Intercontinental Hotels Group PLC /New/ Q2 FY2025 Earnings Call

Hello, everyone, and welcome to today's IHG Half Year Results Call. I will now hand the line over to Stuart Ford. Please go ahead.

Thanks, and hello and welcome from me to IHG's 2025 Half Year Results Q&A. So I'm Stuart Ford, Senior Vice President, Head of Investor Relations at IHG Hotels & Resorts. And I'm in the room today with Elie Maalouf, our Chief Executive Officer; Michael Glover, our Chief Financial Officer; and Jolie Fleming, our Chief Product and Technology Officer. I am obliged to remind all viewers of the webcast and listeners in on this call that the company may make certain forward-looking statements as defined under U.S. law. So do 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, we may also refer to certain non-GAAP financial measures. And once again, do please refer to the accompanying results announcement and SEC filings for reconciliations of those measures to the most directly comparable line items within the financial statements. That results announcement, together with the usual supplementary data pack as well as the replay of this morning's presentation and the slides for that presentation that accompany the webcast can all be downloaded from the Results and Presentation section under the Investors tab of ihgplc.com. So now over to Elie for a few opening comments.

Thank you, Stuart, and welcome to this question-and-answer session. I'm Elie Maalouf, Chief Executive Officer of IHG Hotels & Resorts. Hopefully, you've all had a chance to watch the results presentation, which we made available at 7:00 this morning. It featured myself, along with Michael Glover, our Chief Financial Officer; and Jolie Fleming, our Chief Product and Technology Officer. Both Michael and Jolie are here with me today. Before we open the line to take the first question, I will summarize our strong performance in the first half of 2025. Our RevPAR grew by 1.8%, reflecting the breadth of our geographic footprint, the depth of our brands and the resiliency of our operating model. We delivered gross system growth of 7.7% and net system growth of 5.4%, driven by outstanding development activity and record openings. We signed over 51,000 rooms across 324 hotels, a 15% increase over 2024 when excluding M&A and large portfolio conversions. We expanded our fee margin by 390 basis points, driven by operating leverage and step-ups in ancillary fee streams. EBIT grew 13% and adjusted EPS grew 19%. We've completed 47% of our $900 million share buyback program, which, together with ordinary dividends, will return to shareholders over $1.1 billion this year. In summary, we made excellent progress on our strategic priorities, and we are confident in the strength of our enterprise platform and the attractive long-term growth outlook. And with that, let me turn it over to the operator to take the first question.

The first question is from Jamie Rollo at Morgan Stanley.

Three questions, please. First, could we start by discussing current trading? I know you don't provide guidance, but could you share your thoughts on how Q3 is shaping up and whether you anticipate an increase in Q4 RevPAR in the U.S. considering the election comparisons and holiday shifts mentioned by some of your peers? Secondly, regarding the Americas, fee revenues were down about 1% despite approximately 1.5% RevPAR growth and around 1.5% adjusted net unit growth. Could you help us understand the roughly 4-point gap and whether some of that might continue into the latter half of the year? And finally, regarding the central line, there was a significant improvement from negative 40 to positive 17. In your prerecorded call, you referred to some cost phasing. Could you please quantify that? Are we now looking at something like a sustainable profit line of around $30 million to $40 million? Should we expect that to grow in the future?

I'm going to address your first question, touch on the third one briefly, and hand off the second question and more details on the third to Michael. First, regarding current trading in Q4 and Q3, we do not provide guidance. We generally examine the short term, but more frequently focus on the midterm and long term. As we stated, most of the uncertainties and turbulence we faced in March and April are easing. While there are still some trade tensions, there are more trade agreements than disagreements. The financial markets that declined in March and April have fully rebounded, achieving records in the U.S. and in some European nations as well. The clarity from the U.S. tax bill is creating certainty for businesses and consumers regarding lower tax rates moving forward. Job growth in the U.S. continues despite last week’s job report not meeting expectations; it still reflects job growth. We are at record employment levels in the U.S. with stable inflation and interest rates. There is a significant surge in corporate capital investment, particularly in technology, driven mainly by data centers, AI infrastructure, and energy delivery. These trends support a positive outlook for U.S. demand, growth, and our performance in the U.S. While we do not provide guidance for Q3 and Q4, we confirmed today that we are very comfortable with the full-year profit and EPS consensus, similar to our stance after Q1. A shift in RevPAR by a point is unlikely to alter our year-end trajectory. We are focused on maintaining a positive outlook beyond this point. Regarding the Q4 election, we did not see it as a significant factor for us last year, so we are not anticipating a different impact this year. Now, I’ll briefly discuss the central costs, and then Michael will provide details. We have indicated for some time that point sales are performing well and will increase by another $25 million this year, on top of last year’s $25 million, and will continue to grow. Our credit card revenues are expected to double this year from $40 million in 2023, and they are on track for that growth. We have maintained efficiency with our costs; last year cost growth was just 1%. Over the past 15 years, our cost growth has consistently remained below revenue growth. We are pursuing some larger opportunities this year due to advancements in technology, artificial intelligence, and shared service centers globally that require additional investment, which we highlighted in our release today. These investments are sustainable and will continue to grow, so there should be no fundamental surprises there. Michael, over to you for the last two questions.

Yes, of course. Regarding the increases in fee revenue in the Americas, it's important to consider the relationship between net system growth and RevPAR growth during the half. We observed a 1.4% increase in the Americas and a 1.2% increase in RevPAR in the U.S., along with approximately 0.3% system growth in the Americas. This raises the question of why there has been a negative impact. Several factors contributed to this situation in the first half of the year. Firstly, some high fee-paying hotels exited the market, notably one in New York, which affected the figures. However, we have a replacement hotel coming in, though it hasn't been accounted for in the numbers yet, leading to some discrepancy. Additionally, we have more hotels undergoing renovations at this time, which also affects the total rooms available, resulting in limited growth in that area. There’s also some influence from key money amortization and the leap-year effect, as we had one fewer day in the first half of the year. While there are various elements at play here, we don't consider this to be a long-term concern.

Not only that, let me just add that. I think the bigger thing to take into context here is our openings in Americas were up, I believe, 40% year-over-year in the half, and those haven't really fully ramped up. But when we have such a step-up in openings that is not the same year-over-year, there's still some ramp-up of those hotels that will accrete the fees on an increasing basis going forward, but we're not getting the full benefit of that yet. We're very happy with the fact that our opening stepped up that much in the Americas and in fact, globally, 75% year-over-year. But we still haven't gotten all the benefit from that fee growth because it is a significantly higher step-up than before.

Our next question is from Jarrod Castle at UBS.

Yes, I have three questions as well. Elie and Michael, you touched on residential contributions in your prerecorded comments. Could you provide some insights on the general scale of this contribution to group profitability and how you perceive the phasing or irregularity of that business? Is it consistent, or does it vary by period? Secondly, your presentation includes various technology investment areas focused on promoting, optimizing, and engaging. Can you share more details on how time and resources are allocated among these three areas? It appears that optimization through the PMS and RMS systems could be where the majority of time and spending goes, but I’d appreciate any further insights. Lastly, Michael, you mentioned Ruby in your prerecorded remarks, and it seems to be progressing well. Elie also referred to Ruby regarding pipeline and integration. Additionally, if I remember correctly, you indicated there is potential for further mergers and acquisitions or adding brands. Is this more of a medium-term outlook, or are there short-term opportunities to pursue?

So first, on branded residential, look, we're very excited about our trajectory there. First, it really starts from having constructed what I think is the leading Luxury & Lifestyle collection out there, may not be the biggest yet. That's not the goal. I think it's the most aspirational, the leading one. The majority of our Six Senses and Regent Hotels coming into the pipeline now are coming with the branded residential, and that's led us to having 30 properties now that are open and selling, and usually they start selling well before the hotel opens, right? Well before the residents are even finished. And so that starts to bring cash flow to our owners and actually fees to us even before the hotel or the residences are ready. And we have quite a few more coming under development. There's a lot of excitement around this space. And it's extending beyond just those two ultra-luxury brands, but also to InterContinental to Kimpton, and we're getting demand from owners for some of our other brands, some of other lifestyle brands. So I think we've got a vector of growth there for fee growth. It is today still smaller than co-brand and point sales, but it's growing, and we think it's going to be a consistent contributor. I'll be visiting actually next month in Dubai, some of our developments, where we have quite a bit of branded residential, either already selling, some open, and some coming. And here in London for you that are calling from here, the Six Senses in London is getting ready to open and those branded residential sales are on track. On how we're investing under the three technology pillars that Jolie spoke about. We don't disclose the individual investments. They are in our system fund. We manage them and govern them very prudently in the interest of the system fund of our owners. They all have very high returns, I can tell you, and we've been at it for some time. I mean, we've been investing in GRS for a long time, even before I started and here at IHG 11 years ago. Our new app has been a consistent investment for years. The PMS new project has been going on for at least a couple of years. It's now active in the market. And everything we're doing with the RMS, revenue management system, has been going on for a couple of years, and it's not most of our hotels. So it's nothing new. And you have to think about this as a consistent level of investment. It's not sort of a big build the product and then just watch it go. We think more in terms of product management here, in terms of not so much in terms of a project because you have to keep these things current. You have to keep it fresh. You have to keep it competitive. Those investments are in the system fund, but they're delivering very good return for our owners.

I would just like to add that many people often wonder about potential tech debt and significant cash outlays. However, we really do not have that issue. As Elie mentioned, we have been consistently growing and investing in our technology through our system fund. We plan to continue this approach, so we do not anticipate any large, unusual investments in our operations.

And part of it is because we've been on a journey for multiple years to stay current and update our tech stack. So we don't feel like we face a significant or any deficit that requires a massive leap of capital and effort. On new brands, M&A, of course, I'm not going to make any specific comments, as we never do. But we're very pleased with the trajectory of Ruby. 16 of the hotels I mentioned already in our system. The next four will be in our system before the end of the year. And the pipeline of 10, which is now a pipeline of 14 since we bought it, will be opening over the next several years in incredible destinations today around Europe, but we'll be launching the brand in the U.S. by the end of the year, and then we'll take it further east from there. And we've shown that ability to take brands, whether the ones that we develop ourselves or the ones that require internationalize them and lead them to success. And by the way, adding more brands to our portfolio, which I don't know when it will occur, but it will occur. It has been occurring. So it's going to continue to occur. Doesn't have to be just inorganic through M&A or partnerships. At least half of the new brand additions we've had to our portfolio have been organic internal development. So that could occur, too.

Our next question is from Jaafar Mestari from BNP Paribas.

I've got two, if that's alright. Firstly, on operating leverage. So Americas fee margin is up in the half, but there's obviously a better Q1 than Q2 there in terms of RevPAR. I know you're expecting some improvements later in the year in Q4. But big picture, how should we think about fee margins, if you were to remain around the 0 RevPAR? Would fee margins be flat? Could you make some progress from efficiencies? Would they be down because flat RevPAR and some cost inflation? I'm not expecting you to communicate on the Q2 fee margin, but yes, along those lines at flat RevPAR, how the fee margins look please? And then secondly, group's bookings, Americas Group's bookings, if I remember correctly, were one specific point of strength you had mentioned in the previous call with some visibility. I think you had plus 7% group's bookings on the books for the summer. In the half, group's occupancy was actually down in the Americas. Just curious what the moving parts are? Are the long lead-time bookings you already had on the books, are they definitely happening and holding? It's just the short lead-time bookings that have not been very strong? Or have there been any cancellations, for example, on the stuff you had on the books?

Yes, let me address the operating leverage and margin. We have previously mentioned our expectation for the Americas margin to continue improving, and it has not reached its peak yet. Therefore, it is encouraging to see this trend continue. We have undertaken several initiatives in the Americas, including cost management efforts that have improved our margin through operating leverage. Our margin increased by 390 basis points at the half, with 130 of those points attributed to ancillary fees. We previously discussed the rise in credit card usage and point-of-sale transactions, contributing to that 130 basis points. The operating leverage itself accounted for 260 basis points, supported by strong cost management across the company, including all functions within Central and the regions. Everyone has participated in the program to reshape our cost structure for future scalability. Elie and I have been focused on this since the beginning, and we are fortunate to be at a point where we can make significant changes. The exceptional performance you see is linked to these efforts, allowing us to leverage new technologies, shared services centers, and continuous process improvements. We will maintain this approach and see opportunities for further growth. This applies across all regions, including Central. Looking ahead, even in a lower RevPAR environment, we anticipate system growth and ongoing cost savings. We expect costs to decline by 1% to 2% for the full year, which is a slight decrease from our current position at the half. Thus, we still foresee strong margin growth as we complete the year.

I believe it's crucial to note that we are managing our costs efficiently while simultaneously growing the business and increasing our investment in high-growth opportunities. We are integrating Ruby and expanding it globally. Our investments are focused on high-growth markets such as India, the Middle East, and Southeast Asia, as well as high-potential markets like Japan and Germany. We are enhancing all of our global brands and investing in the technology stack that Jolie presented. This is not a cost-cutting approach leading to a reduction in business; rather, we are excited about the opportunities to grow and expand our business globally in a prudent manner. We are benefiting from technology, artificial intelligence, shared services, and process redesign. Additionally, we are achieving a 15% increase in signings and a 75% increase in openings, which supports our growth and contributes to operating leverage. In terms of operating leverage in the Americas, we are happy with the improvement. Last year, the operating margin experienced a slight decline, and there were concerns about whether we had reached our peak in the U.S. We maintained that there were periods where we were adjusting our investments, and we are now pleased to demonstrate that we are resuming our operating leverage growth. Regarding group bookings, there was a notable change from Q1 to Q2 across all businesses in the Americas, particularly the U.S. This was partly due to the Easter timing and also related to the volatility experienced in March and April, sparked by trade tensions, policy issues, tax uncertainties, and drops in financial markets. When U.S. financial markets dropped significantly, it likely caused some hesitation among consumers and businesses. However, in May, we indicated that we had moved past the peak of that turbulence and that conditions were stabilizing, which is what we have observed. We are seeing increased certainty regarding trade, tax issues, and financial markets, which have fully bounced back. The job market remains robust, corporate investments are strong, and corporate profits reported through the second quarter have been solid. We view this as a positive, more stable, and certain outlook. Therefore, while there was a decline from Q1 to Q2 for business leisure and group sectors, we are optimistic about the future outlook.

The next question is from Muneeba Kayani at Bank of America.

I wanted to start by discussing net system growth in the first half, which was 4.6%, and adjusting for The Venetian, it comes to 5.4%. I’m interested in your views on net system growth. We have been in the 3% to 4% range for some time, so do you believe this increase to 5% is sustainable? How are you assessing this considering your current signings and openings pipeline? My second question is about China. What insights do you have on that market? When do you anticipate RevPAR trends could stabilize or turn positive? Also, any updates on the development environment would be appreciated.

I'll answer your questions and then Michael can add if he wishes. We're pleased to see that, despite the uncertain environment over the past six months which has created concern, we've managed to earn the confidence of our owners, resulting in a 75% year-over-year increase in openings. This clearly showcases the trust our owners and investors have in IHG’s brands and enterprise, as evidenced by our ability to sign 15% more hotels for the future and open 75% more across all regions, including the Americas, EMEAA, and Greater China. We are optimistic about achieving our growth targets for this year but always aim to do better—that’s not our limit. We believe we can achieve more as our development pipeline advances, along with our signings and openings. Many of our brands are at the beginning stages of their journey, with pipelines exceeding the minimum 20% ratio. Some brands have several times more in the pipeline than what is currently open, indicating significant growth potential in various countries. In the first half of the year, we entered over a dozen new countries with brands from our existing portfolio, presenting new opportunities even if they aren't official brand launches in those countries. We're excited about the future, especially in the area of conversions, where nearly half of our openings and signings are conversions—twice the volume we previously achieved—showing the strength of our enterprise attracting other hotels and introducing more conversion-friendly brands. We are optimistic about our prospects this year and beyond. Regarding China, we've consistently communicated our constructive long-term view and, in the short term, see the market bottoming out. Various sectors in China are doing well, like electric vehicles and artificial intelligence, despite ongoing challenges in residential real estate. Overall, we believe the economy is improving, with GDP growth over 5% in the second quarter and surprising export results. Our company saw better RevPAR performance in Q2 compared to Q1 and the previous year, and we anticipate continued improvement in the latter half of the year. While it's uncertain if we will reach a fully flat status this year, we believe we will eventually reverse the trend in RevPAR due to the current undersupply of hotels and strong travel demand. We are in the bottoming phase but are also seeing record development progress—signings and openings this year are expected to surpass last year's records while maintaining occupancy rates, indicating that the market is absorbing the additional supply we are providing.

We're still observing that the Chinese are traveling. As Elie mentioned, our occupancy was essentially flat in the first half, with a slight increase, and it remained broadly flat in the second quarter. We continued to see a significant amount of outbound travel. In countries around Southeast Asia, including Japan, Korea, and Vietnam, we experienced double-digit RevPAR growth within our business. Chinese travelers are still active, and this trend of increased outbound travel continues. As Elie stated, we remain optimistic about the future of this trend.

The next question is from Richard Clarke at Bernstein.

Three, if I may. Just the first one, last quarter in Q1, you gave some very helpful directional commentary on the books revenue, I think, flat in the Americas, strong level of growth in EMEAA and heading better in China. Just wondering maybe one the philosophy of why you've not given that again? And has anything meaningfully changed on the book revenue? Secondly, closure is a bit higher. You gave a few explanations of that and said it doesn't change your view of 1.5% in the longer term, but are higher closures going to linger for a few quarters? Or is this just 1 quarter effect. And then lastly, just on Garner, just an update on how that brand is going. It feels like an interesting battleground where yourselves, Hilton and Marriott have all launched quite similar brands at the same time. So how are you competing in that? I know Marriott has gone with an innovative fee structure on City Express? Is there any desire from the owners to want to match that? Just an update on how Garner is progressing.

Richard, I'll address your question about Garner. We're thrilled with the progress we've made. We opened 28 Garners in the first half of the year, including 17 from the NOVUM deal and 8 in the U.S. In total, we currently have 51 Garners open and roughly 80 more in the pipeline, leading to a total of 138 hotels and 13,000 rooms across ten countries. The brand is exceeding our expectations, particularly in terms of international demand, which is greater than we anticipated. We expected to enter a few international markets by now, but we actually foresee being in over a dozen, which is exciting as we're attracting interest from owners worldwide. There's ample opportunity for more than one global company to thrive in this space. While we recognize competition, the market is large enough for several key players to succeed, similar to other market segments where leading companies gain share from one another and also from new supply. We believe there are decades of growth ahead for Garner. Regarding removals, they are above our long-term target of 1.5%, yet our net system size still grew by 5.4% with record openings. There are a few factors to note: in China, the situation is a bit more challenging than we would prefer as we’re still navigating post-pandemic adjustments. We also experienced a significant removal in the U.S., but we have a replacement in the works that isn't part of the brand system yet. We don’t view this as a structural change, and we believe that both long-term and midterm, we will return to our growth trend. Overall, we are pleased with our gross openings, signings, and the continued growth of our net system size.

Yes. So Richard, when we gave out that Q2 on the books kind of guidance there, we really did that because we were trying to help explain that Easter timing. As we look into Q3, I think we've mentioned that Q3 could be similar to Q2. The booking windows are still very short. If you look at our booking windows there, roughly 60% of our bookings are coming in within 7 days of arrival. So the booking windows are still very short. So even for us right now, it's a little harder to have some of that visibility out longer term into kind of the fourth quarter and beyond given those booking windows.

As we assess our overall business situation as of early August, we feel confident about the consensus on profit, earnings per share, and net system size growth. Therefore, even if RevPAR is slightly above or below expectations today, I don't believe it will significantly impact our results.

Next question comes from Estelle Weingrod at JPMorgan. Though you'd have to take some note of the fact that in looking at our business overall and where we stand today, early August, that we're very comfortable with consensus profit and consensus EPS and net system size growth. So yes, we're looking at everything in the round. And look at RevPAR is 1 point more or 1 point less than expectations today. I don't think it makes a difference to where we land.

The first one is on cost savings again around the H1-H2 phasing of this more specifically. I mean does it imply an acceleration of operating costs in H2 year-on-year? And also, can you give us more color on what are the key cost buckets that contributed to your good margin performance in H1? Is that mostly your overheads? And on that point on fee margin expansion, is that right thinking that the fee margin upside in H2 will likely purely come from ancillaries? And the last question, the third one, can you give us more color on EMEAA? It was a little bit behind. I mean not a complete surprise, but can you go through what dragged the slowdown, please?

We're pleased with our performance in EMEAA for the year-to-date and quarter-over-quarter. Strong RevPAR from last year and a 5% growth in Q1 means we may not see the same results going forward. There were many one-time events last year in Europe, such as the Olympics in Paris, the European football championships in Germany, and even the Taylor Swift concerts, which attracted numerous American visitors to Europe. This created a unique situation that we're now comparing against. However, a 3% growth in EMEAA performance is satisfactory, especially considering some uncertainties. Additionally, when looking at the broader picture for EMEAA, there are impressive increases, with openings up 136% and signings up 36%. Overall, our business is trending in a positive direction. From a cost savings perspective, IHG has consistently maintained a disciplined approach to cost management for a long time. This mindset is integral to our operations. Elie and I have focused on improving efficiency and effectiveness since we started, and we continuously take action. Through process redesign, better use of centralized support, and enhancing technology, especially AI, we are becoming more efficient and scalable, with sustainable long-term savings. We have incurred some costs to establish this setup, but it positions us well for the future. In the first half of the year, we achieved 4.5% cost savings, and we anticipate about 1% to 2% for the full year, likely resulting in flat performance in the second half. There is a timing element to consider from the first half as well, but we still expect margin improvement due to these cost savings for the full year. We also project around 130 basis points of margin improvement from ancillary services and see operational leverage from the growth in our system size and cost savings as we move forward. Overall, we expect strong results in margin expansion for the full year.

The next question is from Alex Brignall at Rothschild & Co Redburn.

I'll do two, if that's possible. Finally, just on costs, I'm really sorry to ask it again. I went through whole this morning with the IR team, but just the final piece of it. If we look at $57 million difference in the full year, we've got $32.5 million in credit card and loyalty and then the $15 million from the Central costs that you've taken out, which you sense that it's going to be is obviously H1 weighted. There's obviously another little bit in there. Could you just tell us where that's coming from and whether that's part of the ongoing improvement in the contribution of that central line or whether there's some timing? And then on net unit growth. A lot of your peers have talked about an expectation that conversions will add a greater proportion of their growth in the future than they have in the past, Marriott, specifically going from sort of 10%, 15% to 30%. And obviously, that's necessary in an environment where there's new construction growth. But can you just talk about how that will work? It's obviously very competitive and conversions are somewhat of a zero-sum game given it's not new supply. So how you think that will work in the context of key money, which has obviously been going up and some of the sort of bigger mass conversion deals where the fees for certainly your peers have not been anywhere near as high as the sort of normal group fees.

Let me address the central question. To recap for everyone, we mentioned at the beginning of the year that our point sales and the changes we made would generate an additional $25 million in revenue last year and another $25 million this year, totaling $50 million. You are already seeing that $25 million this year, and we fully anticipate realizing it, representing a strong revenue stream for us. Additionally, regarding credit card revenue, we indicated that we would double last year's credit card revenue, which was around $40 million. We also expect this to continue growing through 2028, eventually reaching three times what we achieved in 2023. We are pleased with this growth and feel confident about delivering these results. Furthermore, within our Central operations, we have consistent revenue from technology fees, which generally align with RevPAR in various regions and increase as we expand our unit count. You’re observing some of that growth as well. Additionally, we've accounted for cost savings in our central line, as there have always been associated overheads. These four factors are contributing to the potential profitability of our central revenue line.

To add to that, the underlying fundamentals of our ancillary services, credit card, and point sales are very strong. We've reported significant growth in our loyalty program and credit card offerings, which ultimately enhances membership engagement. This engagement drives point sales, credit card applications, and spending. Additionally, the strength of our portfolio and distribution plays a crucial role here. With robust openings, strong signings, and continued success in our Luxury & Lifestyle sector, we need to assess whether these fundamentals are supporting growth in ancillary revenues. Our progress in these areas hasn't just happened by chance; it stems from building a strong Luxury & Lifestyle collection, expanding IHG One Rewards membership, enhancing our app, and providing better benefits. This has resulted in notable growth in ancillary revenues. While we have shared these developments, they are now reflected in the numbers, showcasing a significant year-over-year improvement alongside sustainable cost savings. When discussing net unit growth conversions, it's important to recognize that everyone may have a different experience. We currently possess a diverse conversion portfolio with brands like Vignette, voco, and Garner. Initially, we primarily focused on our established brands, but now we have richer options, particularly with Garner performing well. Voco has over 100 locations open and another 100 in the pipeline, while Vignette is well ahead of its goal of opening 100 hotels within ten years. This diversity enhances our ability to pursue conversions. In terms of proportions, the first half of the year showed that, excluding Ruby, our openings were 57% and our signings were 39%. However, our main goal is to grow both new builds and conversions. New build activity, while still below potential, is improving, and our new-build signings and openings are on the rise, with signings up 9% for the year. We're not dissatisfied with this growth but would welcome even more increases in new builds, regardless of conversion proportions. Addressing the notion of a zero-sum game, we perceive the market differently. We believe the addressable market is vast and not limited to independent properties. Most of our conversions come from other brands rather than independents, and this market continues to grow as new builds contribute to it. We think this growth is beneficial for the industry, improving existing supply for both guests and owners while showcasing the strength of our system.

I just have one follow-up regarding the loyalty contribution. The slide in the presentation on loyalty enrollments shows a 22% increase, while Reward Night is going up by 5%, which aligns with your net unit growth. Should we infer from this that although the number of loyalty members has increased significantly, the percentage of bookings hasn't really changed as a proportion of the total? I'm trying to reconcile this with your earlier comment on the high engagement from loyalty numbers.

I don't think that's a direct read across. After people enroll, it takes time for them to accumulate a balance, reach status and then redeem. And we're in a point right now where we have fast enrollment growth, that will translate into engagement into redemption growth, but it takes time for people to build a balance because had our enrollment growth not accelerated, you might see more of a one-to-one relationship, although it's not going to be like that quarter-to-quarter, year-over-year because different things lead people to behave differently, whether they want to use cash or points. But it does take time for people to build status, build their milestone rewards, build their points. But once they get in, they get engaged, they stay as we see and they reach that point of converting into redemptions.

We are seeing significant growth in member penetration, which increased to 65% in the first half, representing a 5% rise from the first half of 2024. In the Americas region, the contribution level is around 70%, demonstrating a top-tier contribution from loyalty programs industry-wide. Overall, we are experiencing improvement across all three regions, highlighting the value of our platform and the app we relaunched in mid-2022. That growth in contribution levels is quite impressive.

Five years ago, our global loyalty contribution was approximately 50%. With loyalty now at 65% to 70% in the U.S., it demonstrates the value of the work we've been doing. It's providing benefits for owners and enhancing our value proposition. This is a crucial indicator of engagement and the success of our initiatives.

Next question comes from Leo Carrington from Citi.

Two questions for me, please. Firstly, it probably ties into that last answer. But in the release, you noted 2 percentage points, I think, improvement in direct digital bookings. The drivers are outlined well, but I'd be really interested to know what you see in the other channels and presumably some of these have been giving share away to your channels. And then secondly, on the new-build signings, which you mentioned are up 9%. Is that still mostly driven by China? I'd be interested in hearing what developers are saying in the other regions and whether the other regions can also consistently grow new builds from here?

Okay. Can you repeat your second question, please, again?

Sure. Just around the new builds trajectory by region. China is still below its potential but presumably contributing more to that growth. I'd just like to know some more about what's happening in EMEAA and Americas with new build specifically.

We are satisfied with the growth in our digital bookings. While some traditional channels, like the voice channel, may not be seeing growth, there is a noticeable shift towards digital platforms, whether through the web or apps. Our GDS channels continue to perform well, and we are not losing market share to third-party channels. In fact, we are gaining share from these channels, while still maintaining a positive partnership with third-party travel agencies, whether they operate online or offline. Our goal is to provide the right inventory at the right price for the appropriate customer and channel. Overall, digital bookings have been consistently growing year after year as consumer behavior and device usage evolve.

Elie, I'll start off maybe some of the new builds, just to give some additional facts and then you can give some color on that. If you look at our signings in the Americas, actually only 3% of our signings in the Americas were new build signings. In EMEAA, 51% of our signings in the half were new build. And that was actually up 45%. And as you then go so to Greater China, 67% of our signings were new build, and that was up about 4%. And as a group, we're up 9%. So overall, you really see there's still a lot of new-build signings coming. And that's great because we've got great brands for new-build signings in brands like avid and Atwell and things like that will really drive strong growth in those new build signings over time. At the same time, we've introduced great conversion brands, whether that be voco, Vignette, Garner. And then even our Holiday Inn Express brand continues to be one of the highest conversion brands that we have. So we have a really nice mix between new builds and conversions, and we feel really good about that. And to be honest, we want all signings, whether that's new build or conversion. And so we're out there trying to win everything.

We have no further questions on the call. So I will turn back to management for any closing comments.

Well, thank you, everyone. It's been great to connect with you today. We're very proud of what our teams have accomplished in the past six months, and we remain confident in our ability to continue delivering on our strategy and driving shareholder value creation going forward. Our next market communication will be our third quarter trading update on Thursday, the 23rd of October. Thank you for your time and interest in IHG, and I look forward to catching up with you soon.

This concludes today's call. Thank you all very much for joining. You may now disconnect.