of strength. to the immediate benefit of owners and reflecting the efficiencies that are already being achieved, IHG is lowering its standard loyalty assessment that owners pay into the fund and is also increasing the reward night reimbursements that owners receive back out of the fund. Across all the changes being made to the system fund arrangement, IHG and the IHG Owners Association have worked together to ensure that overall capacity and effectiveness of the fund to invest and spend on behalf of all ISG system hotels remains strong, and that the operation of the fund continues to be on a net yield surplus or deficit basis over the long term. With that, I'll hand back to Ellie for some closing comments.