InterContinental Hotels Group PLC Q4 FY2025 earnings call

• 2025 performance: RevPAR growth, gross and net system growth, strong signings, fee margin expansion, EBIT and adjusted EPS growth. 2026 trading performance in all regions was positive, new $950 million share buyback program launched, and new brand Noted Collection formally launched. - Cost management: Highly disciplined approach with broad-based cost efficiency, including in the system fund, leading to sustainable cost base. - AI: Already deployed AI powered systems in various areas like revenue management, with focus on guest acquisition, commercial optimization, and cost efficiency. - Brand portfolio: Excited about Branded Residences with strong sales and growth potential, and looking at brand acquisitions and new launches thoughtfully, focusing on premium and above premium, upper upscale luxury lifestyle.

In 2025, RevPAR grew by 1.5%. Gross system growth was 6.6% and net system growth was 4.7%. Signed over 102,000 rooms across 694 hotels, a 9% increase excluding Ruby acquisition and NOVUM Hospitality agreement. Fee margin expanded by 360 basis points. EBIT grew 13% and adjusted EPS grew 16%. In China, RevPAR bottomed out gradually, with fourth quarter turning positive, and there are strong signings and openings of brands like Holiday Inn Express. Branded Residences have 30 projects with substantial increase expected from 2027 and beyond.

• On net unit growth: Confident in more upside than downside to the consensus 4.4% for 2026, with strong signings, brand portfolio strength, and proven enterprise for growth. - On RevPAR: Early indicators positive in all regions, with favorable factors in different regions like U.S. having better comps, China recovering, Middle East strong, Europe with strong travel growth. - On Branded Residences: Substantial increase expected starting in 2027 and beyond, contributing to growth algorithm.

Q: If RevPAR doesn't play role in 2026 or going forward, do you have other levers to pull to hit algorithm?

A: Ancillaries are expected to grow in double digits, cost control with strong cost management, and fee triangulation factors like normalized openings, renovation impact normalization, and others.

Q: Scope of key money deferred into first quarter of 2026 and unit growth optimism?

A: Key money can be lumpy, some may roll over from '25 to '26, but confident in growth track record with strong system size growth, signings, pipeline, and openings.

Q: China margin, RevPAR in China, and brand work at $22 RevPAR?

A: China RevPAR bottoming out, strong system in China, economics work for owners, different tier markets have different rates, and openings of brands like Holiday Inn Express are ramping up.

Q: Fee business overheads, broad-based or targeted?

A: Broad-based across regions and functions, with investment in growth areas.

Q: Credit card fees and ancillaries gap with peers?

A: Confident in own upside, with growth in card fees due to more members, engagement, and sign-ups, and no ceiling seen.

Q: Branded Residence income last year and '27 and beyond?

A: Fees range from $5 million to $10 million last year, substantial increase expected from 2027 and beyond.

Q: Removals rate and net unit growth upside?

A: Confident removals rate will go back towards 1.5%, and net unit growth has more upside due to strong signings, brand portfolio, and openings.

Q: Gap between comparable and total RevPAR and fees?

A: Timing issues like ramp-up of hotels, renovation effect, leap year effect, and mix effect cause the gap, which normalizes over time.

Q: Brand acquisitions and share buyback?

A: Look at brand acquisitions thoughtfully in premium and above premium, upper upscale luxury lifestyle, and share buyback part of capital allocation policy with surplus cash flow.

Q: Branded Resi contribution to growth algo and net unit growth run rate?

A: Branded Resi contributes to growth algorithm, and net unit growth is expected to be sustainable in medium term.

Q: RevPAR inflection and region color?

A: Early indicators positive in all regions, with favorable factors in U.S., China, Middle East, Europe.

Q: Fee revenues royalty rate trend?

A: No decrease in royalty rate, with factors like key money amortization and opening normalization causing year-over-year fluctuations.

Q: AI disruption details and segmentation trend?

A: AI deployed in various areas, segmentation: 2025 business up 2%, Leisure flat, Groups up 1%, with strong groups and positive early 2026 trends.

Q: Loyalty program target and new clients?

A: IHG One Rewards at 160 million members, engaged members contributing to room nights, with no ceiling on membership and contribution.

Q: Pipeline new build vs conversion?

A: Roughly 20% of pipeline is conversion, with signings and openings having different proportions due to conversion coming in and out of pipeline quicker.