InterContinental Hotels Group PLC Q2 FY2024 earnings call

• RevPAR grew 3% in Q2, accelerating from Q1. • System growth: gross system growth 4.9% and net system growth 3.2%. • Signings: record-breaking signings of over 57,000 rooms, up 67% year-over-year, with pipeline growth 15%. • Margin expansion: EBIT up 12% in H1, with margin accretion from EMEAA recovery and strong outbound travel from China. • China outlook: softness in RevPAR attributable to outbound travel, but long-term trend of upward travel growth remains. • U.S. performance: RevPAR accelerated in Q2 for most brands, business travel mix shifting with group revenue compensating for slight decline in business transient room nights.

No detailed breakdown of product segments with absolute revenue and contribution % provided. However, discussed regional performance: Asia Pacific region up 15.4% in key markets, EMEAA delivered $55M in incentive management fees vs $43M last year. U.S. RevPAR showed acceleration in Q2 over Q1 for most brands. China's RevPAR affected by outbound travel but long-term fundamentals remain positive with growing middle class and underpenetrated travel market.

• Management is comfortable with consensus RevPAR growth expectations for the year. • Confident in full-year EBIT and EPS growth, with EBIT expected to be around 10% and EPS at around 15% growth. • No specific downward or upward revision but confident in maintaining current growth trajectory based on global diversified business model and asset-light operating model.

• Geopolitical tensions in the Middle East, particularly if the situation expands and escalates, could impact business in the affected regions. • Economic slowdown or weakening travel demand in key markets could affect RevPAR growth and overall financial performance.

Q: On unit growth and exits, Elie Maalouf responded that net system size growth expectations include NOVUM and are comfortable with consensus at 4.2%, with over 7,000 rooms opening this year and spillover from NOVUM next year. Exits are comfortable with the 1.5% long-term objective.

A: Elie Maalouf Q: On IMFs in China, Michael Glover said IMFs in China were down but EMEAA is capturing outbound demand, with Asia Pacific region up 15.4% in key markets.

A: Michael Glover Q: On U.S. data and central revenues, Elie Maalouf stated U.S. RevPAR data doesn't show concern yet, and Michael Glover explained central revenues have moving parts but overall strong with credit card growth.

A: Elie Maalouf and Michael Glover Q: On U.S. signings and lag effect in China, Elie Maalouf said U.S. signings mix shifted but confidence remains, and lag effect in China is not structural due to growing middle class and underpenetrated travel market.

A: Elie Maalouf Q: On free cash flow conversion and fee revenue growth, Michael Glover explained free cash flow conversion lower due to System Fund surplus spending, and fee revenue growth expected to be high single digits due to global distribution and operating model strength.

A: Michael Glover