InterContinental Hotels Group PLC

Morning, everyone, from me, and welcome to IHG Hotel and Resorts conference call covering the 2025 first quarter trading update. I'm Stuart Ford, Senior Vice President and 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 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 three of this morning's R&S release. The release, together with the usual supplementary data pack for the first quarter, can be downloaded from the results and presentation section under the investors tab on isgplc.com. Now over to Eli.

Thank you, Stuart, and good morning, everyone. I'd like to start today by thanking our teams for what has been a very busy and productive start to the year across our business and another period that has really demonstrated the attractiveness and strength of our globally diverse footprint, despite heightened macro volatility. Rev Park continued to grow and on a global basis was up 3.3%. This was driven by both ADR, which was up 2.2%, and occupancy, which was up 0.6%. The growth was across all three drivers of stay occasions. Rooms revenue on a comparable hotel basis for leisure stays was up 2% globally. Business was up 3%, and groups were strongest, up 5%. In terms of system growth, we opened 14,600 rooms across 86 hotels in the quarter, more than double the same period last year, and with increases delivered in each region. This produced 7.1% gross growth year-on-year and 4.3% net growth, or 5%, excluding the Venetian removal. 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 flat, the same result as this time last year, but it was actually growth of 0.7% when excluding the Venetian removal. We expect that growth to ramp up through the rest of 2025, as is typical with our phasing. Turning to signings, we added nearly 26,000 rooms into our pipeline in the quarter, or over 20,000 when you exclude the Ruby acquisition. This level of signings was also well ahead of last year and led to a closing pipeline of 334,000 rooms, which is 9% more than a year ago and 3% more than the start of this year. Around 40% of organic signings were quicker-to-market conversions, reflecting the breadth and attractiveness of our brands and the benefits to owners of joining ISG's powerful enterprise. Let me pull out a few highlights for you. Garner, which we only launched around 18 months ago, has already reached 35 hotels open and a further 91 in the pipeline. Combined, that's 126 hotels, just under half of which are in the Americas, with the rest in EMEAA as we rapidly internationalize. There were also 10 openings across Vodko and Vignette in the quarter, as well as another 18 signings for these two brands. These were part of our strong performance in conversions, which also saw more than 30 other conversion signings across the rest of our brands. Once again, there was a strong development performance across our six luxury and lifestyle brands, with nearly 30 openings and signings combined. The Intercontinental brand was seven of these. We opened in Indianapolis, U.S., and in Monterrey, Mexico, and the five signings were in Nashville, two more in Greater China, and the two in EMEA were in Cambodia and India. This was another great quarter performance for this truly iconic global brand as we continue to penetrate established and new growth markets. On the point of growth markets, Saudi Arabia had five openings in the total quarter, India had six, and Japan had seven. Great progress in each of these target markets. And then when I look at our powerhouse brands and essentials, there were 24 openings for Express and 30 signings. This world-leading brand has an estate of over 3,200 hotels and a pipeline to add over 600 more. Hottie Inn itself has over 1,500 open and pipeline hotels with another 11 openings and 22 signings achieved in the quarter. The final point I make on development is reminding you of our completion of the acquisition of the Ruby brand in the quarter, which added 30 hotels to our pipeline. We are very excited about the potential of this premium urban lifestyle brand, and we've actually achieved two more signings just since the acquisition. So the year has gotten off to a strong start for development activity, as well as delivering a strong trading performance, even in a more volatile environment. And with that, let me now hand over to Michael, who will provide more color by region, and he will also detail for you that, though we are at an early stage, we are on track to meet current full-year consensus profit expectations.

Thanks, Ali. Starting with the Americas, where red par was up 3.5%, was also the growth rate for the U.S. Occupancy in the region was up 0.7 percentage points, and pricing remained robust. with rate growing by 2.4%. In terms of demand types, groups was the strongest, with comparable rooms revenue up year on year by 6%. Leisure revenue was also ahead by 2%, and business revenue was up by 4%. So, as with the global performance, there was growth in all three stay occasions. In 2-1 of this year, there was the benefit to March from the timing of Easter pulling forward some business travel, and this reversed in April. This is the opposite of the timing impacts last year. When we take the last eight weeks in aggregate, WebPAR has been broadly flat. We've also noted in today's statement, that the latest position of on-the-books revenue for comparable hotels across the balance of Q2, i.e., for May and June, is also broadly flat. Our confidence remains for growth beyond Q2, particularly when economic uncertainty subsides and when the industry's fundamental tailwinds prevail. And we already see on-the-books revenue ahead of last year for July and August. Going back to our performance for the first quarter compared to the U.S. industry, we are very satisfied when we look at it on a weighted chain scale basis. Taken together, this industry outperformance combined with growth across all demand drivers underlines our continued confidence of IHG's delivery in the region. In terms of system size in the Americas, we opened just over 4,000 rooms in Q1, a 30% increase on the same period last year. Albeit, as we've noted, Q1 is a seasonally small quarter for openings. This included 12 hotels across the Holiday Inn brand family, and there were also 12 more signed in the quarter. In total, we signed 4,500 rooms across the Americas, broadly in line with the first quarter of 2024. Further signings for Garner took the brand to almost 60 open and pipeline hotels in the region. Moving on now to our Europe, Middle East, Asia, and Africa region, which had another strong quarter, was well far up 5%. As with the Americas, this too was driven by both pricing and demand, with rate up 4% and occupancy up 0.6 percentage points. Looking at rep part performance across this diverse region, the UK was broadly flat, with continental Europe, which was up 5.6%, the Middle East up 6.2%, and East Asia and Pacific was up 6.8%. There was further benefit to the latter from inbound leisure travel from greater China. This helped even stronger rep our performance within that sub-region, such as 11% in Thailand and 12% in Japan. Over 6,000 rooms were opened in the quarter, almost six-fold more than the same quarter a year earlier. Within the 30 hotels open, there were 13 that were part of last ABLE's No Loan Hospitality Agreement. Another notable opening was the BOCO Xel Exeter Science Park, our first branded net zero carbon hotel. 12,900 rooms were signed into the pipeline in the quarter, which included 5,700 rooms from the acquisition of the Ruby brand. Of those 30 Ruby hotels, 20 are open and will start to be added in the ISG system from the second quarter, while 10 were in the Ruby pipeline at the time of the acquisition. Since then, a further two have already been signed, Copenhagen and Berlin. Within other signs, there were three more Gartners, including a flagship for the brand in Edinburgh Haymarket. And since the quarter end, we've also launched the brand in India with the first two signings in that country. Q1 was also another strong development period in Saudi Arabia with four signings in Regent, Vignette, BoCo, and Holiday Inn. Finally, moving on to Greater China, where REFAR was down 3.5%, which was similar to the previous quarter and an improvement on the 2024 overall REFAR performance. From here, there's an easing in the strong comparatives from the prior resurgent return of post-COVID travel demand. Travel has been occurring in the same volumes as the prior year, which is reflected in the occupancy holding up, though rate is down year on year. This included further impact from the increased outbound leisure travel, leading to Tier 2 to 4 cities being down 5.7%, whereas 10 Tier 1 cities were close to . Record-breaking momentum in development activity has continued. 4 400 rooms were opened in the quarter more than double the previous year with the milestone of 800 hotels open achieved there were 8 500 rooms signed in the quarter also well ahead of last year there's now three atwell suites in the pipeline since launching the brand a few months ago eight signings across luxury and lifestyle brands and of course express holiday inn and crown plaza all powered ahead with 28 signings between those three brands as we've noted in this morning's announcement we remain encouraged of further improvement to come and of the continued attractiveness of the long-term drivers for the region which are fueling development activity Last week, the Investors Relations team issued our eighth episode of IHG Checks In On, and this one featured a Greater China CEO, Daniel Aumer, and Chief Development Officer for the region, Ken Sun, talking more about the huge strengths and further opportunities for IHG in Greater China. Now, to update you on the share buyback, we are currently 36% of the way through the $900 million program announced in February. To date, this has reduced our share count this year by a further 1.9%. In concluding with some comments on consensus, as was said in the statement, whilst we are in an early stage in the financial year, we are on track to meet our current full-year profit expectations. We publish details of consensus on our website based on the visible alpha data service. This currently sees consensus for operating profit from reportable segments as $1,251,000,000. While spread part expectations may well come down a little from the current consensus of 2.3% growth for the year, we remain comfortable with the profit consensus. One thing to remind is that in 2025, we have a step up in ancillary fee streams as previously described. The incremental profit from loyalty point sales and from the new U.S. Co-brand credit card agreements should add around 130 basis points to our fee margin expansion. And then on top of that, there would be further margin progress from the positive operating leverage, given we expect fee revenues to be growing in excess of where we are controlling overheads growth. The profit consensus implies growth of 11% on 2024's results. And the adjusted earnings per share consensus, which is 497 cents, implies growth of 15%. This would result in another year of IHG delivering on our growth outlook. With that, I'll hand back to Ellie for closing comments.

Thank you, Michael. We included in today's statement a short section of additional comments regarding current trading conditions. Michael has covered that, though early at an early stage, we are on track to meet full year consensus. As we see it, our on-the-books revenue for comparable hotels is still ahead of Q2. Michael set out that it is looking broadly flat for Americas, whereas the EMEAA region is still showing stronger levels of growth, and improvements are expected in greater China as comparatives start to ease now that we are beyond the first quarter of the year. We are very clear that the attractive long-term structural growth drivers for both demand and supply are unaltered, and we also set out reminders as to ICU's many points of continued strength. So in summary, we had a strong start to 2025, both in our trading performance and development activity, despite increased volatility, and we remain confident for more progress ahead. And with that, I'll now pass it back to the operator to open up the call for your questions.

Thank you very much. If you would like to ask a question, please press star followed by one on your telephone keypad now. please ensure your device is unmuted locally. And if you change your mind or your question has already been answered, please press star followed by two. Our first question comes from Jamie Rollo with Morgan Stanley. Jamie, your line is now open. Please go ahead.

Thanks. Good morning. Can everyone hear me?

Yeah, we can hear you, Jamie.

Great. Three questions, please. First, thanks for the commentary on the U.S. outlook. Could you please give us a little bit more flavor maybe on government spending and also international visitors? What are you seeing in those two buckets and also what's your exposure to those two in the U.S.? ? Secondly, very strong openings in Q1, as you know, particularly in EMEA. Is there any sort of phasing in there? And I note that nearly half the new rooms were in the other brand bucket. So it doesn't appear to be Novum. So what is behind that? And how are you feeling about full year consensus net unit growth in the sort of high 3% for the group? And then finally, you've not mentioned currency, but it's been quite a big depreciation in the dollar. And your report hopefully gives the sensitivities. But it looks like there's probably something like a 5% profit boost, market-to-market, that weakness for the rest of the year. Is that why you're happy with consensus EBIT, despite the talking down the rest of the numbers? Thank you.

Thank you, Jamie. I'll take U.S. government international. EMEA openings, and net system size growth projections. And leave it for Michael to talk about foreign exchange. Okay. So, look, in the U.S., total government, including state, federal, local, as you know, in the U.S., there are many, many layers of government, is less than 5% of our revenues. And federal is 3.5% or less. So, yeah, that, along with everybody in any business in the U.S., saw a decline. Federal beginning maybe in March and probably continuing into April as government, you know, cut spending and cut cost and travel. But it's a small part of our business. Now, interestingly, state was up. State travel, state government travel was up. So it is a small part of our business. It's been impacted in Q1, and we anticipate that that federal government impact will probably continue. But as you saw, we were able to perform quite well despite that impact, and our outlook is steady, including continued assumption of that impact for federal government. Now, I'd also add on federal government is that it's a pretty low-rated business. It's not your high-rated business. The impact is mitigated by the fact it's not high rate. On international, international for us is 5% in the U.S., all international from any destination. Canada, Mexico is 1.5%. So starting in March and April, we saw some diminution of inbound from Canada. We probably picked some of that up in Mexico, within Canada itself, in Europe, but there was diminution from Canada to U.S., and that's not new news from anybody. However, total international inbound into the U.S. was positive for every month of the quarter. And, you know, as Michael said, on the books for Q2 globally is still positive. So, you know, if Some of that international travel goes somewhere else. We're well positioned to capture it, I believe. We feel good about our net system size progress for the year. Consensus is at 4.3, excluding the Venetian, which we signaled well early last year, a non-profitable property for us. So we feel good about the 4.3. I think we made actually good progress because if you look at historically, our year-to-date net system size progress in the first quarter was almost flat. Last year was zero. Years before was pretty close to zero. This year, when you exclude the Venetian, it's 0.7 with double the openings that we had in the previous year. Some of that, 1,500 rooms, came from Novum, but we just had strong openings across the board. It was 30% higher in the U.S. and the Americas. It was double in China with no particular property or transaction. In the Middle East, we did open a couple of large properties, but we're optimistic about good growth signings and openings in the Middle East for the rest of the year. So I'm not saying we're going to double every quarter for the rest of the year, but I'm feeling very good about consensus.

I'll take the currency one now, Ellie, if you don't mind. If you look at the currency profit expectations and us being comfortable with the currency profit expectations, that does not include any benefit from currency impact. I think at the full-year announcement, we said that roughly we expected about a $12 million negative impact on currency. As we sat at the end of Q1, that was roughly an $8 million – that had reduced to an $8 million impact. Now, it can move throughout the year. As we all know, the dollar has weakened a bit against some currencies, but remember, we're a very broad and large currency. largely distributed company. So there will be some currencies where it hasn't done that. And so if you think about how it looks at the average of last year and then compares today's results against that average of last year. So as we sit right now, there's no currency positive impact expected in our full year confidence in hitting consensus.

Jamie, I think you've got a specific question about the other line in the EMEA system size. Just to clarify on that, given the high proportion of conversion openings, what occurs is If we have a hotel joining our system, but before it's formally transferred over to one of our brands, if it's in our system count and on our platform, then it gets included into other. And then what you end up seeing, and it comes through in the column of internal rebrands, you'll see movements either between brands or out of other into one of those brands when it's officially lit with one of our brands. Hopefully that makes sense.

Great. That's all very clear. Thank you very much.

Thank you very much. Our next question comes from Richard Clark with Bernstein. Richard, your line is now open. Please go ahead.

Thanks for taking my questions. Three, if I may. I guess, you know, Hilton, one of your peers sort of set out the framework for their guidance was US effectively flat for the rest of this year and China back to flat. Just want to clarify that roughly your assumptions on what you expect to get to the consensus number. And if we did end up having a recession, that's not in there, you know, you do refer to an agile cost base. So how much could you offset sort of preserve profitability? Second question, Holiday Inn expressed a 3.2% rev park growth in the Americas. Hampton did 0.7%, I appreciate, just in the US. I think that is by far the widest gap we've seen between those two brands. So just anything you could call out as to why Holiday Inn Express is sort of leaving its peers in the dust a little bit there. And then thirdly, we've had a few questions from investors on the Defending America's Job and Investment Act that would impose, you know, sort of staggered 5% tax rises on foreign companies operating in the US if there are like digital service taxes, which the UK does have. Is this anything you've looked at? Do you expect you would come under the remit of this? And, you know, does this push you towards that long-standing question of should you list in the US instead of the UK?

Richard, thank you. I'll take a stab at all three, and then Michael will give you the detail on PACS and our perspective. I'll talk a little bit about our engagement with the U.S. government in general. You know, I'm not going to comment on Hilton's guidance or directions. I'm sure you know people there. You can get all the information you want on that. I will tell you the way we're looking at it is the way Michael described it in his remarks, and the SEA is, as we look into Q2, we're encouraged by the fact what we have on the books is positive globally, and it's flat in Q2 and combined in the U.S., in the Americas. But, you know, the pickup windows, you know, is short. And 50% of our bookings come in the last seven days. And, you know, there's room and time for that to improve or change. And recent trends have been encouraging in that direction. Then as we look past May and June, we look into the summer, July, August, on the books is positive globally and positive in the Americas. So we're seeing ourselves through in a steady, constructive way. And I think you can, you know, when you talk about China, you ask about China, what we said last year consistently is we think China's bottoming out. And I think the results affirm that. Our ref bar in Q1 was roughly similar to our ref bar in Q4, better than the ref bar in Q1 of the year before. And And the demand is good. Like what I'm pleased about in China is occupancy was slightly positive. Rate was impacted down, but the big part of that was very strong outbound to Asia Pacific. We were double digit up in most Asia Pacific countries like Vietnam, Japan, South Korea, even Thailand again. So people traveling out of China, The higher-end traveler mostly left China, and so that took some rate off. But demand was good, and the latest results we got for the May holiday, their Labor Day holiday basically, was record travel, over 6% increase in travel from last year, over 8% increase in travel spending. So look, we know there's a lot of bearish narrative around China, and I'm sure that's affecting a lot of industries. Things, you know, are steadying up in China. So could we be lavish in red par this year there? I think we're in the game for that as the comps get better going into Q2, three and four, where we're not going to be very precise at this point. But I said last year we could be flat. I think we can be flat again. Moving to the last positive thing I'll say about China is You know, there's a lot of people that have belief there with our openings being double, our strong signings in Q1. I think we're headed towards a record, another record year of signings and openings in China. So there's confidence locally with investors in our brands and in the hospitality market. Moving to your question about our U.S. Repar, Hawaiian Express, other brands. Again, I'll Won't comment on how other brands performed. We obviously, like you, compare ourselves to others, but won't comment on it. I'll tell you that, yes, I'm very pleased with how our teams performed, first globally with our 3.3% REVPAR, then in the Americas, then in the U.S. at 3.5%, despite some uncertainty and volatility. We saw positive REVPAR across every brand. In the Americas and in EMEA, of course, not in China as things level off there, but in both regions, we saw positive effort in every brand. And look, Holland Express, it's just a powerhouse. I mean, 3,200 hotels open, another 600 under development. And I think it's just an all-team effort spread across many aspects of our enterprise. I see one rewards now delivering 60% globally, but over 70% in the U S and that's a ramp up of 10 points in the last five years. So I think that's helping us deliver for owners and for guests, our new revenue management system that we deployed last year, uh, is in over 4,000 hotels. Now, almost all in the Americas and in the U S are new AI driven, uh, machine learning best in the industry, uh, you know, revenue management system that we know delivering outperformance for our hotels. Our powerful cut-through marketing continues. We have the best-in-class, I think, reservation system. And so I think it's not just one thing, Richard. It's a combination of factors that are starting to come together. And that's just the beginning. We're moving ahead with our new property management system, our new CRM system. So there's more ahead for our brands in the U.S. On tax, I'll just give you sort of a a broad perspective that we engage very closely with the U.S. government, with the U.K. government, personally myself, Michael himself, advocating for things that are in the interest of our industry and of our company. We're encouraged by the news today that actually leaked yesterday that the U.S. and the U.K. are nearing an agreement on a trade deal or a An agreement on a framework for a trade deal, but the news flow is incrementally positive there. And we hope that within that outcome, there will be a constructive resolution of any tax uncertainties and disputes. But, of course, we'll have to see what comes up. But we're engaged in the process. to advocate for our business.

I'd also just say it's really early in the process. Yeah. And it seems like the conversations have been very constructive. I think the, you know, to be honest, I feel like we were really early on this. Our tax teams and government affairs teams were really quite aware of what was happening, which allowed us to raise this and get this up to the appropriate people in both governments. And so we've been working very diligently and tirelessly on that. Our board has even engaged in that to making sure it's getting to the right folks. And I think, look, it's early days, but it seems like there's a lot of positive momentum in the right way to make sure this doesn't become an issue in the future.

I mean, look, as you can see in the current sort of negotiations, a lot gets put on the table. And then where things eventually settle in the end state can be very different than what's on the table. And so I think we just have to be patient, but we're heavily engaged. As Michael said, I myself was met with the U.S. government, with the chairman of the House and Ways and Needs Committee that is working on the tax bill in the U.S. We've met with leaders here in the U.K., and I think we're making some constructive progress.

Thanks very much.

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

Hi, thank you for taking my questions. I have two, if I may. First question is, are you seeing any changes to the development environment, particularly in the US since Liberation Day? And then my second question is, actually it relates to Richard's question earlier. If there is a downturn, do you see scope to drive further cost savings and cost efficiencies within the business?

Thank you. Thank you, Jaina. Let me try to address your questions, and Michael will support as always. Look, we're very close to our hotel investors, our owners, our partners. in this business, not just in the US, but around the world. I mean, I probably spend nearly half my time engaged in activities with them or meeting with them personally. And so does our entire leadership team. So we have a pretty good pulse, especially in the US where I spend a fair amount of time. On the one hand, yes, there's been quite a bit of turbulence in the news flow beginning in March and into early April, although we're seeing that improving since then. I'd say that the news flow more recently has been more constructive. We've gone from more trade tensions to more trade negotiations, right? We're gone from policy that wasn't clear, just a little more clarity on policy, financial markets that had reacted strongly in a negative way, have mostly stabilized. In fact, in the U.S., we covered most, if not all, of the drop at the top of the quarter. The dollar stabilized. Interest rates have stabilized. So, I mean, clearly, there's still some uncertainty out there, but we're moving to more clarity and to more certainty and to a little less turbulence, which is encouraging. And just like we, our owners, watch all this, and they're an optimistic group by DNA. They always want to build and develop. If not, you know, we wouldn't have had the signings and openings that we did in this quarter that we did last year. And actually, if you exclude the Ruby acquisition from our pipeline, 60% of our signings are new bills, which take a little more courage than a conversion. And yet, you know, our owners are signing up to it. So on the one hand, I think they remain optimistic. They're obviously watching what's happening. We haven't seen, we haven't detected a... a palpable, visible behavior change, but certainly everybody's watching to see the direction. And I would say that if the direction that we've seen in the last two to three weeks continues, which is more resolution, more constructive, more negotiation, more clarity, less volatility, then I think their mood will continue to move in that direction. But so far, they voted with their pocketbook and signed up for hotels and and open hotels that they signed up to open.

I think from a cost growth perspective and what we would potentially do in a recessionary scenario, I think as ICEG has demonstrated over the years, we have the ability to flex. most recently in COVID and during that time period, you've seen us flex our cost base. In fact, we were widely cash positive during that period. And even in more recent times, even if you just look at last year, we grew, you know, feed revenue by 6% last year with overhead costs only growing at 1%. And we constantly look at our costs and and work diligently to make sure we're growing revenues faster than we're growing our costs. And you heard in my statement today about the opportunity to continue to grow margin based on operating leverage and cost discipline. So we will continue to do that and look at that. And obviously, you know, our biggest risk as a company is not capturing the growth to the future. And we want to make sure that we're balanced and we're really going after and grabbing that growth. But as we need to, we will obviously manage those costs, but we take a very disciplined approach every single day. We look at ways to increase our efficiencies and effectiveness and build in those into our day-to-day operations.

I mean, Jaina, if you go back to 2019 and compare, you know, our fee margins today were up 700 points. So, yes, we went into the pandemic in 2020. We emerged very strongly, but we emerged a stronger, more profitable, more efficient business. And we've maintained a lot of those gains while still growing the business. So we don't feel at this time there's anything in particular we need to do other than maintain the strong discipline that we brought that allowed us to have, you know, solid growth last year, but good cost containment. And that's the approach we've taken going into this year that allows us to stay disciplined, but also capture the upside.

Thank you very much. Our next question comes from Alex Brignall with Redburn Atlantic. Alex, your line is now open. Please go ahead.

Thank you very much for taking the question. Just one on the full year guide, if it's possible. As the full year results, you kind of signposted EBIT to 1.25 to 1.3. So if we kind of think of the midpoint there, it's come down I'd say 25 million. And then the FX is about 12, which I think I understood your answer earlier to be that it was going to be a 12 headwind, and now you're assuming no benefit. But please tell me if I'm wrong there. And I think, again, at the full year result, you signposted RevPog growth to be kind of two to four, which was, you sort of said, like our peers, two to four, and now two. So is that sensitivity about right? I would have thought that the sensitivity would be slightly higher. less than that. You said it was about 11 or so million historically, but it feels like where you're sort of suggesting EBIT today versus where it was suggested before, there was slightly more of a reduction than what you're suggesting on REV parts. I'm sure I've got something wrong in my assumptions. If you could just kind of help me towards that, that'd be great. Thank you.

Okay. Let me start, and then we can – because there's a few things I just want to clear up there. I think on – first on FX, when we said the full year results, we expected a $12 million headwind. As we sit today at the end of Q1, that was an $8 million headwind in that we said – what I was saying is that within the 1251, there is no positive expectation from – FX there. In fact, it would take into account the 8 million headwind that we have, as we said at the end of the first quarter. From a guide perspective, at the full-year results of the—we don't guide, but you may remember consensus was around the 1250 mark at the time. We had a few markers that were in the 1270 range, and we said, you know, that was a good range for where we thought it could be. And as we sit today— a consensus sitting at 1251 we still feel comfortable with that i think the way when you look at that i think in this we think about it i think at the time uh you know right now consensus rep are sits at about 2.3 percent uh i think you've got some high markets in there with lack we come down that's why we feel like uh consensus red part may come down a little bit but we feel like because of the great cost control that we have and The benefit from the ancillary fees that we see coming in, there's no reason for consensus to go down a further from the, where it sits today. And so that's kind of how we would, we would think about now, when you look at sensitivities, 1 point of rep part, and you can see this on our website is roughly 11 and a half million franchise and managed fees. So you can see that in sensitivity. And so, you know, you're not really seeing a big drop there as we talked about with RepR coming down just a little bit. Hopefully that helps and answers your question. There was a lot in your question, so hopefully that answers it.

That's really helpful. And then just as a follow-up, it's kind of been interesting going through the reporting season for all the peers and looking at the changes in in expectations now clearly there's a big dynamic from kind of when people reported if you go back to Wyndham when they started they cut by 300 basis points their guide and then you go to Marriott oh this is on RevPath and then for Marriott they kind of cut by 50 basis points so I guess my question to you would be do you think that is really the question of the passage of time the last couple of weeks have felt a little bit better or what a lot of the hotels have pointed to, particularly Marriott, is that high-end demand has held up better than low-end demand. And so if you're a high-end hotel, your trading hasn't been as much worse in the last few weeks, and therefore you're not cutting as much. But if we look back to 2009, low-end hotels outperformed. So it doesn't seem quite logical to expect high-end hotels to like outperform persistently through if we did want to be a bit more cautious on the macro. So if you could just kind of talk through both your expectations for how things happened over the last couple of weeks that might have affected that guidance, and then your views on how you would expect high-end versus low-end hotels to trade in maybe a more cautious macro environment. Thank you so much.

Thanks, Susan Bailey. I think the hard thing is, While it'd be easier and nicer to consider all hotel companies to be homogeneous and therefore have a similar reaction to events, it's actually not the case. Yeah, we're all in the same sector, but the businesses can be very different. The distribution, the location, the geographic weighting, the chain scale weighting really makes a big difference. And then just your systems, how you operate, how you drive performance makes a big difference. And so over probably a very long period of time, some similar companies will perform within a similar range. But, you know, over multiple quarters, it can vary. for structural reasons. It doesn't make one business better or worse than another. Now, we think we're a great business, but I won't comment on the others and how they're guided or not guided. I'm just saying that we follow all this data that you follow in great detail, but we also recognize that there are structural differences between our businesses. We've designed a business model that we believe is powerful by geographic distribution, by chain scale distribution, by segmentation, and put behind an enterprise That allows us to perform steadily throughout cycles, throughout regions, throughout volatility, and always make higher highs as we go forward. I'm certain that we will again. I don't think what we're saying today is different from what somebody said last week and somebody said two weeks ago comes down to the passage of time. I mean, you'd have to ask them. I don't know. But for us, it's not really the passage of time as much as this is how our business has been performing. This is how it's indicating its performance will be. And a lot of our performance this year really comes down to structural factors that we've put in place over a long time that don't necessarily vary with a week or two. It rarely inflects that much that quickly. We are confident in And EBIT outlook for the year, as Michael said, we're confident. System size outlook for the year, recognize there's been some turbulence and volatility. We think we're moving into a period of better clarity. I can't guarantee you that. I mean, things can change quickly, but that's kind of been the direction. And if those conditions persist, we're cautiously optimistic for the rest of the year.

And could you just expand on the high end versus low end and how you'd expect them to trade?

We try to sort of stereotype how a segment will perform. Yes, I know historically there's been this stereotype that the mid-scale segment will always outperform in a downturn. But at the same time, what's happened over the last 20 years is is the upper class has become larger and more upper, has become richer and healthier and living longer and traveling longer. And there's a segment there in the population that is just unaffected by downturns that continues to travel. And we saw our luxury segment perform very well in Q1. And we saw our luxury segment, where open, perform very well during the pandemic. The problem was that a lot of those hotels could be open. But where they were open, they were jammed. And so if you could get there. And so I think that what has been common received wisdom 10, 15, 20 years ago probably does change with time. And we believe that the upper luxury segment is pretty resilient. due to the insensitivity or lack of sensitivity of people to that wealth bracket, and that our mid-scale segment is resilient because of essential travel. We saw during the pandemic, Holland Express did not go down below 50% occupancy when theoretically people weren't allowed to leave their homes. And our extended stay brands then go below 60% because there's a level of travel that's essential. So each segment can do well for different reasons, and they're not affected the same way as people, you know, tried to stereotype them years ago.

That's a really helpful explanation. Thank you.

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

Thank you. Morning. Could I ask two questions, please? Firstly, on the ancillaries and the new credit card agreement, why hasn't the slowdown in the rev par and your expectations since last year changed the potential fee income for FY25? I'm thinking actually both credit card agreement and the point sales. And secondly, I think it's interesting that between your acquisition of Ruby and Marriott acquiring System M, the urban micro hotel concept seems very popular and very valuable. Is there space elsewhere in your portfolio and your group of brands for another similar concept, but perhaps pitched at a different price point? Thank you.

Perfect. I'll try to take both questions.

Michael, please jump in as you see. So, on the ancillaries, we're pleased with the performance year to date on points and credit card. We think the outlook is steady, is robust. Can things change? Of course, anything can change, but based on what we see today, we're confident in meeting the expectations that we set out last year for doubling in 25 what are credit card P&L revenue would be from 23. And for the additional 25 million in point sales, we look to be quite on track for that. So I just think it's, you know, travel has continued. And as long as people are traveling, they're engaging more with our brands and engaging more with ISG and feeling a level of affinity. And therefore, They want to participate in our credit card and earn more points. And, I mean, keep in mind that we're just really relaunching our partnership with Chase and with MasterCard. And that's giving us a boost because we're moving to a whole new level of marketing, of engagement, of promotion of our cards. And they're doing very well, and the feedback we're getting from our credit card partners is that they're very pleased with the performance they're seeing. We're very pleased with the performance we're seeing. So for now, the trajectory is good, and we're pleased with it.

I think also there may be a misconception that the credit card performance is tied to REPAR. It's not. The way we're compensated on that is tied to really usage of the credit card and acquisitions of the credit card and our credit cards. is performing very well, very well. And in fact, we've our partners, they're very impressed with what our relaunch has done and what we've offered. So there's multiple components to that. And it's not just hotel spends in which we earn profit from that. So I think just to be clear on that. And then the point sale is actually performing extremely well and in line or ahead of expectations as guests look for maybe different ways to purchase their rooms.

On your question about Ruby and could there be other similar brands in our portfolio, we're very pleased with Ruby. Just since the acquisition, the interest from owners, from customers has been very, very pleasing. And I'm confident the brand will be a great success in our portfolio, not just in Europe, but globally. And, you know, I won't predict whether there's room for something similar there, but we really like the lifestyle space. We've been leaders in lifestyle space. I mean, I joined the company in 2015, which was right when we were acquiring Kimpton. And that really broke us into lifestyle and then growing Indigo and adding Voco and Vignette and purchasing Six Senses and Regent and now Ruby. I think we've been early pioneers in differentiating ourselves in lifestyle, luxury lifestyle. And so this is more accessible. uh luxury they call it sort of uh you know uh the uh the urban premium urban micro accessible a sense of luxury and accessible price here in london you got three hotels that are just amazing that do very well uh we think there's room for ruby to grow a lot and if there's something that is uh similar but not the same uh we're always looking thank you thanks michael

Our next question comes from Estelle Wingrod with JP Morgan. Estelle, your line is now open. Please go ahead. Good morning.

I have two questions, please. I mean, the first one, just to come back on the quarters ahead. I mean, simplistically, you seem to be still relatively optimistic on the Americas in Q3 onwards after a slightly softer period from, say, March to May. My question is, what are the key elements driving your confidence given the still limited visibility you had? And the second one is on the U.K. market. You mentioned Brody Flatfish Power in the U.K. in the release. I mean, could you just provide some color on what we see there in terms of demand trends, potential, I don't know, consumer weakness, or are you just seeing a continuation of the trends we saw last year? Thank you.

I'll start with Americas, and Michael can pick up the U.K. market. Look, in the Americas, We had a very good first quarter. We've talked about that. We're pleased. So we know that our brands, our commercial systems, our enterprise performs. There was the Easter effect that washes out between March and April to flat, which is similar to last year, actually. Our on-the-books is also roughly flat. But, you know, with maybe seven weeks to go, eight, seven, eight weeks to go in the quarter. Keep in mind that 50% of our bookings come in the last seven days. So there's a lot of room if the environment remains constructive for more pickup to come. But we're not saying it's any more today. And then as we look to July and August, you know, our on the books business is positive. So we're getting confidence not from a mood but from the data and we're very data-driven at ISG and we focus just on the figures exactly what they say and right now we recognize there's been some sentiment impact from the volatility turbulence in March and April as I said earlier we believe the news flow is more constructive today things are a bit better the data still don't show The economic data still don't show a downturn in the U.S. You have the jobs report for February and for March were pretty strong, better than expectations. Unemployment is still pretty low. Yes, the GDP report for March was down, but that really all came to forwarding and front-loading imports ahead of potential tariffs while consumer spending was up and private investment was up. And so with hiring still strong, consumer spending still good, you know, investment still good, maybe the data will reflect something different at some point. So far it hasn't. And combined with what we see while limited but actual visibility going forward, still to the positive. If you look into the summer, flat for the rest of the quarter. That gives us the perspective that we have today. You know, cautious and optimistic for the rest of the year and confident and in consensus either.

Yeah, as we look at the UK, the UK was broadly flagged, but London within that was a small negative. And I think outside of London, we were slightly positive. So, in London, if you look at London, you know, roughly was down low single digits year over year. And that was really driven by the number of events that were in London in the first quarter relative to last year. And, you know, I just say we have really a quite broad portfolio across all kinds of chain scale segments within the UK. And so we saw some really strong performance, but I think London is really the reason we were drug down in the UK a little bit. And that's mainly driven from events that were held last year versus this year.

Which to put in perspective, while, you know, I love here being in London, it's a great place. The UK totals 5% of our rooms globally. So it's unlikely anything happening in the UK is, is a big swinger to our results in either direction.

Very clear. Thank you.

Our next question comes from Jared Castle with UBS. Jared, your line is now open. Please go ahead.

Thank you. Morning. Three as well. Firstly, just on tariffs and the cost of gold, are you seeing any pressure? Ellie, you spoke about, you know, more imports coming in, I guess, into the U.S. So how much of, I guess, goods made in China actually, you know, end up in our hotels, you know, linen, beds, et cetera, furniture? Secondly, the financing markets, any commentary around that? It seems like they're pretty open given the signings of new bills. And then lastly, just on outbound international traffic, How buoyant is it at the moment? I was surprised to see, you know, U.S. travel into Europe looks up. So just in general, international traffic globally is, you know, I know it's not anywhere near a majority of your travel, but it is material. How are you seeing the outbound international travel markets? Thanks.

Yeah. Thank you, Jared. Let me try to cover these here. So, look, first thing, let's say, on tariffs is we just need to be a little more patient to see what the end state here is. Clearly, there's been a lot put out there on what they could be, what they might be, where they might go, whom they might be imposed on. But then we also see significant changes to CARBAS, to special deals, to negotiations. I mean, right now, you've got UK and US talking about coming to an agreement, EU and US in negotiations. Now, China and the US are back in discussions. So there is a different end state than what has been put out there. We just don't know what it is. And the impact, therefore, on especially hotel development in the U.S. is undetermined. It is uncertain. I will concede that. But I think to conclude what the impact is, is undetermined. Then to bring it to you to some quantitative perspective, of the cost of a hotel, I mean, when you just You've got to go build a hotel. Everything included. Excluding land, only 10% of that construction cost in the U.S., roughly 10%, is sort of FF&E materials, linens, this, that, the other, OS&E, which are sort of those consumable items. The vast majority of it, 90%, is going to be construction costs. Bricks, sticks, roofing, contractors, labor, plumbing, excavation, concrete. And the vast majority of that is local. So to really extrapolate how much of that 10% is either directly from China or has some China component starts to get a little complicated. But I would say that during the pandemic, what we did in our procurement practice, which is an extensive process support that we bring to owners to buy everything we can possibly buy and can contract for them for around the globe at the highest quality, the best prices, at high service and reliability. We did start transitioning much of our supply chain from China to other countries only to diversify. I'm not saying we won't continue to purchase in China. Of course, everything that we do in China for our vast China business A lot of it comes from there, but also we're still going to continue to source from there, especially when this uncertainty clears up. But we had already begun to diversify. So I actually don't think that it is a material exposure per product, especially if you can substitute in some cases due to China and U.S. trade tensions. Now, if there is general inflation, I think the bigger risk And I don't want to lead you down some other thought of worry, but I think the bigger risk isn't some particular element costing more because of its origin. I think it'd be more the general inflation. If there's general inflation as we had in 22, 23, and mitigating in 24, that would probably be something to watch out more for than what goes into it. Because almost everything is either locally sourced or can be substituted from a different source. point of origin. But we're waiting to see. I think let's just take a deep breath. I think there'll be more clarity when we talk again at the end of the summer and towards the end of the year. I think a lot of this will reach an end state that's clearer. On the financing market, it's just this I would call this grind forward. It did not, and I always said, it's not going to be a V-shaped improvement in the new construction financing market. It's just been getting gradually better. Probably took a pause in March, early April, as you had increased market volatility. Probably ameliorating right now. But yeah, our owner's are able to finance the quality projects to sign with ISG. It just takes a little bit longer. They might need to put up a little more equity. But it's sort of grinding forward. And as the general context of policy becomes clearer, I hope that it will continue to improve. Meanwhile, we're doing very well with conversions and our owners are able to find financing for conversions that continues our growth, not just in the U.S., but around the world. Your last question on outbound international, I assume you mean from any destination to any other destination, not just outbound from the U.S. to Europe or Europe to the U.S.

That's correct. International travel.

I mean, look, I sit on the executive committee of the World Travel Tourism Council. We just had a meeting recently, looked at the latest update. It was interesting. There was a record of international travel last year. They still expect it to be a record this year. Not as much growth, but still growing. And the thing to remember about ISG, though, is we intentionally designed a business model that, yes, is global on one hand, but it's also focused on being a very large domestic player in very large domestic markets. So in the U.S., we're 95% domestic. In China, we're over 80% domestic. In Europe, we're mostly domestic. In India, it's mostly domestic within the travel. So yes, we have some exposure, of course, to international, intercontinental travel, but by strategy, by design, we're large domestic players in large domestic either countries or affiliated regions. However, you are correct that You know, outbound from country to country, while some country pairs may have changed their travel figures, Canada, U.S. is one. We said, yeah, that country pair figure is down, no question. But those Canadians are going somewhere else. We're seeing them more in Mexico. We're seeing them more in Europe. We're seeing them here in London, interestingly. China to Asia Pacific is again up double digit from last year and inbound into Europe. from Asia is up again. Middle East is strong. So it is a resilient factor and we're pleased by it. So I don't think that, I think our fundamental thesis, Jared, that over the mid to long term, the growth in GDP and growth of middle class is a structural tailwind to travel. And the industry is cyclical and makes highs and lows, but makes higher highs and higher lows. I think this is a time where it is further reinforced, that thesis is further reinforced.

Thanks very much.

Our next question comes from Jafar Mastari with BMP Paribas. Jafar, your line is now open. Please go ahead.

And I've got two questions, please. Just on forward bookings in the Americas, the flat for Q2 and then growth in July and August, I'm just curious if there's some color you could share on price versus occupancy in those figures. And then on industry pricing in the US, obviously the industry has shown a great amount of price discipline in the last five years, much more disciplined than expected, I guess, at the time. But as you alluded to, Ellie, during lockdown, people were physically prevented from traveling. You could not just entice them with a discount and then see if it worked. Right now, if people are just uncomfortable traveling because of the noise and the uncertainty, someone could try a discount and see if it works. So my question is, are you seeing competitors in the US selectively use more promotions? Are you seeing some of your franchises in the US being a bit more open to use promotions? And in your managed hotels where you have pricing sovereignty, are you tactically using or exploring more promotions? Maybe not lowering headline prices, but allocating a bit more to discount channels, and what has been the feedback from any of those explorations, please?

Yeah. Thank you, Yvonne. I mean, year to date, last year, even the year before, our growth has been driven a little bit by occupancy growth, mostly by rate. It is generally similar on the books globally and in America, so there's no change in that, actually helps answer your second question, which is we're not seeing yet any price resistance or any, people generally ask us if we're seeing any downshifting, any trading down from brands to brands. We're not seeing that in any discernible way. We're not seeing any price resistance. Occupancy continues to be good. What's on the books is either flat or up, as we said, which isn't showing a decline or resistance to travel. And look, supply has been low in the U.S. Supply has been low, and that may not be a tailwind for unit growth, although we're getting there with taking share and with conversions, which is another form of taking share. But it's also a tailwind – it is a tailwind for rep parks. You just don't have that many options in many cities and many destinations, many resorts. They are undersupplied today, given, you know, the level of demand that comes. So I don't think, well, I know we're not seeing any behavior, any promotion, excessive or new promotional behavior in the industry. And, you know, we're We're continuing steady as we were before.

I think, Ellie, also, I mean, you mentioned it earlier, you know, some of the new systems we've rolled out using AI, large language models, pulling in data takes a lot of the emotion out of pricing now. And I think that being rolled out to our hotels in the Americas, has really helped our performance. And I think it will continue to help owners make the right decisions on where to set rates. And so I think that environment has changed significantly from where we were post the financial crisis where, yeah, historically in the industry, You know, rate declined and occupancy came back and then rate came up. And I think we're just in a much different situation now. It doesn't mean there couldn't be a situation where that happens, but the technology and advancements were helping take the emotion out of those decisions for owners and helping them make the right kind of pricing decisions.

That's a great point because usually when you get irrational discounting, it's because humans are making decisions with fear. The nice thing about machines is they don't have fear. They're perfectly rational. And, you know, it sounds humorous, but it's true. The fear factor as you reach the date of arrival. This meeting is no longer being recorded. Even when having some unsolved inventory is actually the best decision for your long-term revenue, profit, and price integrity. But humans, you know, don't process that the same way the machine does. So the more we are moving to high-quality products, AI-driven, machine learning-driven, trusted systems that our franchisees are using, I think the better rate integrity and stronger performance we're going to have for them and for us.

Thanks. On the occupancy versus pricing, I'm sorry, I'm not super clear what this means for when numbers are zero. So when numbers are 2% or 3%, I take your comments to mean zero. you know, one-third of that is occupancy, two-thirds of that is pricing. On the zero flat for Q2 in America on the books, is that zero and zero? Is it slightly down and still up a bit in pricing?

Well, we're not commenting specifically. I mean, as you know, we don't give guidance. This is a deeper level of specificity than we've given before. We're only talking about the future months given the recent volatility and wanting to give our investors a little more color and clarity on the current context. But, you know, it's broadly flat and following similar patterns to the past.

Yes, sir. Thank you.

Thank you very much. Just as a reminder, if you would like to ask a question, please press star followed by one on your telephone keypad now. Please ensure your device is unmuted locally, and if you change your mind or your question has already been answered, please press star followed by two. Our next question comes from Andre Juilliard with Deutsche Bank. Andre, your line is now open. Please go ahead.

Yes, good morning. Thank you for taking my question. Most of them were already answered, but just wanted to come back on the demand in general. You mentioned that public sector was down, which was not a surprise, but could you give us some more granularity about the split between corporates, leisure part, and if you've seen any change, significant change during the past few weeks, months, in terms of booking and the way people are booking. Thank you very much.

So what we have seen is that federal government travel has declined. Not a surprise to anybody. And now that federal government travel is less than 3.5% of our U.S. business, so less than 2% of our global business. It's declined in the 10% range. State travel has been higher. It's a smaller piece of the business. State travel has been up. you know, even more than that on a percentage basis.

And it's about 1.5% U.S. business.

So the net of all government travel has been down, but we've made it up in other segments. Group's been strong. Leisure's been steady. Business transit's been steady. So You know, we made it up in other segments. We expect, you know, federal government to continue to be down for a period of time, obviously. But what we do is we look forward from there. We just go ahead and say, you know, in total, we're pleased that the second quarter is looking, you know, flattish, but still seven, eight weeks of pickup available given the short booking window and beyond that in the summer. it's positive. So that's, that's extent to the data that we're sharing today where, you know, our group on the books to give you one, our group business on the books to give you one point is about seven ish percent over last year. And so there are other segments that are helping make up for, you know, when government's down and, and I said earlier, the government, Business, while it used to be steady business, is actually a pretty low-rated business. So we don't need an equal amount of leisure or business or group to make up for an amount, you know, a specific unit of government because that's capped at usually low rates. There's very little extra spend. It's not in your luxury properties or any upgrades. And, you know, yes, the government's going through an efficiency program, but per trip, I'll tell you, they were also very efficient already.

Okay. When you talk about the groups, you include the MICE segment in it, I guess.

It's corporate, MICE, anything that's group business. For us, it's 50-50 between corporate group and the rest.

Okay. And no slowdown on the MICE segment.

We haven't detected anything different, really. I mean, it's all part of group, and it's not a very big segment in and of itself. But, you know, you don't hear that from also big conference destinations like Las Vegas or Orlando. Conferences are still very popular at this point. That's the data we have. That's the view we have.

Okay. Thank you very much.

Thank you very much. We currently have no further questions, so I will hand back over to Eli for any closing remarks.

Welcome to all of you on the call today. Just want to remind you that our second quarter updated financial results for the first half of 2025 will be announced on Thursday, the 7th of August. Look forward to speaking to you then. Goodbye.