InterContinental Hotels Group PLC

Good morning, everyone, from me, and also welcome to IHG's conference call covering that 2024 third quarter trading update. So 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. Do 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 Presentations section under the Investors tab on ixgplc.com. Now over to Eli.

ELLIOT METCALF- Well, thank you, Stuart, and good morning, everyone. As Stuart said, I'm here this morning with Michael. I will pass over to him in just a moment, and he will review each of the regions for you in more detail. And before that, I would like to cover some of the highlights for the group overall. We are certainly pleased with the latest trading performance, and it's been another strong period of development activity. And we are on track to finish 2024 in line with market expectations and our growth algorithm. Revpar continued to grow, driven by our globally diverse footprint. It was up 1.5% for the third quarter, and the year-to-date performance is up 2.4%. There was continued pricing power, with third quarter ADR up 1.7%. Occupancy was pretty much unchanged in Q3 and was up 0.4 percentage points for the year to date. Michael will provide more detail, but within this global performance, the red bar for Greater China was down as expected, which reflected the unusually strong comps a year ago. These comps, of course, get easier in the fourth quarter. In terms of performance by demand driver, Groups showed further strong growth, with revenue up 6% in the quarter globally. Business revenue also grew up 2%. Leisure revenue was broadly flat, down less than 1%, despite the particularly strong comparative, as leisure was already 34% above 2019 levels this time last year. Going back to groups activity for a moment, Q3 was a record period for bookings, taken up by our global sales organization. Pace looks strong through the rest of 2024 and into 2025. And we're pleased to see corporate travel organizations like Amex saying that two thirds of meeting planners expect to spend more on meetings in 2025. What's on the books for groups and meetings cumulatively for all future time periods is about 25% ahead of this time last year. And what's on the books across all demand drivers, so that's including leisure and business, as well as groups and meetings, is 7.7% ahead of this time last year. While you will all appreciate that the overall booking window is relatively short for all major global hotel operators, these on-the-book statistics will still give confidence of future total revenue growth to come. In terms of system growth, we opened more than 17,500 rooms across 98 hotels in the quarter, well over double the same period last year, which was in part due to the next 6,000 rooms of the Novum Hospitality Agreement joining Aishi System. This contributed to year-on-year gross growth of 5.9% and net system growth of 4.1%. It is worth reminding that we typically experience seasonality in our system growth with a greater proportion of openings occurring in the last quarter of each calendar year. Year-to-date net system growth of 2.3%, which is ahead of the 2023 Q3 year-to-date of 2.0%, is therefore expected to significantly ramp up through the final quarter of 2024, just as it did last year, and as reflected in the net growth being 4.1% for the rolling 12 months. Turning to signings, we added over 19,000 rooms to our pipeline in the quarter, which was an increase of 14% on the same period last year. Our global pipeline, which now stands at 327,000 rooms, representing future growth equivalent to over a third of our current system size, finished a quarter 12% larger than at the same point last year. So, we've got good momentum heading into Q4 and 2025. And with that, let me now hand it over to Michael.

Thanks, Ellie. Let me start with some further detail on each region. For the Americas, REBPAR was up 1.7% year on year, with the U.S. up 1.2%. It has been encouraging to see the economy hold up well and demonstrate both stability and normalization as expected. Across Canada, Latin America, and the Caribbean, Repar was up 6.2%. Occupancy for the region, which had already normalized quite some time ago, was unchanged for the quarter, and pricing remained robust, with rate growing 1.7%. If we take a closer look at the stay occasion drivers, groups demand was the strongest, with comparable rooms revenue up year-on-year by 7%. Business revenue was ahead by 3%, while leisure revenue was only slightly lower than the same period in the previous year. In terms of development progress in the Americas, 3,500 rooms were opened in the quarter. In the first three quarters of this year, we have opened almost the same number of rooms as we did for the whole of 2023, and we still expect further acceleration of this run rate as we head into Q4. Openings in the quarter included 11 hotels across the Holiday Inn brand family. One of these is an express that is dual branded with Candlewood Suites, which was completed in just 16 months from ground break to open, an example of the speed of which new builds can be done in a more normal environment. There were also two more VOCO properties that opened in the quarter, two for Kempton, and two for Intercontinental as well. And on October 1st, the Regent Santa Monica Beach officially opened, the first hotel for this legendary luxury brand in the region, and which will drive further progress at the very top end of luxury with this flagship property. We signed close to 7,000 rooms across the region, an increase of more than 30% on the same period last year. It was another great quarter for Garner with seven more hotels signed, which now takes the brand to 92 hotels across open and pipeline just one year on since launch. There were 19 Holiday Inn brand family signings and 17 across our extended stay brands, showing their continued strong appeal to owners. And within the seven signings across our luxury and lifestyle brands, there is a 700-key Intercontinental in Orlando, another flagship for this leading global brand. Moving on now to Europe, Middle East, Asia, and Africa region, where Repar was up an impressive 4.9%. Pleasingly, this was driven by both pricing and demand, with rate up 3.6% and occupancy up 0.9 percentage points. In a region as broad and diverse as the MEAA, there will be a range of trading performance observed across individual submarkets. Continental Europe saw Q3 repart increased by 7%, with benefits including the Olympics in France, as well as very strong groups and events demand in Germany. The Asia Pacific region saw repart growth of 6.5%, with a continued uplift in outbound Chinese travel boosting demand. Within this subregion, Growth was up high single digits in Japan, as well into the double digits in popular leisure destinations like Vietnam and Thailand, but growth was modest in locations like Australia. The UK saw red par increase by over 2%, with both London and the regions driving growth. The Middle East saw red par decline year-on-year by 3%, having been up by 9% in the first half of the year. There were some impacts from the timing of religious tourism events and the ongoing conflicts in the wider region. It's worth remembering the geographic breadth of ISG's portfolio within the whole of the Middle East region is representing less than 5% of ISG's global system. Over 8,500 rooms were opened in the quarter, including 6,000 related to the Novum Agreement we signed earlier this year. 31 further Novum hotels were opened in Q3, bringing the overall total to 37. As a reminder, 119 hotels were signed as part of the original agreement, and therefore this portfolio will continue to contribute to our overall system growth in the next 12 to 18 months. There will be a smaller number of openings in the next quarter, as we move into the next tranche of hotels that have more extensive PIPs required for them to convert to our system, and then further openings next year. Gross growth for EMEAA was 8.2% year-on-year, while net system growth was 6.6%. 5,800 rooms were signed to the pipeline in the quarter, over 20% more than a year earlier. These signings were well dispersed across all segments, demonstrating ISG's ability to compete in win deals all through the chain scales. It was great to see Vignette perform particularly well with eight signings in the quarter, clearly reflective of the traction the brand has already established. There were also two Garner signings as it ramps up development activity in the region, and conversions overall represented 56% of all rooms signed in the quarter. Finally, moving on to Greater China, where Repar was down 10.3% year-on-year, against very strong comparatives on the back of resurgent domestic travel this time last year. To remind you, in Q3 of 2023, Repar left up to be 9.3% ahead of 2019 levels. And so, a year on from that, we're back to being broadly in line with 2019. Rate was down 7.4%, reflecting a pricing environment that has been normalizing in the effect of the high-end Chinese leisure travel heading outbound. In Q3 last year, we witnessed what was in effect a captive market in Greater China, with limited outbound capacity driving up domestic rates, particularly in Tier 4 resort locations. Chinese leisure travels now have more optionality with most short-haul flight capacity in fully back to pre-pandemic levels. And so they have trended towards international destinations through the summer, which, as I've already mentioned, has provided an uplift in other locations, particularly our business in Asia Pacific. It's also worth noting that in September, there were two typhoons that passed through numerous Chinese provinces. And trading in September was also adversely impacted from the shifts in the timing of public holidays compared to the prior year. Coming on to development activity in the region. While short-term trading performance has been impacted particularly by the unusually strong comparatives a year ago, we remain very encouraged by the longer-term demand drivers for the region and the continued supportive government policies toward travel and tourism, infrastructure investment, and economic development. and this is reflected in the excellent levels of hotel development activity we've been seeing. In terms of system size, 5,500 rooms were opened in the quarter, an increase of over 50% on the same period last year. This has driven gross growth of 11.9% year-on-year, while net system growth was 9.6%. Highlights for the quarter included the opening of a dual-brand Voco Suites and Even Hotel facility in Shanghai, representing the second examples for each of these brands in the city, and further demonstrating the growing popularity of these more recently introduced brands. A further 6,700 rooms were added to the pipeline as development momentum continues to build following the extended period of COVID-related restrictions. Cumulative signings to date in 2024 are up by over 20% on last year. Notable signings include another stunning representation of the Kempton brand in Shanghai. Elsewhere, the Holiday Inn brand family also performed particularly well, with 24 signings in the quarter. As we've noted in this statement out today, for both hotel openings and hotel signings, 2024 is headed to be one of our biggest years ever in the region, which is very exciting. Just to update you on the share buyback, we are currently 77% of the way through the $800 million program we announced in February. To date, this has reduced our share count by a further 3.7%. This year's buyback, along with ordinary dividend payments, will have returned over $1 billion in to shareholders in 2024, equivalent to 7.1% of our market cap at the start of the year. I'd also note to you, last month we issued a new $750 million Euro bond, which we swapped into dollars, then repaid a bond that matured earlier this month. This results in the blended borrowing cost across our six bond maturities being just a touch over 4%. As we set out back in August, leverage continues to be expected to be around the lower end of our net debt to adjusted EBITDA target range of two and a half to three times at December 31st, 2024. And then finally, a brief update to note that ISG's license agreement to affiliate the Venetian and Palazzo hotels in Las Vegas with the Intercontinental Hotels and Resorts brand will come to an end on January 1, 2025, after 15 years. This will mean the removal of just over 7,000 rooms, or approximately 0.7% of IHG's overall system in 2025. However, the unique nature of the fee structure under this particular licensing agreement means that it contributed significantly contributed less than $1 million to our fee business revenue last year, and it made a net nil contribution to operating profit from reportable segments, or EBIT. The impact on the system fund is also not material. In fact, the agreement created a small loss to the system fund. Other agreements in the Intercontinental Alliance, which are three resorts located of the Venetian Macau, the Parisian Macau, and the Londoner Macau remain unchanged. I will now hand back to Eli.

Thank you, Michael. So, to summarize the third quarter, global REF PAR increased 1.5% driven by our globally diverse footprint and the strong demand for groups and business travel while leisure has also sustained. Growth system growth was 5.9% year-on-year, And net system growth was 4.1%, with openings more than double and signings up 14% on the same quarter last year. Our teams delivered a performance over the last quarter that reaffirms our confidence in advancing the strategic priorities that we laid out for ISG to drive the core components of shareholder value creation. As a reminder, these are growing our fee revenues through the combination of Ref Bar system size expansion and ancillary fee streams, which in turn will drive further margin accretion. And with our typical strong cash conversion, this allows IHG to both reinvest in the business and to return surplus capital to shareholders. Now, you may have questions regarding an update on co-branded credit cards. We remain in a process that, as we've previously said, is evaluating the opportunities to further grow this important ancillary fee stream. And of course, In the meantime, these cards are already driving further loyalty contribution and revenue. We look forward to giving you an update on the review at the appropriate time and are confident in the strong future growth of our co-brand business. As I said at the opening of the call, we are on track to finish 2024 in line with market expectations and our growth algorithm, and we remain confident in our abilities to capitalize further on our scale, leading positions, and the attractive long-term demand drivers of our markets. And with that, I will now pass back to the operator to open up the call for questions.

Thank you very much. If you would like to ask a question, please press 1, star followed by 1 on your telephone keypad now. If you change your mind, please press star followed by 2. Our first question comes from Jamie Rollo, with Morgan Stanley. Jamie, your line is now open. Please go ahead.

Thanks. Good morning, everyone. Three questions, please. The first two are on China. You said your REF PAR is now broadly back to 19 levels. It was broadly also there in Q4 last year. So should we expect Q4 REF PAR to be sort of broadly flat year on year? Secondly, on the very good momentum you're seeing there on signings and openings, has anything changed in terms of the fee structure or key money? And what sort of confidence level in sustaining this sort of circa 10% net unit growth going forwards? And then finally, just on the Venetian, I appreciate that that's an immaterial contract for revenues. But are there any other sort of licensed deals coming up for renewal or And when do those three Macau hotels come up for renewal, please? Thank you.

All right. Thank you, Jamie. I'll take a crack at all three, and Michael will support me and help me where I need that. So on China Repair, yeah, you're right. It's been bumping along at 2019 levels now for three or four quarters. We don't know for sure what the fourth quarter will be, but, you know, The comps get easier. We think it could, yeah. It could easily continue that same 2019 trend. Our belief, as we said at the half, is that the situation is bottoming out in China after two to three years of digesting the residential real estate overhang. It takes time to digest it, as it took time in the U.S. to digest it. Meanwhile, the Economy's still growing. GDP came in at 4.7%, which exceeded slightly exceeded expectations. Consumer spending slightly exceeded expectations. It's going to take time to turn, but we think it's turning. And, you know, travel continues to be strong, especially when you look at the outbound Chinese travel to Southeast Asia, to Japan, the nearby markets. Flight capacity is Outbound is back almost to where it was in 2019. Inbound isn't, so that's coming back more slowly, but that is a tailwind whenever and however it does come back over time. So we do acknowledge that there are other sectors of Chinese economy that are slower, that have different fundamentals. The travel sector continues to move ahead. Most of the decline in REF PAR, as you could tell from the figures, was rate, not occupancy. A lot of that was due to the upper end traveler going outside of China. Last year, they were all trapped in China. So next year, maybe, or in this fourth quarter, they may split their time between domestic and international. So I think that would not be a surprising outcome if Q4 stayed in line with 2019. I also wouldn't be surprised if it starts improving in the next few quarters on a comparable basis. On the development environment, It continues strong. We're not seeing any change to the financial competitive structure, if that's what's your question. There's no key money. We're not having to discount fees anymore. We're not having to provide different incentives or really, frankly, any incentives. I think it's a factor of two things. First, The investors in China are seeing resilience in travel versus other real estate sectors, which are more under pressure. And so capital is moving towards hospitality. And our brand is in a very strong position in China. We are in almost every category the leading brand. So you put that together, we're headed towards a record year in China of hotel sales. unit, hotel unit signings and openings. It's a lot of credit to our team and to the position of our brands and to think the resilience of the Chinese industry and Chinese market. So we're confident, as we've said on multiple calls in the mid to long term in China. Now, on the Venetian, we have, to your question, three other properties in Macau. that are now part of a different entity. Remember, there used to be just one entity called Las Vegas Sands. They broke up years ago. So it's now two different entities. And those arrangements are not affected at all by what we're doing in Las Vegas. And those have a few more years to go under contract, but they're not affected at this time. So I mean, when you think about that, that was a legacy agreement from over 15 years ago. We were a different company 15 years ago with only Intercontinental in the luxury lifestyle category. There was this concept of the Intercontinental Alliance, one that we're not taking forward. We now have what I consider the strongest luxury lifestyle portfolio in the world with Intercontinental, Six Senses, Regent, Kimpton, Vignette, Hotel Indigo with over 550 hotels open, over 400 under development. So it's just different strategy and luxury and lifestyle, different position that we have. And so we're very confident in our growth in that area. And as you noted, no impact to P&L and actually slightly favorable to system fund. Thank you, James.

And I'm sorry, there's no other license agreements coming up. I mean, that U.S. Army deal, that's somewhere away. And confidence level of 10% net unit growth in China going forwards?

We're confident in China. and high rates of growth in China, whether it's 10, whether it's a little more, whether it's a little less. Keep in mind that our base is growing significantly. We closed last year a little over 700 hotels in China. We'll probably close this year over 800 hotels in China. So when you think of the denominator, the denominator keeps getting bigger. So high single digit, which... is still going to be even more fees and more units because it's on a bigger base. We wouldn't be surprised if it's in that high single digit number going forward.

Thank you.

Thank you. Our next question is from Vicky Stern with Barclays. Vicky, your line is now open. Please go ahead. Yeah, morning.

Thank you. Just firstly, coming back to your comments, Michael, on the balance sheet. So yeah, as you say, your leverage is hovering around the bottom end of that two and a half to three times target range. I think the group used to be quite happy having leverage in the upper part of that range. So just any reason now to believe that you've shifted from that? Or should we think about cash returns potentially going forward next year, leaving you in the upper part of that two and a half to three times? Second one's just on the Revpar outlook. So I think consensus for the year has two and a half or 2.4%. That does obviously require a bit of a positive inflection in Q4 versus Q3. which makes a lot of sense in China, obviously, given that comp. But just how are you feeling about any possible positive inflection in the Americas and EMEA? Your comments there on the booking outlook seem quite upbeat for Americans in particular. Just curious what you're seeing. And then just lastly, as we look at net unit growth into next year, obviously, I appreciate those Vegas rooms are pretty negligible in profit terms. But how are you thinking about net unit growth into next year, given that 70 bps headwind? I think consensus is around 4%. can you still do that sort of level or should we now think something more in the low threes?

Well, let me start with the balance sheet. Yeah. Well, there's no state of change to, to where we believe we could be within there. I think we're comfortable being at the, you know, the middle of the top end of that range right now. So I think I wouldn't say we would look to change anything there. So yes, we'll be finished around the low end of that range and, I think as we think about returns to investors through share buybacks, we've been pretty clear around what we'll do there and that we plan to continue to do that. So obviously the board will look at that as we get into the full year results, and we'll make an announcement on that at that point. You know, we're still seeing strong cash conversions. And, you know, we're still, I think at the half year we said we'd still be at around that 80% range. I think actually we'll be a little above that, maybe all the way back to 100%. So still seeing strong cash conversion. So I think, you know, I think everything looks really good from a balance sheet perspective to continue on with that progress. I'll maybe take Repar Outlook real quick and then let Ellie add to that. Yeah, certainly we talked about – Ellie just talked about China and the Q3 and Q4 and how that's improving. But also if you look at the Americas, back in the half year, there was a lot of concern, I think, around the U.S. consumer and the U.S. economy, and it was going to turn into recession eventually. I think a lot of that's been alleviated now, certainly the Fed reducing rates. If you look at unemployment, we made the point that job growth was still happening. We actually happen to be at kind of all-time highs or almost all-time highs. I think we're a couple thousand jobs off of all-time highs in the U.S. You look at some of the data layoffs or have are relatively flat, not moving. You see real personal expenditure up almost 3% versus last year. So the economy overall feels really strong and really good. And I think the other thing you're starting to see a bit also is a bit of impact from the hurricanes coming in, positive impact in the quarter. You're certainly seeing that. We're seeing that come through. And if you look at hurricanes, what typically happens is you have people fleeing and moving away from the affected areas. Then you have the government to come in. You have the Army, FEMA, things like that coming in to look at and maintain the areas and look at the damage. You have insurance companies come in. And then as the repair process happens, people have to be put into temporary housing facilities. You see the contractors come in, the big suppliers come in like Home Depot or Lowe's, and we're seeing that start to happen and come in. And in the U.S. in particular, that tends to be a bit of positive. So we're seeing that come through. But I think more importantly, we feel like the underlying economy is going well. And as we go through our corporate rate negotiations, we're seeing really strong demand. We talked about corporates still traveling. Most of our corporates are saying they're going to increase travel overall. going to spend more on trade shows and events, customer outreach and building their customer base, and then also still connecting with employees. And so as you don't have return to work yet completely done and completely back, there's still a need to connect with employees. So we're really seeing strong growth there. Then you're also seeing kind of small, medium enterprises are up 8% year to date, still strong demand, nothing there that would suggest a slowdown. So I think we feel comfortable with Q4 being a little better than where Q3 was. And that gives us confidence in that kind of thing will be around that consensus number for the half. And I'll turn it over to Eli for Nug and any other comments you might add on it.

Just a little more on Q4. I mean, October started well. We're well into it by now. So we can say it's in line with what we expect and what we would need to do. globally and in the U.S., so we're comfortable with that. The economy is in good shape. And, you know, supply growth is still low, which is supportive of rate. And when you combine a strong economy, consumers on average and total still feeling good and consumer spending strong, then with low supply, that supports rate going forward. So that, I think, also makes us feel good about Q4 and next year for Ref Bar in our largest market. Europe is stable. China comps get better. And you put that together, we're already at 2.4 year to date. So it isn't as if we need an Olympic leap here to get to expectations. On 2024, I mean, yeah, we're comfortable with expectations, which I think are in the four range. The way we look at Venetian, to your question, and to build on what I said to Jamie earlier, you know, it's, I think you were referring to 2020. I said 24. 2025, Nug, we're comfortable with that expectation. We're also comfortable with 24 expectations of 4.2. So we're both, the way we look at Venetian is it's really not been part of the algorithm, legacy deal. Happy to have had the relationship, but it hasn't contributed to the growth algorithm, which is What really informs all of our business strategies and all of our shareholder value creation strategies, as we articulated in February, it hasn't contributed to it, wouldn't contribute to it going forward. You know, frankly, Vicky, if we came today and said the opposite, which is, oh, we have this new agreement for 7, 10, 20, 30,000 keys, some part in the world with no contribution to fees to the algorithm, but our NUG goes up, 1, 2, 3% next year, I think we would not expect that to be a, let's just say an underlying increase in projections for ISG's growth, nor would you allow that. And so I think I wouldn't consider it part of our base going forward. And we look at our 4%, our 4.2 this year and our 4% next year, really exclusive of that. I think that wraps up your three questions. Thank you.

Thanks very much.

Thank you. Our next question is from Jaina Mistry with Jefferies. Jaina, your line is now open. Please go ahead.

Hi. Morning, Ellie. Morning, Michael. Hello, Jaina. Hello. I wanted to spend a moment on the importance of the keys with fees. The first question is, is this a shift in the way the business operates? You know, looking forward, how much of your portfolio is under-earning or not earning fees, say? And then the second part of the question is, you know, how do you balance the benefit of the larger system size on the attractiveness on your loyalty scheme versus the P&L impact, the cash impact of, let's say, potentially fee-dilutive rooms? Thank you.

Okay. I wouldn't call it a strategy shift. I think it's an emphasis that we have. And I think, guys, she's always been focused on shareholder value creation. But I think the environment changes, the dynamic industry. And there are probably a lot of opportunities today that were not as numerous in the past to... to enter into arrangements that are not as accretive as they used to be. This one wasn't in the past. Again, I want to emphasize we had a great relationship with that ownership group of that property, and it's a legacy deal. But I think today, as you've seen in the industry, there are more opportunities to enter into lower or almost no value arrangements, and we're very – selective about those, very discriminatory about those, and discerning about them. So that's the first thing. I wouldn't call it a shift. It's really an emphasis, but it's driven by a change in the external context. There is just not a prevalence of these arrangements at ISG, I can tell you. We know our portfolio extremely well, and we have really no no prevalence of these in our system. Now, to your second part of the question is, how do we think about these properties and their value to the loyalty plan? We've been very clear about our strategy to drive our loyalty, which is growing extremely well, and that, of course, drives our ancillary fees, which are growing very well, and focusing at the top of our portfolio on our luxury lifestyle portfolio, which has grown from just one brand to six brands now, and over 500 open properties, another 400 under development in all major markets, and a lot of it in resorts, the most attractive resorts in the world. I mean, there is no brand out there today that has the cachet, that has the impression, the buzz that Six Senses has. None. Everywhere we go, people are just, you're either wanting to build it or are wanting to visit it and build their experiences around it. So that's just an example. Regent, the same, you know, Intercontinental still remains the largest and fastest growing traditional luxury brand in the world and so forth. Kempton Hotels and Restaurants is the global standard of boutique lifestyle. So we're just in a very different place than we were 15 years ago. And And we're very pleased with the progress we're making. And those make a very strong contribution to loyalty while making also a very strong contribution to fees. So we believe we can do both. We don't have to sacrifice fees for growth and loyalty, for growth and ancillaries, for growth in our master brand. Now, clearly, in luxury lifestyle, the fee arrangements are different. You have much higher FBARs, so the percentages may be different, but the total take is very large. You know, it's a very – it's a different equation with very high fees. So we believe we can and are doing both through our luxury lifestyle and loyalty strategy, which reflects the decisions and actions we're taking today.

Yeah, I think also just like you can look at some recent examples of what we've done with, for example, Aberastar. Aberastar was a gap – addressed a gap that we had around resort locations and all-inclusive resorts. You know, great loyalty play there, but also we're earning fees from that. And so, as Ellie says, we're in a lot different position than what we used to be. And so, as we look at those, we want to really look at how do we make win-win arrangements for our shareholders, but for our guests and for the owners. And so, we look across all three.

Let me just give you a macro statistic and an anecdote. Today, in luxury and lifestyle, we have over 900 hotels. Think nearing 1,000 open under development. Over 500 open, over 400 under development, nearing 1,000 hotels out of our 6,500 in the world under development, earning high fees and contributing to loyalty and contributing to our master brand that eventually drives ancillaries. On the other hand, on a micro sort of anecdote, here in London, we're nearing the opening next year of our sixth census. That property is going to be nearly 1,000 ADR, and the residences have been selling. We've sold over 60% of the residences. They're selling from a minimum of $3 million to $5 million to up to $25 million for the penthouses, on which we earn fees. So we believe in driving luxury and lifestyle with high fees, not a discrimination between one or the other. Thank you, Jaina.

Thank you.

Our next question is from Leo Carrington with Citi. Leo, your line is now open. Please go ahead.

Good morning. Thank you. If I could just ask a couple of follow-ups on the demand points and then separately on Ghana. First of all, In the Americas, the hurricane impact in Q3, is there any way you can quantify that just for your business specifically, just to help us get the trajectory for Q4 right? And then secondly, on China, the point about outbound travel is well made. But in terms of the impact on ADRs given the strong supply growth, Is that a major factor that you're seeing, or is that diluted by the demand levels? The other question on Ghana, if I just say that now, with the European expansion that we've seen in the quarter and in October, to what extent has this been a function of the brand launch plans itself versus a demand pull from owners that's emerged subsequent to launch? Thank you.

Oh, if you want, I'll take the demand in America's hurricane one there. In the quarter, we had about a 30 basis point positive from the hurricane impacts that happened early in the quarter. But you also need to remember that you had late in the quarter some impact from the two hurricanes that happened in the fall. So it'll be a little bit muted relative to what it would have been had there been no other hurricanes. In terms of China and supply growth, actually, if you look at China's supply growth, it's interesting. I know there's a report that shows that FCR has growth of roughly 17%. What's happened there is you've had some players come into that that reporting sample. So large brands like Home & Group and H-World have increased participation. However, they've only been added to 2024 data, but not the historic data. And so if you exclude this, the overall supply growth has actually lowered, and it's down roughly 12% to 13%. And so when you think about that, I think that may have been causing some confusion around what's happening in China around supply growth. I think what we're really seeing, actually, if you look at that occupancy growth or occupancy movement we had in China, we were only down two points in the fourth quarter, coming off a very strong third quarter last year. So most of it was around rate, and it was really around that China outbound travel happening. You had the high-end consumers that were buying up the big suites in the Tier 4 locations moving out of the domestic locations and moving into some of the destinations around Asia. And actually, if you look and you see some of the stats come through Golden Week, actually, there were 765 million domestic travelers up 6% year over year. That's up 10% from COVID. You had tourism revenue up 6%, up 8% from COVID. you had outbound travel out of China up 33% year over year. And so I think that just speaks to what we're seeing there. It's not dissimilar to what we saw in Florida in the U.S. When everyone was kind of contained to the U.S., Florida rep art jumped through the roof. And then the next year as everything opened up, Europe became a key destination for American travelers. And rep art in Florida went down. And so I think that's what... that's kind of what we're seeing there. I'll go over to Ellie on the rest.

Sure. On Garner, I think it's a great question. We had always planned to take the brand globally. We design our plans, our brands, to have global potential. Rarely do we design them just to be concentrated in a market, unless it's really U.S., which is our biggest market. And then most brands we do take globally eventually. I think... We were pleased to then get a lot of interest from owners sooner than we'd anticipated, whether it was in Germany and Europe. In other countries in Europe, we already signed in the U.K., in Austria. We're in Turkey, we've announced, and I'm sure I'm missing a country or two already in Europe. But it's also gone beyond Europe and Asia. We've signed in our opening in Japan. We've signed in – I think we're going into Southeast Asia with Garner soon. And we have plans to expand it further into Asia. We're already, I think, over 85 hotels in pipeline in Garner. We've opened four that are performing very well. So we're well on track to – I mean, we said we wanted to be 500 open hotels in 10 years with 85 in the pipeline in about a year. I think we're well on track to do that or exceed it.

Thank you very much.

Thank you, Leo. Let's see, who's next? We've got Alex.

Yeah, so our next question is from Alex Brignall with the Redburn Atlantic. Alex, your line is now open. Please go ahead.

Good morning. Thank you very much. Just one from me, really. Just the signings number, if we take out Novum, is still at about, let's say, 70% of where you were in 2018, 19, just year to date. Obviously, you already answered a question about these sort of incremental deals that sometimes have inferior economics to kind of organic signings. And lots of your peers are talking about them, and it seems a little bit like it's a seller's market to be a small brand that might be converted to a big brand. So what's your hope for organic signings getting back to previous levels, because obviously the denominator is significantly bigger, as you already alluded to. So the organic net unit growth number seems to require a pit up in organic signings if there's not to be a reliance on these deals with inferior economics. Thank you very much.

Sure. I think we're moving in that direction, Alex. It's development... I think I've said this before, doesn't move in spikes. It moves in trends, right? In trends, because there's a lot of process you have to come to place. You have to buy the land and get the design and get the equity and go get the financing and all those things. And there's been quite a bit of friction along the way, especially in the United States, where the total industry is pipeline has recovered, but total industry under construction has not. These are just industry data. And so we're kind of in the same situation. Following an upward trend, our signings are trending up. Our under construction is trending up. Our openings in the third quarter were substantially, I mean, year to date through the third quarter are 66% in the Americas, higher than They were last year. So we're getting that machine going, but there's just a trend line. And we think that the stabilization of interest rates, the stabilization of inflation both contribute, but they don't create a V-shape trend right after. Fortunately, the economy is still strong, which is supportive of demand, and we think over time the supply will recover. That's probably been the biggest – The gap to getting back to 1819 has been the U.S. new construction market. But in the meantime, we've picked up conversions quite a bit. And as part of conversions, I would include Novum. Novum is neither a sort of, it's neither a partnership, it's not an alliance. It's a full fee, 119 individual franchises for 20 years each. It's just they all happen at once. The unusual part of Novum is that they all happen at once, but it is in our base figures because we consider it organic because it's individual franchises for 20 years with full fees. Now, do we have to provide some key money incentive for it? Of course, because it's not typical to find such an attractive quantum all at once. But other than that, and we'd like to find more if we could, but we consider that organic. But yeah, there is opportunity to still

increase our organic growth and that's our optimistic about about the future here thank you alex fantastic thank you our next question is from jafar mastari jafar your line is now open please go ahead hi good morning i've got a couple of that's all right uh just on on the middle east uh it's not huge for you it's five percent of the global system um it's negative i think Operators who report negative for FR in the Middle East this quarter may just be tempted to say, yeah, it's the timing of the religious pilgrimage, minus 3% move on. But just wanted to give you an opportunity to discuss any other trends you're seeing. And you refer to the geopolitical uncertainty in the region, which is quite obvious. But do you have more exposure to oil and gas? Do you have more exposure to specific industries? countries or end markets in the region that's worth keeping in mind, please. And then on co-branded credit cards, no update. We'll have an update in due time. Of course, just in terms of what's on the table there, could you maybe mention a few options you're looking at in the next two years? Is consolidating your products with fewer suppliers? an option is launching a lot more products with more suppliers. An option is, is the geographical expansion, um, in some key markets outside the, the U S a big part of the upside, just, you know, keen to, um, have a, have a list of things in mind there, please.

Sure. Thank you. So on the middle East, uh, relevant topic, I'm going there Sunday for a week's visit to Dubai, Doha and Riyadh. Um, I'm not going to Beirut as I was supposed to go a month ago, so that's been postponed. Realistically, two things are at play. Yeah, there was some movement in religious holidays, but while we can't measure it at this time, we think there was some impact from the conflict on the Mediterranean side of the Middle East, but it's hard to measure how much it happened, how much it contributed. It's hard to predict if it's going to contribute anything in Q4. So we're not seeing anything that we can measure yet. But it could happen, of course, given the nature of the conflict and the volatility. So two things I'd say about that. First, as you correctly said, it's a small part of our business, 5% of our rooms. Second, we believe if there is any impact, it will be short-lived, as previous impacts have been short-lived. Unfortunately, the region has experienced conflict over 60, you know, 50 of my years of memory at least, and it's habituated to it. There are impacts. They're short-lived. We're actually very optimistic about the long-term growth of our Gulf region business. It's mostly concentrated in Kingdom of Saudi Arabia, the Emirates, you know, Qatar, Oman, but mostly I'd say the first two. are the kingdom and the Emirates, we're broadly distributed. And across many industries, we're not concentrated on oil and gas or any particular end markets. We're in the major cities, but also in resorts. There's no particular concentration. We're not the most exposed there relative to other global hotel companies. But I would say we're gladly exposed to the growth that we have. we're certain will continue to occur in those Gulf countries. On co-brand, I hope you'll be patient with us and appreciate that we can't say much in this very delicate stage of discussions. But just factually, our business in the U.S., which is the majority of it by far, is already concentrated, is already, you know, with one issuer and one And one network, the issuer currently is Chase, and the network currently is MasterCard. Unlike others, we aren't working with multiple parties. But to your reference on geographic expansion, yes, we see opportunity to expand geographically over the years into more markets in Europe, more markets in Asia. Not every country. There are peculiarities that make some countries more attractive for co-brand and debit card business and others not. But we think there is material opportunity, nowhere near to be frank as what the U.S. has given the special nature of the credit card business in the U.S., but not irrelevant either. So we're very optimistic about the growth of our card going forward. We're confident it will reach multiples of what it is today. And there will be on top of that some international opportunity, too. Thank you very much.

Our next question is from André Joulard with Deutsche Bank. André, your line is now open. Please go ahead.

Good morning. Thank you for taking my question. Two questions, if I may. First one about your brand portfolio, the fact that you're around 20 at the moment. Do you see any potential development for new brands considering that your two main competitors, Marriott and Accor, have got quite more. But do you see any value in developing some new brands and eventually thinking about M&A on that subject? Second question is very French, I should say. Do you see any... Don't loaf. Do you see any issues about the tax level that you could have to pay in the future? Because France is talking a lot about improving taxes, some other European countries as well. Do you have any visibility on that side or is it too early? Thank you.

All right. Thank you, André. And we don't have anything against the French, honestly. Don't take it personally. We love France and French people. Brand portfolio. We actually have 19 brands, not 20, unless somebody did something recently and I'm not aware of it, which is always a possibility. But seriously, we have 19 brands today. When you count all of our brands, that includes Holiday and Club Vacations. That includes Wallach's in China. So some of them aren't really globally distributed in that way. We don't believe that success is measured by number of brands necessarily. That's not a measurement of industry success. Who has more brands is not necessarily the most successful. I don't think you could plot a correlation between – valuation and number of brands. You might almost get an inverse correlation today if you did that in terms of multiple in valuation. So we don't think that's the key to success. What is the key to success? Is that based on your strategy for growth, in which markets you plan to grow and in which segments you plan to grow, do you have the right brands addressed at a scale? So if you look at a company like Ice Jeep, We are global, so all major geographic markets, and we go from segments that are mid-scale to upper, upper luxury. And therefore, our goal in our brand portfolio is to have the right number and, more importantly, the right type of brands to address the greatest share of growth in those geographic markets and in those customer segments. And we've been on a journey since I joined the company 10 years ago to go from 10 to 19 brands, not to have more, but to have the right brands to address those geographic and and customer segments. We think currently we're very well positioned to drive our growth through the portfolio that we have. I've also said that this is a dynamic industry, not a static industry. Customer preferences are dynamic. Owner investment preferences are dynamic. So we stay close to those. And where we see a material desire for customer experiences and owner investment in those experiences, it has to intersect. Owners have to be willing to build for that experience. And where we find that intersection, and we are not participating with a brand, and none of our brands can address it materially, then we do launch a brand. That's why we acquired Six Senses and Regent. That's why we launched, well, Avid and Garner. That's why we acquired Kempton. And to enter beachfront resorts at scale, that's why we did the agreement with Veristar. So we have addressed that. you know, brand opportunities with a strategic view to capitalize on the growth segments and growth geographies we want to plan, but not to reach a certain number. We don't feel like we are disadvantaged because we have 19, somebody else 35, and somebody else 50. In some cases, we think it's an advantage to stay focused on the brands that are successful. Your question on M&A is partly answered by the first part, which is when we come to add to the portfolio. We look at which is the best way to do it. Is it organic through a brand launch? And we've done that mostly in limited service mainstream brands or through acquisition, which we've done that too, mostly in upscale to luxury because it just takes longer to get distribution and name recognition. So acquisition tends to be not the only, but the most likely path. So we will continue to look at acquisition opportunities. We don't need them to grow our business. But we are always looking at them to see which are accretive. We do follow taxation material, taxation level changes around the world. We can't do anything about it fundamentally. It doesn't drive our strategy, really. And so we follow them, recognize them. There could be changes in UK taxations. There could be changes in US taxation after the upcoming election. Certainly other countries like France and Europe are looking at their tax regime. It has never been a deterrent to the success of our strategy, but it's something obviously we manage in the interest of driving the greatest earnings per share and values our shareholders while doing it responsibly and fully compliant with all tax regulations.

Let me just add, and thanks for taking the tax question, Ellie. Let's just talk about this year. We were expecting our tax rate to be around 27%. I think we've been pretty clear on that. That's a little bit lower than it was last year at 28%. Also, some of the relative tax things that are going on, like OECD, global tax reform, we don't expect to be caught out by Pillar 1. Pillar 2 will have some relevance for us. However, our current high-level view is that we don't anticipate any material tax charge related to that. Obviously, as we move further out there there could be tax change tax changes but as ellie said we'll we'd monitor those and we'll do what we uh have to do uh uh with those okay very clear thank you that ends our q and a session i will hand back to ellie for any closing remarks all right well thank you everyone we're

Feeling confident going into Q4 and to 2025, and we want to remind you that our financial results for the full year 2024, along with the trading in the fourth quarter, will be announced on Tuesday, the 18th of February. Thank you very much, and have a good rest of your day.