IHG

• Overall Business Resilience

  • The diversified, asset-light business model delivered strong results despite geopolitical disruption in the Middle East; 95% of the global portfolio performed well, with the business offsetting regional impacts through geographic and demand segment diversification.
  • 5% net system growth (record development activity), 13% adjusted EPS growth, and 120 bps fee margin expansion demonstrate progress against the 2024 growth algorithm, which targets 12-15% CAGR for adjusted EPS, high single-digit CAGR for fee revenue, and 100-150 bps annual fee margin expansion.

• Brand Portfolio Expansion

  • Expanded from 10 brands in 2015 to 21 brands today, covering all price points and stay occasions; Luxury & Lifestyle total gross revenue has doubled to $10 billion since 2014, driving higher average fees per key. Newer brands account for ~1/3 of current development activity with substantial remaining growth runway:
    • Regent (upper luxury): Grown from 9 hotels at 2018 acquisition to 25 hotels today; IHG acquired the remaining 49% stake in H1 2026, with strong growth potential ahead.
    • Ruby (premium urban lifestyle): Acquired in 2025, grew from 30 hotels to 42 hotels; first two U.S. hotels signed in New York and Chicago, now franchise-ready across East Asia and Pacific.
    • Garner (value segment): Fastest scaling new brand in IHG history, reached 17 countries across open and pipeline properties less than 3 years after launch; opened 23 hotels and signed 54 in H1 2026, with first opening in China completed.
  • Selected alongside partner Sentinel for the 50-year U.S. Department of Air Force Lodging program; operational transfer will begin in 2027, starting with 23 installations across the U.S. and its territories, further underpinning long-term system growth.

• Geographic Diversification and Growth

  • 79% of current system size is located in the U.S., Europe, and China, with ~90% of guests traveling domestically or from nearby regions, limiting exposure to shifting international travel flows and geopolitical uncertainty. 60% of the pipeline is located east of Europe, a region expected to deliver 4% annual economic growth over the next decade.
  • Strong momentum across 6 priority markets: U.S. (signings up 30% YoY, led by Essentials and Suites brands), Greater China (celebrated 900th hotel, record H1 openings, 600+ rooms in pipeline), Germany (over 250 open and pipeline hotels, more than doubling since 2024), Japan (62 open hotels, 34 in pipeline, 14-hotel conversion portfolio signed in Kyoto), India (24 hotels signed in H1, 160+ open and pipeline hotels, targeting over 400 in 5 years), Saudi Arabia (continued development activity despite regional tension, first Noted Collection deal signed in Q2, 77% future room growth in pipeline).

• Technology and Enterprise Platform Development

  • Upgrading to a new cloud-based property management system (PMS) across the estate; PMS is already live in 2,000 hotels, on track to reach 4,000 hotels by end-2026, enabling more efficient hotel operations and enhanced connected guest experiences.
  • AI integration across three core priority areas: guest acquisition/loyalty, hotel performance, and corporate efficiency. H1 2026 saw the launch of AI-powered natural language search on the IHG app/website, an IHG ChatGPT plug-in, and pilots for a new AI-enhanced hotel content platform and cloud-based guest CRM to deliver more personalized experiences.
  • IHG One Rewards loyalty program now has over 160 million global members; loyalty penetration reached 67% of global room nights (73% in the U.S.), with member engagement up 7% YoY for milestone rewards. IHG's direct/enterprise channels deliver 83% of all hotel room revenue for owners, driving higher quality revenue and lower owner costs.
  • Piloting a new tiered commercial delivery model for additional specialized owner services in 500 Americas hotels; 75% of participating owners already see price reductions alongside expanded service, with full regional rollout planned for 2027.

• Ancillary Fee Growth

  • Co-brand credit card partnerships: U.S. co-brand membership grew at a mid-single-digit rate in H1, with new partnerships launched in the U.K. (debit card with Revolut/Visa) and agreed for Japan (launch in 2027 with Sumitomo Mitsui/Visa), expanding this fee stream over time.
  • Branded residences: 35 projects open/selling across 19 countries, with additional projects in the pipeline; meaningful fee growth is expected in 2027 and beyond as more under-development units are sold, leveraging IHG's luxury and lifestyle brand portfolio.

• Capital Return

  • Declared a 10% increase in the interim dividend to $0.645 per share, maintaining the 10% annual growth rate held since 2022. A $950 million share buyback program is 42% complete as of H1 2026; total 2026 shareholder returns (dividends + buybacks) are expected to exceed $1.2 billion, equal to nearly 6% of IHG's beginning-of-year market capitalization. Over 2022-2026, total shareholder returns will exceed $5 billion.

• Full year adjusted interest cost guidance narrowed to $230-$240 million, from the prior wider range; all other core guidance from 2025 full year results remains unchanged.
• Full year overhead cost growth is expected to remain in the 1-3% range, consistent with prior targets, supporting further fee margin expansion in 2026.
• Annual key money and maintenance CapEx guidance is maintained at $200-$250 million, with average annual gross CapEx guidance of ~$350 million unchanged.
• Management expects 2026 end-of-year net debt to EBITDA leverage to remain within the target range of 2.5-3x.
• Consensus net system growth (NUG) for 2026 is 4.7%; management notes there is more opportunity for upside than downside, and does not expect any outcome below this level.
• Medium-to-long term guidance remains aligned with the 2024 growth algorithm: high single-digit CAGR for fee revenue, 100-150 basis points of annual average fee margin expansion, 12-15% CAGR for adjusted EPS, and continued return of surplus capital to shareholders. Management expects the gap between (NUG + RevPAR growth) and fee revenue growth (caused by staggered fee step-ups for newly opened hotels) to continue narrowing over time as the new hotels mature.

Overall reportable segments generated total revenue of $1.255 billion (+7% YoY) and EBIT of $655 million (+10% YoY).

1. Fee Business: Revenue increased 7% YoY to $971 million, operating profit increased 8% YoY to $640 million. Fee margin expanded 120 basis points to 65.9%, in line with the medium-term target of 100-150 basis points of annual accretion. By region:

• Americas: Fee margin increased 150 basis points to 84.2%, operating profit grew 7% YoY to $442 million (contributing 69.1% of total segment operating profit)
• EMEAA: Fee margin increased 400 basis points to 69.8%, operating profit grew 10% YoY to $141 million (contributing 21.5% of total segment operating profit)
• Greater China: Fee margin increased 460 basis points to 62.5%, operating profit grew 25% YoY to $55 million (contributing 8.4% of total segment operating profit)
• Central segment: Revenue increased 13% YoY, operating profit increased 5% YoY; margin dipped slightly due to front-loaded planned cost investment, which remains aligned with full year expectations.

Global RevPAR grew 4.1% YoY in H1 2026, with Q2 growth of 3.5%: Americas +4.8% H1 (+5.4% Q2, +100 bps Q2 uplift from the World Cup), EMEAA +3% H1 (+0.6% Q2, with Middle East subregion down 19% Q2 offset by 4% growth in the rest of the region), Greater China +3.1% H1 (+0.8% Q2, impacted by public holiday timing). All three demand drivers saw growth globally: Groups +6%, Leisure +3%, Business +2%.

System growth: Gross system growth of 6.5% from 31,500 opened rooms; 8,900 rooms were removed (1.5% removal rate), resulting in 5% net system size growth YoY, the strongest performance in 7 years. 49,200 rooms were signed across 352 hotels, with organic signings up 8% YoY, balanced between 51% new builds and 49% conversions. The current pipeline holds 33% further room growth, ~50% of which is under construction.

• Geopolitical conflict in the Middle East negatively impacted Q2 2026 RevPAR in the region, with the Middle East subregion down 19% Q2; management notes that if conflict levels remain at current reduced levels, gradual recovery is expected through H2 2026, but any escalation of tension could further disrupt regional performance.
• Greater China saw RevPAR softness in Tier 2 and Tier 3 cities for transient business, and public holiday timing impacted Q2 2026 RevPAR growth; oversupply has not been observed to date, but slower than expected economic growth in China could pressure RevPAR and owner economics.
• Broad industry-wide cost pressures continue to impact owner economics, which could create pressure on IHG's franchise value proposition if not addressed.
• The Revo bankruptcy in Germany presents no material risk, as IHG only has 6 hotels (820 rooms) of exposure to the firm.
• Key money incentives for conversion and mid-scale projects have increased at peer firms, which could create competitive pressure for IHG's deal flow if the trend continues.

Q: What is driving slower RevPAR growth in Greater China Q2, and could weak owner economics slow net system growth? / A: Q2 slowdown was primarily driven by holiday timing: an extended Chinese New Year and added school holidays in Q1 pulled forward travel demand from Q2. Positive 0.8% Q2 RevPAR growth was still delivered, with strength in Tier 1 and leisure resort markets. IHG continues to see record development activity and absorption of new rooms, with 25% YoY operating profit growth in the region. Long-term fundamentals of continued economic expansion, growing middle class, and rising domestic travel demand remain intact, with no signs of material oversupply, so growth is expected to continue.

Q: Why is there a gap between combined NUG + RevPAR growth and reported fee revenue growth, and when will this gap narrow? / A: The gap is almost entirely driven by recent record system growth: newly opened hotels require time to reach stabilized occupancy and rates, and most franchise agreements have graduated fee structures that step up over the first 2-3 years of operation. The gap has already narrowed 40 basis points YoY overall, and 110 basis points YoY in the Americas, and will continue to narrow as new hotels mature. Management prefers to continue accelerating system growth even with this temporary lag, as it means more future fee revenue is locked in.

Q: Will IHG follow peers in reducing owner charges, and would these changes be in the System Fund or IHG's P&L? / A: IHG has already proactively reduced owner costs since 2024, including lower loyalty assessment fees, higher reward night reimbursements, and reduced IHG Ignite marketing program costs. All of these changes were implemented within the System Fund, using scale and technology efficiencies to pass cost savings to owners, rather than coming out of IHG's P&L. IHG has a constructive, formal relationship with an elected owner association, and continues to adjust pricing and services to support strong owner returns, as owner success is fundamental to IHG's asset-light model.

Q: Can fee margin in the Americas continue expanding, and how much further upside is there? / A: The core driver of fee margin expansion is that IHG can add new net system growth without adding proportional overhead costs, creating a 'jaw' of growing revenue and muted cost growth. Management confirms the medium-term target of 100-150 basis points of annual fee margin expansion remains achievable across all regions, with no foreseeable near-term ceiling on this trend. Even as the Americas margin approaches 85%, there is still continued opportunity for further expansion.