InterContinental Hotels Group PLC Q2 FY2025 earnings call

• RevPAR growth of 1.8% due to the breadth of geographic footprint, depth of brands, and resiliency of the operating model.
• Gross system growth of 7.7% and net system growth of 5.4% driven by outstanding development activity and record openings, with 51,000 rooms signed across 324 hotels, a 15% increase excluding M&A and large portfolio conversions.
• Fee margin expanded 390 basis points from operating leverage and step-ups in ancillary fee streams.
• EBIT grew 13% and adjusted EPS grew 19%.
• Strong performance in Americas, EMEAA, and China; China is in a bottoming out phase with expected RevPAR improvement.
• Progress in branded residential with 30 properties open and selling; investments in technology across promote, optimize, engage buckets; Garner brand has 51 open hotels and 138 in pipeline.

RevPAR grew by 1.8%. Gross system growth was 7.7% and net system growth was 5.4%. EBIT grew 13% and adjusted EPS grew 19%. Fee margin expanded by 390 basis points. The company completed 47% of its $900 million share buyback program, with plans to return over $1.1 billion to shareholders this year. No specific product segment revenue contribution breakdown was detailed in the transcript.

• Comfortable with full year profit and EPS consensus. No specific Q3/Q4 guidance given but expects constructive outlook for U.S. demand.
• Expect costs to be down 1%-2% in the full year.
• Confident in net system size growth and reaching consensus targets for profit, EPS, and net system growth.

• Uncertainties and turbulence in March-April due to trade tensions, policy, tax questions, and financial market drops.
• Higher closures in some regions, though expected to normalize over time.
• Competitive landscape in conversions and new builds, with conversions being a competitive and potentially zero-sum game.

Q: Could we start on current trading, Q3 outlook, and Q4 RevPAR in U.S.?

A: Elie Maalouf discussed U.S. fundamentals like job growth, stable inflation/interest rates, and corporate capital investment boom, with a constructive outlook despite short-term fluctuations and no specific guidance given.

Q: On Americas fee revenues down, bridge the gap?

A: Michael Glover discussed factors like exited high-fee hotels, renovations, key money amortization, and leap-year effect as contributing to the gap, with expectations of improvement as openings ramp up.

Q: Net system growth sustainability and China outlook?

A: Elie Maalouf and Michael Glover talked about sustainable net system growth driven by owner confidence and brand pipelines, and China is in a bottoming out phase with expected RevPAR improvement as the economy recovers.

Q: Cost savings phasing and Garner brand progress?

A: Michael Glover discussed cost savings from point sales, credit card revenues, and Elie Maalouf updated on Garner brand with 51 open hotels and 138 in pipeline, showing strong growth and international demand.