InterContinental Hotels Group PLC (IHG) 2025 Q4 法說會逐字稿

Hello and welcome to IHG's 2025 full year results presentation. I'm Stuart Ford, Senior Vice President and Head of Investor Relations at IHG Hotels and Resorts, and shortly you'll be hearing from Elie Maalouf, our Chief Executive Officer; and Michael Glover, Chief Financial Officer.

Before we proceed, I'm obliged to remind all viewers and listeners that the company may make certain forward-looking statements as defined under US law. Please refer to the accompanying results 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.

In addition, the presentation will refer to certain non-GAAP financial measures. Once again, please refer to the accompanying results announcement and SEC filings for reconciliations of these measures to the most directly comparable line items within the financial statements.

The results announcement, together with the usual supplementary data pack, as well as the presentation slides accompanying this webcast, can all be downloaded from the results and presentations section under the Investors tab on ihgplc.com.

Now over to our 2025 highlights reel, followed by Elie.

(video playing)

Hello, I'm Elie Maalouf, Chief Executive Officer of IHG Hotels and Resorts. Welcome to IHG's 2025 full year results presentation. I will kick things off in a moment by sharing highlights from the year, a period of excellent financial performance and further progress on a clear strategy that's unlocking IHG's full potential for all stakeholders.

Michael Glover, our Chief Financial Officer, will then provide a financial review, after which I will share areas of progress on our strategic priorities.

We delivered excellent financial performance in 2025. RevPAR grew by 1.5%, driven by rate and occupancy gains, reflecting the breadth of our global footprint and the diversification of our demand drivers. We opened a record 443 hotels in the year to take our total estate to more than 6,900 hotels and over 1 million rooms.

Gross system growth was 6.6% and net system growth was 4.7%, representing the fourth consecutive year of accelerating growth. We signed 102,000 rooms across almost 700 hotels, 9% ahead of 2024 levels when excluding the Ruby acquisition and NOVUM conversions.

Signings were driven by strong momentum across our brands, and our pipeline now stands at almost 2,300 hotels representing 33% future rooms growth. Our fee margin grew by 360 basis points, further increasing operating profit, and EPS grew even faster, supported by 2025's $900 million share buyback program.

Today we're pleased to launch a new $950 million share buyback which together with growing our ordinary dividend payments is expected to return over $1.2 billion to shareholders in 2026. Cumulatively over five years, this will mean IHG has returned more than $5 billion to our shareholders.

We're also very excited to announce the launch of our new premium collection brand, Noted Collection, together with the acquisition of Ruby. This new brand will further strengthen our portfolio and growth potential in the critically important premium segment. More on this later.

Altogether we delivered another excellent set of results demonstrating the strength and resilience of our business model and the power of our growth algorithm despite some turbulent trading conditions.

RevPAR growth, system growth, and margin expansion collectively drove a 13% increase in EBIT, and with the strength of our cash conversion, which funds our investments, dividends, and share buybacks, we delivered adjusted EPS growth of 16%.

This performance is above the top end of what we laid out as the compound average that we are targeting over the medium to long-term, and we are confident as we enter 2026 that we will continue delivering on this growth algorithm going forward. Let me now hand over to Michael to take you through the details of our financial results.

Thanks, Elie. I'm Michael Glover, Chief Financial Officer for IHG Hotels and Resorts. Let me take you through some more detail on a great set of results for 2025. I'll start as usual, with reportable segments, which includes the fee business and our owned and leased portfolio of 17 hotels. Revenue was $2.5 billion and EBIT was $1,265 million growing 7% and 13%, respectively.

Within this, we saw similar trends in fee business revenue and fee business operating profit, which also increased by 7% and 13%, respectively. Fee margin increased by 360 basis points to 64.8%. I'll touch more on this excellent performance shortly.

Adjusted interest increased to $200 million which was at the midpoint of our guidance range of $195 million to $205 million. Our adjusted tax rate was 27%, unchanged from the prior year. Adjusted earnings per share includes the accretion benefit from the $900 million share buyback program executed in the year, as well as the annualized impact of 2024's $800 million program.

The combination of strong revenue growth and fee margin progression, together with the accretion from the buybacks, resulted in earnings per share increasing by an impressive 16%. The total dividend is proposed to increase 10%, consistent with the growth rate in each of the past three years.

Moving on to a summary of RevPAR performance. America's RevPAR grew 0.3% for the year, with a 0.5% increase in rate, more than offsetting a slight 0.1 percentage point decline in occupancy. After strong growth of 3.5% in Q1, RevPAR declined 0.5% in Q2 with the shift in timing of Easter between March and April and the onset of reductions in certain types of business and Leisure travel in light of macroeconomic developments.

RevPAR declined 0.9% in Q3 and by 1.4% in Q4. When there were tougher year-on-year comparatives due to hurricane-related demand in the fourth quarter of 2024. Outside the US, RevPAR for the year grew 4%, with Canada, Mexico, and the Latin America and Caribbean subregion all delivering growth.

In the EMEAA RevPAR grew 4.6% for the year, with occupancy of 1.6 percentage points and rate up 2.4%. In Q4, RevPAR accelerated strongly to 7.1%, driven broadly evenly by increases in occupancy and rate, and with good growth in each of business, Leisure, and groups. By major geographic markets, full-year RevPAR growth ranged from 1.1% in the UK to 4.2% in continental Europe, 5.5% for the East Asia and Pacific subregion, and just under 9% in the Middle East.

In Greater China, RevPAR for the year declined 1.6%, with occupancy up 0.5 percentage points and rate 2.4% lower. The RevPAR decline of 3.5% in Q1 was followed by 3% in Q2, further improving sequentially to a 1.8% decline in Q3, before returning to growth of 1.1% in Q4, with notable improvement in Leisure demand.

This slide shows the business, Leisure, and groups demand drivers presenting booked revenue broken down by room nights and ADR.

Global rooms revenue for business bookings grew 2% on a comparable hotel basis, driven by both room nights and rate. Group's revenue increased by 1%, predominantly due to rate, while Leisure revenue was unchanged year-on-year, with both occupancy and rate broadly in line with 2024's strong performance.

Turning to development activity, gross growth was 6.6%, as a record number of hotel openings saw over 65,000 rooms added to the system, 10% more year-on-year. Just over half of all openings were conversions. 26,000 rooms left the system, equivalent to a 1.9% removal rate when adjusting for the Venetian.

This is slightly higher than the 1.5% average we generally expect, though not indicative of a longer-term trend. Higher removals in China, reflecting lagged post-COVID exits, combined with the natural lumpiness of exits elsewhere, led to this temporary variance. Taken together, reported year-on-year net system growth was 4% or 4.7%, when adjusting for the Venetian.

We signed over 102,000 rooms in 2025, a 9% year-on-year increase when adjusted to exclude the Ruby acquisition in the prior year's NOVUM agreement. Pleasingly, both new build developments, up 8%, and conversion activity, up 10%, contributed to this performance. A little over half of all signings were new builds.

Moving to cost control. As I noted in our half-year results, IHG has maintained a disciplined approach to cost management for many years, with this mindset embedded in how the business operates. Through process redesign, greater leverage of centralized support, and enhanced use of technology, including AI, we continue to build a highly efficient, scalable cost base with step chain savings delivered in 2025 that are sustainable over the long-term.

Set up expenditure to realign our business in this manner, resulting in an exceptional cost within the fee business of $12 million. This delivers a cash on cash payback within 12 months, with further savings thereafter.

These actions alongside those taken in previous years are therefore already yielding results. The business overheads of $666 million in 2025 were $23 million lower than in 2024, a reduction of 3%. Going forward, this sets us up to continue holding overheads growth to a lower rate of increase than revenues. And therefore driving further margin expansion.

Moving then to fee margin, which increased by a very pleasing 360 basis points, this was achieved through a combination of improved core operating leverage, including the disciplined cost management I highlighted, and step ups in ancillary fees streams.

As a reminder on those step ups, in 2024, we announced that revenue generated from the sale of loyalty points would begin to flow directly to IHG. Initially, 50% of these revenues were recognized in 2024, representing an incremental $25 million to IHG with 100% of revenues, and therefore a further $25 million step up recognized in 2025. This delivered an uplift in margin equivalent to 50 basis points.

We've also seen a step up in co-brand credit card fees. When we announced the new arrangements in November 2024, we said we expected an incremental $40 million of co-brand revenue in 2025. This was achieved and delivered a further margin uplift equivalent to 80 basis points.

Historically, IHG's central costs exceeded central revenues, resulting in a central loss. With the step-ups in point sales and co-brand fees, this segment now generates a net profit after central overheads.

For analysts and investors who maintain models, looking to forecast IHG Central Division, I'd refer you to an episode of IHG Checks in on, released today alongside these 2025 results. This episode provides more detail about the composition of Central, how we report it, what has changed in the last two years, and how you should think about modeling it going forward.

So, there was a combined 130 basis points of margin improvement from step-ups in ancillaries, and our operational leverage and cost actions drove the other 230 basis points of margin improvement. Both the Americas and EMEAA delivered strong margin expansion, while China saw a slight decrease due to strategic one-off cost investments and lower incentive management fees.

It is worth reiterating that the overall margin achievement in 2025 was unusually strong, driven by the step-ups in ancillaries and by the additional cost action that was taken going forward. It remains our ambition to expand the fee margin by 100 basis points to 150 basis points a year on average, which would be driven by achieving fee revenue growth of a high single-digit whilst controlling overhead growth to a low single-digit increase per year on average.

Moving on to cash flow. Adjusted free cash flow was $893 million representing a year-on-year increase of $238 million. This improvement was driven by the increase in EBITDA of $143 million or 12%. There was also some lower outflows, including cash tax being $36 million lower than the previous year, and CapEx within free cash flow, $29 million lower, which I will come on to in just a moment.

Free cash conversion was a very strong 115% of adjusted earnings. Well above the around 100% average we expect over the medium to long-term.

After other flows beneath free cash flow, principally the $1.1 billion of returns to shareholders, the overall increase in net debt was $551 million which resulted in leverage at the end of the year of 2.5 times net debt to EBITDA, thus returning us back into our target range.

Back at our Q3 update, I noted that in September, we issued an $850 million five-year euro bond, swapped to $990 million with interest payable semiannually at 4.9%. In December, we then entered into a new $1.5 billion RCF replacing the previous arrangement. This new five-year facility is covenant-free and remains undrawn.

A look now at capital expenditure. Key money investment totaled $177 million and $29 million lower year-on-year. We previously indicated that we expected key money spent in 2025 to be broadly in line with 2024, but some of the outflows we had expected in late 2025 have shifted into 2026.

Importantly, our total key money and maintenance CapEx guidance remains unchanged at $200 million to $250 million. Gross recyclable capital expenditure of just $16 million was $52 million lower year-on-year. These arrangements are often inherently lumpy, and some of these have also carried over into 2026, but such that we still remain within our average annual gross CapEx guidance of $350 million.

This chart shows you the evolution of our capital expenditure deployment. A key takeaway is that our overall CapEx spend has been stable, while revenue and profit has grown.

As I will show you on the next slide, this is a testament to our capital discipline. In the earlier four years on this chart, you can see that system fund CapEx and maintenance CapEx were the largest components. With the completion of our GRS investment and rollout between 2016 and '19, together with the ongoing reduction of our owned and leased estate, and along with the greater utilization of software as a service solutions, CapEx requirements for the system fund and maintenance categories have since decreased.

These prior investments have also ensured we have a very well invested, scalable tech stack and enterprise platform to support future growth. Therefore, in more recent years, the strong growth of our premium and luxury and lifestyle brands have shifted the mix of CapEx towards expansionary investment in key money and recyclable CapEx.

In 2025, overall CapEx spend was lower than anticipated. And in 2026, we may catch up on some timing slippages, but to reiterate, our annual gross CapEx guidance on average of around $350 million remains unchanged.

The strength of our model is resoundingly evident when comparing the acceleration of our fee business revenue, which has grown at a CAGR of 4% over the last decade, and fee business profit, which has grown at a CAGR of 7%, against our gross and net CapEx, which continues to represent a small proportion of our income.

The takeaway is clear. We are achieving very attractive returns on the relatively limited capital required, which supports our medium to long-term growth ambitions, as already shown by the acceleration of fee revenues and profits in the more recent years.

For analysts and investors who want to understand in more detail, IHG's approach to capital expenditure, And with particular focus on key money, today, we have released a mini teach-in on this topic as a further episode of IHG checks in on. In this episode, I discussed these areas with Stuart Ford, Head of Investor Relations, and two of our regional Chief Financial Officers, Blake Longstaff, CFO Americas; and Matt Woollard, CFO of the EMEAA region.

Our strategy for uses of cash remains unchanged. After investing behind long-term growth, which is the foremost priority, we look to sustainably grow the ordinary dividend. In this regard, as mentioned, we are pleased to propose a final dividend growing by 10%. That rate of growth has been consistent for each of our dividend payments over the last three years.

A year ago, we announced a $900 million buyback program, which completed in December. This repurchased 7.6 million shares and reduced the share count by 4.8%. Together with ordinary dividend payments, we returned over $1.1 billion to shareholders, which was equivalent to 5.9% of IHG's market capitalization at the start of 2025.

Today, we are pleased to announce that a new share buyback program will commence immediately, returning a further $950 million. Together with the anticipated sustainable growth in ordinary dividend payments, this will return another $1.2 billion to shareholders, equivalent to 5.8% of IHG's market capitalization at the start of 2026. Cumulatively, for the five years of 2022 to 2026, this will mean IHG has returned more than $5 billion to our shareholders.

And finally, modeling considerations. The interest expense is expected to increase to within a range of $230 million to $250 million for 2026, given the increase in average net debt and a slightly higher blended cost of borrowing. We anticipate no change to our adjusted tax rate of 27%.

Capital expenditure guidance also remains unchanged, with key money and maintenance CapEx of $200 million to $250 million within a gross total of up to $350 million on average annually. For reference, this slide also shows a summary of our growth ambitions over the medium to long-term.

With that, let me now hand back to Elie.

Thank you, Michael. I will now share an update on our strategic progress in 2025 across the five areas shown here.

Starting with excellent development activity across our brands between 2015 and 2025, we doubled our brand portfolio from 10 to 20 brands, and today we are pleased to announce the launch of our 21st noted collection in the premium collection space. Across these brands we are capturing more guests at more price points and more owner interest than ever before.

At the top end in ultra luxury six senses is delivering exclusive one-of a-kind experiences and sought after leisure destinations, driving average daily rates of over $1000 per night. At the other end of our portfolio is essentials.

Garner is rapidly scaling and further broadens our presence in the affordable mid-scale space. In the middle of the brand ladder we have doubled down on the fastest growing premium segments with the acquisition of Ruby in 2025 and today's launch of Noted Collection.

Across all our brands, new and established, we are unlocking the power of our industry leading enterprise platform for even more owners. Our expanded brand portfolio diversifies our customer mix, enhances the value of our loyalty program, and brings more property types into our system. And we continue to consider options to further develop our portfolio in the future.

In 2025, we opened a record 443 hotels and added a further 694 into our pipeline. Our 10 established brands, which include InterContinental, Crowne Plaza, Holiday Inn, and Holiday Inn Express, drove the majority of development activity, accounting for around two-thirds of openings and signings.

And with over 900,000 rooms already in our system and nearly 30% growth in the pipeline, these established brands will continue delivering system growth going forward.

Meanwhile, our newer brands are scaling quickly, accounting for one-third of openings and signings in the year. They've grown to already represent 10% of our current system size and 22% of the pipeline.

By brand segment, we are very pleased with the continued evolution of each of our six brands and luxury and lifestyle. Together these higher fee per key rooms account for 14% of our system size and 22% of the pipeline. Our two ultra luxury brands, Sixth Senses and Regent, are creating a halo effect and opening up new ancillary fee opportunities in areas like branded residential.

Regent was recently voted one of the top three most loved hotel brands in Travel and Leisure's prestigious 2025 World's Best Awards, and we are thrilled in a few weeks' time to be celebrating the opening of Sixth Senses London. This landmark hotel will be a cornerstone in the brand's exclusive and growing portfolio and will redefine urban luxury.

InterContinental is delivering even higher guest satisfaction as we continue to reimagine the luxury experience for today's modern traveler. With over 240 hotels open in more than 60 countries, InterContinental is the world's largest international luxury hotel brand.

And 80 years since its launch, the brand is still young and has a long runway for growth, with over 100 hotels in the pipeline. We are also very pleased with the continued growth of Vignette Collection, Kimpton and Hotel Indigo. Vignette Collection, launched in 2021, is tracking ahead of its goal to reach 100 hotels open in a decade.

Kimpton further expanded its global footprint with notable openings, including a first hotel in Hong Kong, and Hotel Indigo has now exceeded 320 open and pipeline hotels in nearly 50 countries, reflecting its accelerated pace of development.

Turning to Premium, we are focused on expanding our offer in this large and fast-growing category which is key to unlocking cross-category demand between luxury and essentials. Each of our six brands in this category is highly differentiated, capturing a range of stay occasions and guests.

Our Premium portfolio is anchored by Crowne Plaza, a trusted name for both business and blended travelers. The brand is building strong momentum with hotel openings and signings increasing over the past four years, taking its total open and pipeline hotels to 578. And with 34% rooms growth embedded in the pipeline, Crowne Plaza's growth prospects are at their highest level in over 15 years.

Driving this demand is a successful evolution of the brand and enhanced quality of the estate. Today, 70% of Crowne Plaza properties in the Americas and more than 60% globally are new to the system or have undergone a renovation.

At the same time we are doubling down on premium's fastest growing segments. Our versatile premium conversion brand Voco already has 124 open hotels across more than 30 countries since launching in 2018, with a further 108 pipeline hotels as signings continue to accelerate.

Our recently acquired brand Ruby had 20 open hotels at the time of acquisition, has signed new deals in new exciting destinations, including the US, and we expect it to reach 120 hotels within 10 years.

A Noted Collection launched today, we expect to also scale rapidly. Let's take a look at the short reel to give you a brief flavor of the brand.

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Noted Collection which is designed to power the performance of high-quality upscale to upper upscale hotels with their own unique identity fills a key space in our brand ladder and further expands our offer for guests.

It will initially focus on our EMEAA region where there is a significant proportion of high-quality hotels with strong individual brand equity that would benefit from fast connection to our powerful enterprise, global scale, and expertise. We are already in initial discussions with multiple owners, including several with portfolios of hotels, and we expect to reach more than 150 hotels over the next decade.

More details about the brand, including the media release and the full highlights reel can be found on our corporate website.

We also continue to extend our mainstream leadership through our powerhouse essentials and suites brands. Our world leading Holiday Inn Express brand opened another 95 hotels in 2025, taking its open estate to 3,300. Its strongest level of signings in six years, around 170 hotels, takes its pipeline to 655. And during the year, we also opened the brand's first Gen 5 hotels in Greater China and Europe, a format designed to boost both owner returns and guest satisfaction.

Our latest Holiday Inn design has also expanded in the US and is delivering performance uplifts and as mentioned earlier, we are very pleased with the speed of Garner's growth becoming IHG's fastest ever brand to scale globally. Garner entered six new countries in 2025 alone Mexico, Austria, the Netherlands, Italy, Turkey, and Thailand.

Finally, we continued the strong momentum of our suites brands with 50 hotel openings in 2025, up around 30% year-over-year based on rooms, and we signed a further 90 hotels into the pipeline. We now have over 1,200 open and underdevelopment suites hotels.

Let's now turn to priority growth geographies, where we are achieving impressive development activity across our regions. Let me first begin with a reminder of our global position today.

IHG is a large domestic player in large domestic markets with the US, Europe, and China collectively accounting for 79% of our current system size. We are also large domestic players in Canada, Mexico, Saudi Arabia, Japan, and Australia. This is by strategic design. In 2025, approximately 90% of guests staying at our hotels around the world traveled either domestically or from nearby countries.

Therefore, shifting travel flows, while impactful to certain markets and regions, usually have a limited impact on IHG's global performance. And as we approach 7,000 hotels in over 100 countries, we are well positioned to capture guests even further wherever and whenever they choose to travel.

Our pipeline of 2,300 hotels also deepens our presence in the world's fastest growing economies. Almost 60% of this pipeline is located east of Europe and in countries that will collectively see economic output rapidly increase by more than 40% over the next 10 years, and the number of middle income households increase by more than 80%.

Taking a closer look at our largest market, the US, development momentum continued to pick up in 2025, with gross openings accelerating for the second consecutive year to grow 11% year-over-year. We opened 156 hotels driven by momentum across our premium essentials and suites brands and signed 233 hotels into the pipeline, highlighting owners' continued confidence in investing behind our brands.

In Greater China, we celebrated IHG's 50th anniversary and our 800 opening in early 2025. By year end, we reached 882 open hotels with net system growth of nearly 9%. It was another record year of both hotel openings and signings, with the latter taking our pipeline to 582 hotels.

During 2025 we also opened our first Atwell hotel, so 13 of our brands are now present in Greater China. Many of these brands are still in their infancy in the region, and we will introduce additional brands into this vast market in the coming years, including Garner in 2026.

Looking ahead, 56% growth is embedded in our pipeline, and we remain confident in the market's long-term structural growth drivers supported by a middle class forecast to approximately double over the next 10 years and a significant under penetration of hotels per capita relative to the US.

Turning now to EMEAA and four priority growth geographies where our strategic focus is delivering strong growth momentum and market share gains, starting with Germany, one of Europe's largest hotel markets was strong domestic consumption and inbound travel, and also one of the largest sources of international outbound travel globally.

In 2025, we doubled our presence in the country to 190 hotels from 96 in 2023. We are also pleased to have signed a further 25 hotels into the pipeline as growth momentum in the strategically important market accelerates.

Momentum is also accelerating in Japan, where the top three global players account for only 5% of industry supply. In 2025, we opened eight hotels and signed another 18, our strongest year in the country since 2007.

We also launched several successful local partnership initiatives, including an IHG MiniApp in Japan's most popular messaging platform, the LINE. We now have 4 million followers, four times more than our closest competitors.

In Saudi Arabia we opened our first Kimpton in 2025, which takes the number of brands present in the country to seven. We also signed a record 21 hotels, including the launch of EVEN hotels for the wider EMEAA region, as well as two portfolios totaling six hotels across five different IHG brands.

We continue to see tremendous opportunity in Saudi Arabia with over 80% room's growth embedded in our pipeline, industry leading signing share in the first nine months of 2025, and nearly 20% share of future industry supply.

In India, we surpassed a major milestone of 50 open hotels in 2025 and delivered record signings in this rapidly growing market, taking our pipeline to 89 hotels. Notable signings included the first five Garner hotels, and we opened our first Vignette Collection. This momentum reflects strong owner confidence in our brand portfolio and the power of our enterprise platform in this rapidly growing market.

We see large and long-term potential going forward with around 160% growth embedded in our pipeline and an ambition to triple or open and pipeline hotels over the next five years.

Overall, the strength of our brands and global geographic positioning drove our strongest gross and net system size growth performance in six years, with 33% further room's growth embedded in our pipeline, around 50% of which is currently under construction, and attractive long-term structural industry growth drivers at play. We remain confident in the momentum of our system growth going forward.

Now turning to the important progress we're making in developing our leading technology and enterprise platform to capture demand, deepen guest loyalty, and drive hotel owner returns, our industry leading connected technology ecosystem is the backbone of our enterprise platform and one of our key competitive advantages, enabling us and our hotel owners to capitalize on the opportunities that new technologies like artificial intelligence are creating.

At the center of how we optimize operations for owners is our first in the industry guest reservation system, which is extremely well invested in and is the backbone upon which other core systems connect. The GRS interconnectivity is also central to how we leverage the ecosystem to promote all IHG hotels and engage our guests.

I will come back to developments across that promote and engage pillars in just a moment.

Before that, touching on core systems a little further, in 2025, a further 3,400 hotels adopted our new revenue management system, completing the rollout of the platform across the eligible estate. This new RMS offers best in class cloud-based solutions that incorporates data science, machine learning AI, and forecasting tools to deliver advanced insights and recommendations to owners.

This significant innovation is made possible by the previous rollout of our GRS. We are creating even greater value for owners by providing hotels with a next generation property management system through cloud-based above property solutions that apply the latest technology and allow the deployment of fast, efficient enhancements.

Benefits include quicker colleague onboarding and training and streamlined front desk processes via mobile and remote access. The accelerated rollout of our new PMS solutions reached 2,000 hotels in 2025, and we expect to double this to 4,000 by the end of 2026.

Turning then to the next phase of our technology evolution and the ways we are weaving artificial intelligence throughout our enterprise platform and transforming how we deliver on our growth algorithm. Our approach to artificial intelligence can be grouped into three distinct areas guest acquisition, commercial optimization, and cost efficiency.

Starting with guest acquisition, our teams are leveraging the latest technology to develop new ways to promote our hotels, drive bookings, and deliver more memorable stays for our guests. Within this area, we are pursuing four key initiatives search, discover, book, and stay.

First, we will begin rolling out our new content platform this year, ensuring the right hotel information is showing up in the right channels at the right time.

Second, we are developing foundational AI powered trip planning capabilities in partnership with Google, a key step in moving towards a more conversational search experience on IHG's own websites and apps.

Third, we are piloting new AI powered marketing tools that are delivering meaningful improvement in click-through rates and ROI in initial testing.

Fourth, we are refreshing our loyalty platforms and deploying a new AI enhanced CRM platform this year that will help our hotels know their guests on a more personal level and drive deeper loyalty.

I will touch on this and the content platform in more detail shortly. Together these capabilities will strengthen our direct channels, bring more guests to hotels, and keep our most loyal guests coming back.

Turning to our second area, commercial optimization. Our new RMS, which builds upon our previous investment in GRS and leverages machine learning AI, is fully rolled out and achieving positive impact on owners' top-line performance in the form of revenue uplift and market share gains.

Our hotels are also seeing efficiency gains through the use of automatic language translation and digital assistants that answer common guest questions, freeing up time for our hotel colleagues to focus on more value-added activities. Finishing with our third area, we are leveraging AI to drive cost efficiencies and transform how we deliver on our growth algorithm.

By providing our colleagues with the latest technology, we're establishing new ways of working, automating routine tasks, and delivering insights across the business faster and more effectively.

As you heard Michael say earlier, this technology, together with process redesign and greater leverage of centralized support is unlocking a more efficient, scalable cost base with step change savings delivered in 2025 that are sustainable over the long-term.

Now let's take a closer look at our new digital and AI compatible hotel content platform. This platform, which we will begin deploying this year, will bring property features and attractions to life in new and exciting ways with videos, 360 degree images, floor plans, virtual tours, automated language translation, and more.

It will transform how we structure hotel content and strengthen the digital hooks needed for our hotels to be recommended by AI agents. It will also create new ways to combine and display information, unlocking greater flexibility in how content is created, delivered, and personalized. Importantly, this will create new advantages for IHG and our hotels as the search environment continues to evolve.

To deepen loyalty, we are also making big advances to get more familiar with our guests, especially our most loyal guests. We are refreshing our loyalty platform and unifying our customer data with a new cloud-based CRM. We began the rollout of select functionality in 2025 and we'll continue scaling this in 2026. This refresh will provide a seamless view of our customers throughout their IHG experience. Whether they are engaging digitally, calling a customer care center, checking into one of our hotels, or requesting a copy of their bill post checkout.

Combined with AI, we will be able to anticipate their needs, personalize their experience, offer more relevant promotions and benefits, and extend loyalty rewards faster and more effectively. The loyalty platform evolution will bolster our customer acquisition capabilities, widen our competitive mode, and unlock the full potential from IHG One Rewards from an already strong base.

In 2025, our IHG One Rewards membership base rose to more than 160 million members. This means it has grown approximately 60% since the program was relaunched, an outstanding achievement. Globally loyalty penetration is now approximately 66% of all room nights booked, growing by over 3 percentage points in each region, and it is highest in the US and Americas overall at 73%. Loyalty members spend more and are 10 times more likely to book direct, which drives enormous value for owners.

And our engaged members are the ones driving this program growth. Reward night redemptions increased by 9% year-on-year, and there was 12% growth in the number of milestone rewards selected as we delivered value to our most frequent guests.

Overall, the strength of IHG One Rewards, together with our industry leading technology ecosystem and all the channels and sources we manage for our owners, is driving increased total enterprise contribution. That provides hotels with 83% of all the rooms revenue booked. This is generating more high-quality revenue for owners, lowering their costs, and enhancing their returns.

Now, an update on our valuable ancillary fee streams driven by the strength of IHG One Rewards in our powerful brand portfolio and enterprise platform. We've said before that our loyalty members are our most valuable guests, spending more and booking direct.

Our co-brand credit card holders stay even more frequently and spend even more in our hotels. In 2025, the number of US co-brand card members saw high single-digit percentage growth, alongside a comparable uplift in total card spend as we delivered more rewards to more cardholders.

The continued growth in the program together with the new agreements between IHG and our US issuing and financial services partners is driving the step changing co-brand credit card fees that Michael spoke about earlier.

We're also excited to announce that we have recently agreed a new UK co-brand debit card partnership with Revolut alongside Visa, with card products scheduled to be launched later this year. Further co-brand opportunities and priority growth markets are targeted for future years.

Turning to point sales, we are very pleased with the growth of ancillary fees as consumers engage with IHG One Rewards while buying and redeeming points across our global estate. We expect this product and fee stream to continue growing in the future as our loyalty program and system size expand further.

Finally, we continue to see meaningful fee growth potential from branded residential developments. The number of properties in this industry segment is forecast to approximately double by 2032, and our industry leading luxury and lifestyle brands give us an advantageous position to capture that growth.

We currently have more than 30 open or selling projects in the market across 15 plus countries and more in the pipeline. Fees earned by IHG from branded residences increased in 2025, benefiting from strong sales at Sixth Senses Dubai Marina.

Signings in 2025 for future branded residences developments included Sixth Senses Myoko, Japan, and two in Thailand at the InterContinental Phuket Resort and the InterContinental Residences Bangkok Asoke.

Further fee growth is expected to be substantial in 2027 and beyond as more of the current residential units under development are sold. And as we continue to leverage the global reach and potential of our luxury and lifestyle brands.

To conclude, we are very pleased with the strength of our financial performance, the growth of our brands, and progress made in 2025 against a clear strategy that is unlocking the full potential of our business for all stakeholders. The strong performance went beyond the growth algorithm delivering RevPAR growth of 1.5%, net system size growth of 4.7% and 360 basis points of fee margin expansion.

We returned over $1.1 billion to shareholders, and this culminated in adjusted EPS growth of 16%. We remain confident in our ability to continue delivering the growth algorithm on average over the medium to long-term driven by high single-digit fee revenue growth.

100 basis points to 150 basis points of margin expansion per annum from operating leverage. Approximately 100% adjusted earnings converting into free cash flow. Sustainable dividend growth, returning surplus capital to shareholders while targeting financial leverage between 2.5 times and 3 times and ultimately delivering 12% to 15% adjusted EPS growth as a compound annual growth rate and with that we thank you for listening to our 2025 results presentation.