InterContinental Hotels Group PLC (IHG) 2015 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen. And welcome to the InterContinental Hotel's Group Interim Results 2015 Conference Call. My name is Dave and I'll be your coordinator for today's conference. For the duration of the call, you will be on listen-only. However, at the end of the call, you'll have the opportunity to ask questions.

(Operator Instructions)

I'm now handing you over to David Kellett, Head of Investor Relations, to begin today's conference. Thank you.

Good morning, everybody. This is David Kellett, Head of Investor Relations IHG. I am joined this morning by Richard Solomons, Chief Executive; and Paul Edgecliffe-Johnson, Chief Financial Officer.

Before I hand over to them for the discussion of our results, I need to remind you that in the following discussion the Company may make certain forward-looking statements as defined under US law. Please check this morning's press release and the Company's SEC filings for factors that could lead actual results to differ materially from any such forward-looking statements. I will now turn the call over to Richard Solomons.

Thank you, David. Good morning, everyone. Thanks very much for joining us, and welcome to our 2015 call. Before I hand over to Paul, let me just start with a few highlights and prospectus on the market.

We delivered strong underlying financial performance in the first half, driving global RevPAR growth of 5.1%, and signing over 40,000 rooms, our best signing performance for seven years.

July marked a significant milestone for us, as we finalized our major owned asset disposal program, with the agreement to sell InterContinental Hong Kong for $938 million.

Once that transaction completes, over 95% of our operating profit will be generated through our fee business, where the vast majority of earnings are tied to hotel revenues. I'll talk later about how we're growing this revenue through our winning model. But first I'd like to step back and consider the broader market environment.

As we've seen for some time, sector tailwinds remain very favorable, with continued GDP growth driving the globalization of travel, and a growing number of outbound travelers from emerging markets. Meanwhile in our largest region, the US, economic growth is leading to record levels of room night demand.

So let me just hand over to Paul, who will talk in more detail about our financial performance. And I'll return later to discuss execution against our broader strategy.

Thank you, Richard. And good morning, everyone. We're pleased to report another strong financial performance in the half year, with solid growth in fee revenues across each of our four regions.

As in previous years, the year-on-year comparability of our total revenue and operating profit are distorted by the impact of owned hotel sales, significant liquidated damages, the performance of managed leases and foreign exchange movements. Details of these items are included on slide 36 and 37 of the presentation we have released today. I will focus my attention this morning on our underlying performance, using constant exchange rates, to provide the best explanation of our financial performance.

And on that basis, we increased our fee revenue by 9%, and underlying profit by 10%. Our fee-based margin for the half of 46.8%, increased 180 basis points year on year, reflecting the benefits of our global scale, but also that our costs this year will be weighted more towards the second half. Consequently, we expect our fee-based margin to normalize, to reflect an approximate 100 basis point increase for the full year.

Higher interest charges were offset by an 8% reduction in weighted-average shares. And in aggregate, this enabled us to deliver 25% growth in underlying earnings per share, year on year.

Our 9% growth in fee revenue was a result of continued increases in both RevPAR and net system size in each of our four regions, which grew by 5.1% and 4.5%, respectively. Excluding Kimpton, we delivered 2.8% growth in net rooms. We maintain our disciplined approach to quality and expect our removal rate to remain in the range of 2% to 3% of system size in the near term.

Each of our four regions increased their fee revenues, with strong performances across the Americas, Europe and Greater China. This reflects the quality of our earnings and our fee-based model, where fee revenue growth is a product of the change in both RevPAR and rooms.

Despite it having the lowest half yearly increase in RevPAR of the regions in which we operate, Greater China delivered us the greatest fee revenue growth at almost 11%. To give some more color as to where and how we drove this growth, I will now talk to the performance of each of our regions in more detail.

Starting with the Americas, where demand in the United States has been at record levels for 52 months. We have capitalized on this to drive all-time high occupancy across our across our Americas portfolio, which reached almost 68% at the end of June.

Both our Holiday Inn and Holiday Inn Express brands are also operating at record occupancy levels. We are focused on optimizing our revenue management system, which allowed us to increase average rates in the US by 4.2%, and allowed the Holiday Inn brand family to maintain its $5 RevPAR premium to the segment. This generated comparable US RevPAR growth of 5.6% in the half.

From a competitive standpoint, our performance highlights our existing high levels of occupancy and the distribution of our portfolio towards the oil-producing states, such as Texas, Oklahoma, and North Dakota, which were negatively impacted by lower oil prices and resulting industry spend. These three markets represent approximately 13% of our US portfolio. And together, they delivered flat RevPAR for the half year. Excluding these markets, our US RevPAR growth would have been 6.5%.

Elsewhere in the Americas, RevPAR in Mexico was up 9.4%, driven by double-digit growth in key cities. Whilst RevPAR growth in Canada of 1% was also impacted by performance in Canadian oil-producing areas.

Underlying profit was up 8%, reflecting the performance of our franchise business, which increased underlying profit by 10%, and was partially offset by an increase in regional overhead.

Our net rooms' growth of 4.6% or 2.1% excluding our acquisition of Kimpton, was our best in the region for five years. We signed 21,000 rooms, up significantly year on year, an increase for the fifth year running, and almost double the number of rooms signed back in 2010.

Moving on now to Europe, where our key markets continued to perform well. Growth was strong in the UK, where RevPAR was up more 6%, driven by trading in the UK provinces up 8%.

In our second-largest market of Germany, RevPAR increased 5%, with the Holiday Inn brand family continuing to outperform the industry. In what is a relatively small part of our business, Russia and the CIS is expected to face continued uncertainty, impacted by economic weakness and the devaluation of the ruble.

Total underlying profit in Europe increased by 22%, driven by strong RevPAR growth in our key markets, and good growth in franchise business, which grew by 19% following the streamlining of our UK-managed business.

We signed 3,000 rooms into our pipeline, including six deals in Germany with our network of multi-development agreement partners.

Moving now to our Asia, Middle East and Africa region, where comparable RevPAR increased 5.4%, led by Japan which grew by almost 13%, and Southeast Asia which is up around 8%.

The first six months benefitted from Ramadan starting earlier this year, and a number of strong country-specific performances, which will not be repeated in the second half of the year.

Underlying profit grew 17%, reflecting solid like-for-like performances across our fee business and our focus on efficiency, but also a number of small one-off benefits at the expense line.

Our focused development strategy continues to deliver strong growth, with our net system size increasing 3.1%. We signed 9,000 rooms, more than double the same period last year, including a more than 5,000-room Holiday Inn in Mecca.

Moving on now to Greater China where we drove almost 11% fee revenue growth through new openings, and almost 5% RevPAR industry outperformance. Comparable RevPAR increased 1.5%, reflecting our scale and our management strength in the region. Mainland China comparable RevPAR was strong, up 4.8%, but offset by ongoing challenging trading in Hong Kong and Macau.

Underlying profit declined 6%, reflecting our previously flagged investment this year into our regional capabilities to position us for further outperformance. We enhanced our market-leading position in the region, delivering net room's growth of almost 10%, and signed 9,000 rooms, a 20% increase year on year. Taking our pipeline in the region to more than 200 hotels for the first time.

I'll now move on to talk about capital allocation. We have been clear that we are committed to an efficient balance sheet, with an investment-grade credit rating. In 2014, we announced a strategic review of our remaining owned assets. The sale of InterContinental Paris Le Grand completed in May. And as Richard mentioned, on the 10th of July, we were pleased to announce the sale of the InterContinental Hong Kong for $938 million. The sale is expected to complete in the second half, and we will retain a long-term management contract on the hotel.

In line with our usual practice, only when funds have been received will we comment on their use. And a decision on a return of funds to shareholders from these proceeds, alongside those received from the sale of InterContinental Paris Le Grand, will be announced at preliminary results in February 2016.

This transaction finalizes the disposal of our major owned assets. Since our formation in 2003, we've sold almost 200 hotels for gross proceeds of approximately $8 billion. Over the same period, we have returned more than $10 billion to our shareholders.

I had talked in detail over the past year on our capital expenditure. And I won't go through that again today. But we'll highlight the change we made to our system-funded capital investment in April, following our announcement of our strategic partnership with Amadeus.

At that time, we flagged our system-funded capital investments are expected to increase to around $100 million in 2015, up from approximately $60 million in 2014, reflecting our investments in evolving our own market-leading technology. Otherwise, our reported CapEx numbers for the first half are in line with our guidance, which remains unchanged in the medium term.

To conclude then, I will reiterate our focus on executing our capital allocation strategy and maximizing returns to shareholders. We generate significant cash from operations, which we then use to invest in the growth of the business.

We have also announced today a 10% increase in our interim dividend for the half year to $0.275. I will now pass over to Richard, who will talk more about how we are driving our strategy.

Thank you, Paul. Our winning model remains at the core of our success, and continues to deliver high-quality growth. Preferred brands, our leading loyalty program and effective channel management are key components of the model, and form the basis of our commercial strategy which I introduced this time last year.

Effective commercial execution ensures a superior guest experience. And we've made significant progress across all three of our focus areas, as well as continuing to innovate with our digital solutions, and developing a market-leading guest reservation system with GRS.

Before I talk more about technology, I'll touch on the progress we're continuing to make with our brands. I'll start with Holiday Inn and Holiday Inn Express, the world's only truly global mainstream brands, which we relaunched eight years ago, and have made significant strategic progress with since then.

The brand refresh remains the world's largest ever achieved. And since it started we've relaunched 3,300 hotels, opened a further 1,500, and removed over 1,000, reducing the average age of the estate to lower than our major competitors.

The positive outcome from these actions and our emphasis on quality has driven guest satisfaction levels to an all-time high. And this has been recognized across the industry, with Holiday Inn winning the prestigious JD Power award for guest satisfaction in mid-scale full-service for four years in a row.

This guest preference has driven consistent industry outperformance, with over 5 percentage points' growth in the brand's US RevPAR premium since the refresh launched. It's this delivery which makes the brand family so attractive to guest and to owners, driving 10% annual growth in signings in the last four years.

This growth has established the Holiday Inn brand family as the leading global hotel brand. Holiday Inn has over 100,000 rooms outside of the US, more than 4 times that of its nearest competitor. And we have more than doubled the non-US presence of Holiday Inn Express since 2007, adding more rooms than all three of its closest competitors combined.

Together with driving scale, we continue to drive innovation across the brand family. So let me talk briefly about three initiatives which are all deeply rooted in our guest insight and tailored to local needs.

The Holiday Inn open lobby creates a next-generation public space, where guests can both work productively and enjoy leisure time. The solution is already in place at nearly 30 hotels in the Americas, and is live at 17 properties across Europe, where it's already driving an 8 point increase in guest satisfaction.

Our next-generation bedroom design for Holiday Inn Express has been developed in conjunction with our guests and our owners, to deliver a natural and contemporary look, which provides an efficient place to sleep. And the elements of the new design are already implemented in 42 US properties, and are on trial in Europe.

Holiday Inn Club Vacations is a great example of how we've leveraged the momentum behind the Holiday Inn brand family to develop a new offering which perfectly meets our guests' need for family time. Our asset light vacation ownership business was launched in 2008, and has grown quickly to over 4,000 villas across 12 resorts in the US.

So I'll now talk about our boutique business, which is in the fastest-growing industry segment. And with Kimpton and Hotel Indigo, we are uniquely positioned to benefit from this increasing demand. Our boutique portfolio already has 128 open properties, and 79 in the pipeline. Nearly [80%] of the estate is currently in the US. But we've tripled the presence of Hotel Indigo elsewhere in just over three years.

Alongside this, we have already received a number of Kimpton development inquiries from outside the US, where we have over 50% of the Hotel Indigo pipeline.

At an operational and commercial level, the Kimpton transition into IHG is well advanced. The brand continues to be loved by its guests. And we're committed to building on its success, which is people-driven. And I'm therefore pleased we've retained key Kimpton talent, as well as its San Francisco headquarters.

We signed 12 boutique hotels in the half, including the landmark Hotel Indigo Los Angeles, which is being developed by Greenland USA. The Greenland Group already owns eight IHG properties in China. But this marks the first time we've partnered with them in the US, demonstrating the benefit of our global reach and reputation.

Our boutique growth will be somewhat offset by higher than normal removals in 2015, due to the exit of seven Kimpton San Francisco properties in July. These were driven by a specific issue, and will not impact broader growth plans in the US or overseas.

Crowne Plaza is another of our brands which has significantly increased its presence outside the US, more than doubling scale in the last 10 years, and adding more rooms than any other brand in its segment. The demand for Crowne Plaza is particularly evident in Greater China, where we have nearly 40,000 rooms either open or in the pipeline, the highest of any of our brands in the region.

And this growth is complemented by a number of new initiatives as we continue the multiyear refresh program, with an emphasis on delivering a great guest experience, and making business travel work. We've adapted the brand to meet changing consumer needs, rolling out complementary Wi-Fi to our hotels in America and Europe, and launching a selection of new energy-focused food offerings. Later in the year we'll begin piloting our unique next-generation WorkLife room, as we continue introducing new innovations which support business productivity.

Moving on now to look at our IHG Rewards Club, which drives 40% of bookings in our hotels. I've talked before about the growth in personalization. And extensive research has highlighted just how much value our members place on individual and rewarding experiences. To enable this during the guest stay, we've implemented new customer relationship management capabilities at all of our hotels, allowing the front desk to access extensive guest information, and offer a more personalized experience based on member profile and history.

These enhancements ensure IHG Rewards Club continues to be preferred amongst guests. And the brand has already won 16 major awards in the two years since it was relaunched. The attractiveness of this program is further emphasized by over 4 million new enrollments in the first half, which is more than 25% up on last year.

We ensure that all of our members are treated uniquely. But in-depth research reveals that really frequent travelers want a little bit more. They want to feel part of a special club, and be given an extra level of reward in return for their continued loyalty. And the introduction of a new top-tier to IHG Rewards Club called Spire Elite, will do just that.

The reward for reaching this status includes earning 100% extra bonus points on qualifying nights, the richest points incentive in the hotel industry. But most importantly, we'll use our new CRM capability to deliver a unique and tailored stay experience to these guests, ensuring that they are truly recognized and special.

The CRM capability I just mentioned is one example of how we leverage technology to enhance the guest experience. Earlier this year I spoke about how the consumer landscape is changing. And to meet these needs you must have market-leading technology to adapt. Within this context, we'll maintain control over intellectual property and customer data to deliver a unique guest experience, but partner or outsource where we can leverage third-party expertise.

Our pioneering relationship with Amadeus demonstrates how we're utilizing this approach to lead the industry and deliver the first cloud-based guest reservation system. Amadeus is a proven expert in travel reservation, having already developed a community model used by over 100 airlines.

As exclusive launch partner to our guest reservation community model, we have a unique opportunity to input on the design and functionality, as well as being the first to roll it out across our hotels in 2017. In a short time we've already made good progress with what will be an industry-changing initiative.

Our recently announced collaboration with Stay.com is another example of how we'll partner with third parties to enhance the guest journey. Stay.com will [provide] guests the functionality to research trips to over 50 of our destinations, based on insights from hundreds of local influences around the world. This will enhance travel experience, and deepen the relationship with our brands, particularly in the dream, plan and stay phase of the guest journey.

Our initiatives to continuing the momentum behind our direct channels, driving year-on-year digital revenue growth of over $200 million, well ahead of any other channel. Recent in-house developments include the relaunch of our Crowne Plaza, Hotel Indigo, and extended stay websites. The new pages are content-rich, convey the uniqueness of each of our brands, and are optimized with responsive design for ease of viewing across any device.

Meanwhile in Europe, we rolled out an IHG Rewards Club lowest price promise for Holiday Inn Express UK. We already have an internet best-price guarantee, which provides the first night of the stay free if a guest can find one of our rooms cheaper through a different website. However, due to the extravagant promises often made by intermediaries, the benefits of booking direct were not always clear to consumers.

Our lowest price promise is exclusive to our IHG Rewards Club members, and offers more than price matching. It promises a price up to 10% lower than is available anywhere else. We're so confident in this promise that we've included a unique price comparison tool on our website for the UK Holiday Inn Express estate. We're already seeing great results from this innovation, with a 50% increase in the number of guests who are confident they get the best price on our website, and a doubling of online loyalty enrollments.

Within our digital channel, mobile continues to be the strongest driver of growth, contributing over 40% of our website visits in the first half, up 7 percentage points on last year. And we continue to innovate in this area to enhance all stages of the guest journey, with a particular focus on the stay. Our IHG translator app is now available for Apple Watch, making it even easier for our guests to make the most of their experience with 13 languages easily translated by speaking directly into the watch.

We're also enhancing mobile check-out, with the addition of mobile (inaudible), a service allowing guests to view their bill real-time on the device at any point during a stay.

These innovations for our number-one-rated app have driven downloads up more than 50% year on year. And we now have more than 4 million app users in total, which is helping to drive year-on-year total mobile revenue growth of around 50%.

So to recap, we've had a strong half with continued momentum behind our preferred brands, which makes IHG well-positioned in an industry that has compelling tailwinds. We continue to innovate and grow scale across all of our brands. And we're making great progress delivering against our technology roadmap.

The finalization of our asset light transition delivers high-quality earnings. And based on current trading trends, we remain confident in the outlook for the rest of the year.

So thank you. And with that, Paul and I will be happy to take your questions.

(Operator Instructions) Steven Kent, Goldman Sachs

Hi. Just two questions. Good afternoon. Can you just give us some discussion about-- a broader discussion about the FX impact to international travel at your hotels? Is that starting to have an impact?

And then maybe if you could look out a little further on Europe, how trends are going and are they recovering. It feels-- we've seen from some of the other hotel companies that leisure travel trends actually look like they're going to be pretty good for this summer. And I just wanted some sense from you on that.

And then finally, I can't help but ask, because it's crossing the tape right now that according to [VFT], IHG and Starwood have held early deal talks. And I know you're not going to comment on that. But maybe you could just talk about more broadly how you look at acquisitions and how you look at mergers, and the accretion or dilution discussion.

Okay. Thanks, Steven. Well, let me pick that up, and then Paul will talk about Europe and FX. Yes look, there's been rumors. There's been rumors for years around this industry. So we never comment on rumors and speculation, as you'd imagine.

I think we think about the business in two ways, I guess. The first one is that we have an extremely strong organic growth pipeline, which we're very much majoring on. So we signed, as I think we said, 41,000 rooms in the half. That's more than we've signed in any of the last seven years, in fact, back to 2008, which is really quite a peak time.

We've got 100,000 rooms under construction. So our real focus is on organic growth of our existing business. We've always talked about filling strategic gaps. And through insight, through understanding the markets, we've devised a number of new brands, Hualuxe hotels in China, where the first two opened this year, as Paul mentioned. Even hotels where we opened the first two last year and several more to come in the US.

And we've acquired small fill-in add-ons like Candlewood Suites back in 2003 and Kimpton just more recently. So that's how we think about the business. And really our brand development is almost an NPV question. Is it NPV positive to launch a brand in the time it takes to build up? Or is it better to buy something? And there are very few things out there that are actually attractive or would fit within our portfolio in the segments that we're interested in.

So very much an organic focus, and an awful lot of activity on that front. Paul, do you want to pick up the other [part]?

Yes. So Steve, thanks. On your two questions around the impact on international travel of foreign exchange movements, I mean we are a mainly domestic business. A lot of our-- the great majority of our business is through, I mentioned in brands. So about 90% of our business in the US is domestic.

We will see a bit of an impact in the very major gateway cities, so New York and a few others. But really it's around the edge for the whole region. And it's not something I'll pull out as a major contributor in any way to our numbers.

In terms of your questions on Europe, we're seeing the UK now strong for a few years, starting with London. We're seeing some really good growth, then the provinces more recently coming back. And we saw a really good [print] from the provinces in this half, up 8%. London's back up to its prior peak, and the provinces have still got a bit of a way to go there.

And Germany, the last few years it's been pretty steady at around 5%. Key cities, there's a key city strategy for us really elsewhere. We're not a big resort business in Europe. And so we are seeing some reasonable growth in some of the southern Europe markets. But one, it's off quite a low base; and two, it's a really quite small part of the business.

Okay. Thank you.

Chris Agnew, MKM Partners

Thanks very much. Good afternoon. And thanks for the detail on the oil-producing states, Texas, Oklahoma and North Dakota. And actually I wanted to follow up on a couple of things there. Can you give us any sense of have we seen the worst impact from those oil-producing states? Or how long do you think that that's going to impact the business? Do we have to lap kind of the impact in the second quarter last year? I'm not sure when you started seeing weakness there.

And also how much did the-- obviously Texas and Oklahoma had, I think, catastrophic rainfall. I think it was in May. I mean I don't know if you can separate, or if that had an impact compounding. Just any color around those states, thank you.

Hey Chris, thanks for that. So we are a little bit more adversely impacted by the oil-producing states in the market as whole, because of our overweighting into those markets. So it's about 13% of our business in the US. So it's about 10% for the market.

It's going to continue into the second half. We're not lapping against easier comps really. So it's obviously a bit hard to call in longer term. Because it depends on what happens on the oil price. And I'm certainly going to not make any sort of guess on that.

So hopefully that gives you some sort of an idea. We'll probably see the impact coming through into the second half, and into 2016. I can't really call that one.

And the rain impact was a bit of a negative. But it's small compared to oil. So it's not something that we'll particularly pull out. But there was some sort of an impact, but not major.

Got you. Thank you. And then with occupancy at record levels, I'm thinking particularly in the US, supply growth low. And if we assume that GDP growth in demand remains relatively stable, what are the risks to ADR growth not continuing to improve? I mean is demand just really the issue here, given supply? Or are you seeing any risks from-- I don't know-- alternative accommodations? Or do you see supply being an issue on the horizon? Thank you.

Well, we look at the levels of new supplies coming into the market. And if you look at-- the long run, as you know, you're looking at about 2% for the US. And the forecast for next year around the 1.7% mark. And that's the same in the mid-scale area as for the industry as a whole. So it's below the long-run average.

Obviously with the level of occupancy we have already got, our focus is on changing the mix in the hotels and strong revenue management discipline in ensuring that we've got the most valuable guest in there. And our proprietary technology enables our owners to do that.

If we look back to the last cycle where we had this sort of continued economic activity, I mean supply is starting to come through. So you look back to the 1990s cycle, you can see that there was a prolonged period of ADR growth, really in line with economic growth. So that gives us some-- our best indicator we think is what might happen out into the future.

Great. Thank you.

It's worth just adding, I think, to Paul's point. And he pulled some of the fee growth that we've seen. For us, given our very small amount of ownership and the fact that so much of our income comes from revenues, it's actually fees and revenues. That the overall demand is a much more important driver for us than individual RevPAR. And given that we've got 5% of the world's rooms and 13% of the pipeline, probably a larger share in America, then actually we're keyed into the demand growth either way.

So that's the important thing. And we know that in the hotel industry that hotel revenues grow ahead of GDP. So I think we're well-placed, and as I think you've heard from some of our competition actually, in terms of the so-called sharing economy or the sharing business we should really call it, since it's a business. It's really right to the margin for an organization like us. So I don't see it impacting our numbers.

Thank you. Actually, if I could have one more follow-up.

Go on.

Sorry. You just reminded me of something there. Can you update us on-- you had strong unit growth obviously in the first half. And some of that was Kimpton. But are there any update to your thoughts on unit growth over the next couple of years, either through stronger additions and the pace of deletions? Any changes to those two items? Thank you.

No. And we don't give formal guidance on that. I mean I think the rate that we've seen for the last year and this year seems about right. I mean I think as you look at that, adding rooms is clearly an important piece, as we say, not the only piece in terms of accessing the demand. And I think you've also got the issue of the quality of the estate and what you want to bring in.

I mean it's very easy to add rooms if you're focused on driving to a million rooms or whatever stat you've come up with. We don't really think that's relevant. We focus on revenue share and we focus on the quality of the estate.

So we've been removing historically 2% to 3% of the portfolio. Ideally over time that comes down. But we're not going to let up on driving the quality of the estate, which is what creates long-term value.

Currently the business that we are in is delivering great experiences to guests and great returns to owners. And that requires you just to constantly move up the standard of your brands in order to enable you to deliver through your systems. And so that's a really important thing.

And we're not dashing for short-term growth. We really are-- not slow and steady, because I think we're showing really, really strong growth. And with 20-plus percent earnings per share growth, you can see we're focus on it. But I do think it's important that you balance that quality versus growth.

Excellent. Thank you.

David Loeb, Baird

Good afternoon, Richard. I'm going to ask you another question that you probably won't want to answer.

Thanks, David.

I apologize in advance for that. You did note the loss of the seven Kimpton hotels in San Francisco. UNITE here put out their own release about that. Can you just comment on the IHG card check neutrality agreement in San Francisco versus the Kimpton agreement? Do you think the union was correct in asserting that the IHG agreement does allow grandfathered hotels to have card check neutrality?

No. We don't agree with the interpretation that they've put on it. But as I said, it's a particular situation within San Francisco. It's a disappointment to lose those hotels. It's obviously not material to the group as a whole. But it's material to Kimpton brands to some extent, and it's disappointing to lose them.

But they're good owners who own those hotels who have hotels in other markets. We knew it was a risk when we acquired the business. We just don't have the same interpretation as the unions. But I think the important thing is that we're going to open more Kimpton hotels this year, and the brand is [overdone]. We're signing hotels and we're quickly moving to grow it internationally.

So we love the brand. It's performing extremely well. And this is just a particular circumstance that happens in our business. If you don't own the hotels, David, you don't control the hotels. And sometimes this is what happens. But as I say, good owners who own good hotels in other markets. And we'll move on.

I totally understand, and I appreciate your candor about that. Do you have any similar card check neutrality agreements in other markets besides San Francisco?

Not that I'm aware of.

Okay. So it sounds like this really is an isolated San Francisco incident.

In the context of Kimpton, it absolutely is. Yes.

That's great. Well, great. Good luck with the brand. It's a great brand. Thank you.

(Operator Instructions). We have no further questions at this time. Thank you.

Great Dave, thank you. Thanks everybody for calling in. Obviously if you do have questions later on, please contact the IR team. Otherwise we look forward to talking to you again in the future. Thank you very much. Thanks, Dave. We're done.

Thank you for joining today's call. You may now replace your handset.