Stuart Ford: Thank you, and good morning, everyone. Welcome to IHG Hotels & Resorts conference call covering the 2026 third quarter trading update. I am Stuart Ford, Senior Vice President and Head of Investor Relations at IHG, and I am joined this morning by Elie Maalouf, our Chief Executive Officer, and Michael Glover, our Chief Financial Officer. Just to remind listeners on the call that in discussions today, the company may make certain forward-looking statements as defined under US law. Please refer to this morning's announcement on 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. For those analysts or institutional investors who are listening via our website, may I remind you that in order to ask questions, you will need to have registered using the details on page 2 of this morning's RNS release.
Stuart Ford: The release, together with the usual supplementary data pack for the third quarter, can be downloaded from the Results and Presentation section under the Investors tab on ihgplc.com. Now over to Elie.
Elie Maalouf: Thank you, Stuart, and good morning, everyone. I will begin today's call by providing a brief overview of our global trading and development performance in Q3. I will then hand over to Michael to go through the performance in each of our three regions in more detail, and he will also cover the share buyback and financing updates. I will then provide some brief concluding remarks, and we will open up the call for Q&A in about 15 minutes or so. Let me start by thanking our teams around the world for their hard work and dedication. We have delivered another strong performance, with RevPAR growth accelerating in Q3 and our development momentum continuing. The quarter once again demonstrated the benefits of IHG's strategic diversification across geographies, brands, and stay occasions. Turning first to trading.
Elie Maalouf: Global RevPAR grew by 5.3% in Q3, taking growth for the year to date to 4.6%. The US performance was very strong, with growth across every brand, every demand driver, and every location type. This reflects the ongoing strength and breadth of the US economy and of IHG's enterprise platform. The EMEAA region also saw very good growth overall, particularly in Europe and East Asia Pacific. The wider Middle East sub-region improved to broadly flat, though there were still declines in the GCC countries. In recent weeks, there have been escalations of the conflict in the Kingdom of Saudi Arabia, and we hope for a speedy and lasting resolution right across the region. In Greater China, RevPAR eased in this last quarter, impacted by adverse weather and changes to public holiday timings.
Elie Maalouf: RevPAR growth remains positive year to date, and we remain confident in the strength of the outlook. At a global level, both rate and occupancy contributed to the 5.3% RevPAR growth, with average daily rate up 3.9% and occupancy increasing by 0.9 percentage points. By demand driver, rooms revenue on a comparable hotels basis was up 10% for groups, up 5% for leisure, and up 4% for business, further demonstrating the benefit of strategic diversification. Turning to development activity. We expect 2026 to be another record year and the fifth straight year of accelerating net system growth. In the quarter, we opened 12,900 rooms across 92 hotels, taking our year-to-date total to almost 300 and expanding our global system to 7,200 hotels. Net system growth was 4.9% year on year.
Elie Maalouf: Among openings in the quarter, we celebrated our 1,000th opening in Europe and globally, our 200th for Hotel Indigo and our 150th for voco. There were plenty more opening debuts to new countries. For example, the first Vignette Collection hotels into each of Spain, Germany, and the Dominican Republic. We signed 21,100 rooms across 164 hotels in the quarter, almost twice the number of hotels we opened. With that momentum, year to date, signings have already topped 500 hotels. Our pipeline is more than 3% bigger than a year ago, and equivalent to growth of 33% on our current system size. Development is split roughly evenly between new builds and conversions, the latter, of course, moving more quickly through the pipeline. Each of our collection and conversion-focused brands, voco, Vignette Collection, Garner, and Noted Collection, continue to expand around the world, demonstrating the breadth and attractiveness of our brand portfolio.
Elie Maalouf: With that, let me now hand over to Michael to run through the regions in more detail for you.
Michael Glover: Thanks, Elie. Starting with the Americas, where RevPAR growth accelerated to 6.8% in Q3, taking year-to-date growth to 5.6%. Rate grew by 3.9% and occupancy increased by 2.1 percentage points to 73.9%. You have to go all the way back to 2017 for a higher level of occupancy. In the US, RevPAR grew by 6.9% in the quarter and 5.4% year to date. The tail end of the FIFA World Cup in July added 40 basis points to the region's RevPAR growth in Q3. The quarter also had within it a small benefit from the timing of public holidays and events, which supported a further uptick in travel rather than any sort of shift from the prior or following quarter.
Michael Glover: Aside from those small benefits, the vast majority of the strength of the performance in the US is a reflection of the ongoing strength and breadth of the US economy, as we noted. That is also reflected in the growth of all three demand drivers. Groups were strongest, with comparable rooms up 12% compared with 2025, followed by leisure up 7% and business up 6%. Turning to development in the region, gross system growth was 3.6% year on year, and net system growth was 2.1%. We opened 4,000 rooms across 39 hotels in the quarter, 1,300 rooms more than the same period last year. Notable openings included the InterContinental Presidente Mexico Mérida, the new flagship Crowne Plaza in Times Square, New York, 11 Holiday Inn Expresses, and eight more Garner properties. Moving to signings in the quarter, we signed 5,700 rooms across 65 hotels.
Michael Glover: These included 24 hotels for the Holiday Inn brand family, 22 across our extended stay brands, and 14 across our conversion-focused brands. Highlights included signing InterContinental Bogotá, further expanding the brand's presence to one of Latin America's most important gateway cities, as well as signings to take the voco brand into additional markets in Central America and the Caribbean. Moving on now to Europe, Middle East, Asia, and Africa region, where RevPAR grew by 5% in Q3, a significant improvement on the 0.6% growth in the prior quarter. This takes the region to 3.9% for the year to date. In Q3, rate grew by 4.1% and occupancy increased by 0.6 percentage points to 75.5%. Looking at the major geographic submarkets, RevPAR increased by 3% in the UK, 4% in continental Europe, and grew 8% in East Asia and Pacific. A number of other markets were even stronger.
Michael Glover: For example, India and Africa both growing in the mid-teens. The Middle East improved to be broadly flat in Q3, having been 19% lower in Q2. Within this Q3 improvement, Egypt and Turkey performed strongly, though countries closest to the ongoing conflict continue to experience declines. Across the six GCC countries of KSA, the UAE, Qatar, Kuwait, Bahrain, and Oman, there was a RevPAR decline of 12% in Q3. Turning to development in the EMEAA region, gross system growth was 7.1% year-on-year, and net system growth was 6%. We opened 3,600 rooms across 23 hotels in the quarter. We also signed 7,000 rooms across 47 hotels. These included 21 conversion deals and further signings for Noted Collection, which has already secured hotels in five countries since its launch in February.
Michael Glover: Elsewhere, we signed two further Vignette Collection properties in France, additional Kimpton hotels in Thailand and Italy, and a Ruby in Greece. Finally, moving on to Greater China. Year-to-date, RevPAR has grown by 1%, although the third quarter, it eased by 3%, with rate down 0.8% and occupancy decreasing by 1.6 percentage points to 62.3%. A number of adverse weather events impacted domestic travel during the first two months of the quarter, while changes to public holiday timings supported more international outbound leisure travel in late September. However, we did capture the benefit of that outbound travel in EMEAA during the quarter. These factors contributed to RevPAR declining by 7.5% in Tier 2 to 4 cities, while Tier 1 cities grew by 0.2%. There was very strong growth in Hong Kong and Taiwan.
Michael Glover: We continue to remain confident in the attractive long-term fundamentals of the Greater China market, underpinned by strong economic development, a growing middle class, and the continued under-penetration of hotel rooms per capita. Because of these strong fundamentals, development activity in the region remains excellent. Gross system growth was 12.1% year-on-year, and net system growth was 10.3%. We opened 5,300 rooms across 30 hotels in the quarter, taking year-to-date openings to 20,500 rooms. A particular highlight was the opening of Holiday Inn Shanghai NECC, which brought the new Holiday Inn design to Shanghai and became our 90th hotel opened in that city with a population of some 25 million. We signed 8,300 rooms across 52 hotels in the quarter, including 20 Holiday Inn Express and 14 Holiday Inn properties.
Michael Glover: Increasing demand for conversions, comprising both hotel rebranding and adaptive reuse projects, have grown to represent approximately 40% of openings and signings in the year to date. A notable conversion example was The Hari Hotel in Hong Kong, which was both a signing and an opening within the quarter and is part of a portfolio of three luxury hotels joining our Vignette Collection. Moving on next to update you on the share buyback. We are currently 74% of the way through this year's $950 million program, with $707 million spent to date and 4.7 million shares repurchased. This has reduced the total number of voting rights in the company by a further 3.1% to 147 million.
Michael Glover: Together with the $285 million of ordinary dividend payments, the program will take total shareholder returns in 2026 to more than $1.2 billion, which is equivalent to 5.8% of IHG's market capitalization at the start of the year. As previously stated, leverage at the end of 2026 is expected to remain within our net debt to adjusted EBIT target range of 2.5 to 3 times. Finishing with a quick update on financing. In September, we issued €850 million of bonds across two tranches. Following the maturity of a £350 million bond in the prior month, we now have $4.6 billion of bonds outstanding and a blended cost of 5.1%. The next scheduled maturity is the €500 million bond in May 2027. As previously described, our expected range for adjusted interest expense for 2026 remains $230 million to $240 million.
Michael Glover: Given the increase in our gross debt, as well as the modest increase in our blended borrowing rate following this year's refinancing activity, the adjusted interest expense expected to increase $40 to $60 million pre-tax in 2027. This is an expected feature of operating our growth algorithm, which includes returning surplus capital to shareholders and maintaining leverage within our target range as part of targeting EPS growth of 12% to 15% annually on average over the medium to long term. To conclude then with some comments on consensus for this year. Our strong performance for the year to date and the continued positive outlook for demand gives us confidence in achieving consensus expectations for 2026. We would expect consensus to increase modestly further given the successful Q3 we are reporting today.
Michael Glover: Consensus, as it currently stands for the 2026 full year, is global RevPAR of 3.5%. The stronger-than-expected Q3 would flow through to EBIT accordingly. For net system growth, consensus for the current year is 4.8%. Our continued development momentum underpins that view. You can find the full detail of our current consensus on our corporate website. With that, I will hand back to Elie for closing comments.
Elie Maalouf: Thank you, Michael. To wrap up, RevPAR growth accelerated in the third quarter to 5.3%. Net system growth was 4.9%. We expect 2026 to be another record year for development activity and our fifth straight year of accelerating net system growth. We are confident of achieving consensus expectations for the year, which would mark the third consecutive year of delivering adjusted EPS growth around the top end of our growth algorithm of 12% to 15% annually, on average, over the medium to long term. This once again shows the power of IHG's enterprise platform and the benefit of our scale and strategic diversification around the world. With that, Michael and I would be happy to take your questions. Operator, can we open up the lines and take the first question?
Operator 2: Ladies and gentlemen, we will now begin the question and answer session. If you are dialed into the call and would like to ask a question, please signal by pressing star 1. We will pause for a moment to assemble the queue. Your first question comes to the line of Jamie Rollo from Morgan Stanley. Your line is open.
Jamie Rollo: Thanks. Morning, everyone. Three questions on net system growth, please. First, on China, a very strong figure again, 10%, but that was a bit of a slowdown from the 12% at the H1. Some rounding in there, of course. Do you see that slowdown continuing, or is 10% a fair run rate for the next year or 2? Secondly, on the Americas signings down a quarter in Q3. I know it is only one quarter and there is probably some phasing, but anything you would call out in particular there? Then finally, looking into 2027, I know you do not guide, but consensus, I think is on 4.8% again, for net system growth. I think DAF is not in that number. That should add about 70 basis points.
Jamie Rollo: Do you think somewhere in the mid 5% is right for next year, or is there any risk from that China question or indeed from the Middle East situation? Thank you.
Elie Maalouf: Okay. Thank you, Jamie. On China, no, we are very confident that we are going to keep building upon the record year upon record year of signings and openings that we have and strong net system size growth. We do not give guidance on exactly what the number will be for next year, but we do not see any indication that there is a slowdown in development. Our brands are in strong favor. Our signings are strong. Our hotels are performing. The market is expanding. We are delivering for owners over there, and our team is optimistic about continuing the current trend. We are not going to give you a number, but it is going to continue to be a very strong contributor, not just to our net unit growth, but also to our profitability. You saw at the H1, our profitability was up 25%.
Elie Maalouf: These are not just keys, but they are keys with fees in China, and we are confident continuing that trajectory. We do not see a slowdown coming. We are confident in America's signings continuing to power our business. This will be, I think, the third year in a row of America's net system size growth accelerating beyond the pandemic. We had a strong H1 of the year. Signings can be lumpy from time to time. We think we will finish the year with good momentum. We are confident in that momentum over there.
Michael Glover: Year to date, we are up 7% on
Elie Maalouf: Yeah
Michael Glover: signings in the Americas. As Elie said, there can sometimes be some lumpiness there.
Elie Maalouf: For 2027, you rightly include the Department of the Air Force deal. Setting that aside, I think we have good momentum going forward. We are doing better. This is our fifth year in a row accelerating net system size growth. We think that momentum continues, and Department of the Air Force will build on that. We are not putting a number out there for next year, but yes, we are very confident in consensus next year. We would say that at that 4.8 number for next year, there is definitely more upside than downside.
Jamie Rollo: Very helpful. Thank you.
Operator 2: Your next question comes to the line of Jarrod Castle from UBS. Your line is open.
Jarrod Castle: Good morning, everyone. I will go for 3 as well. You have just announced you have got over 1,000 rooms in Europe, so just want to get any views on what has been happening in Europe with the riots and how you see that impacting your business. It looks like potential for further protests, et cetera, coming up. So, any color there, if you do have any color? Secondly, just again, I do not know if you want to say anything on fee triangulation between NUG and RevPAR, I guess. Q3 would have again seen a bit of lag there. So just if there is any comments on the triangulation. I think probably we have spoken about it too much, but I will ask that anyway. Then Elie, Michael, just one looking a bit forward. It is the kind of time of year where you are talking to corporates about their travel plans for next year.
Jarrod Castle: Just getting an idea if you have got any color on what they are saying about volumes of corporate travel and your indications potentially of what room rates will do across your network. Again, I do not know if you have got anything to add there. Thanks.
Elie Maalouf: Sure. Thank you, Jarrod. We are very proud of our teams growing our business in Europe. Europe, the broader definition of Europe, including UK, is roughly 25% of global GDP. It is over 50% of global inbound travel. It punches way above its weight in inbound international travel, and will continue to do so. It has unequaled destinations, culture, gastronomy, climate, geography, history, art, all the things that people come to Europe for. This year, it is going to be another record of Americans traveling to Europe, despite higher airfares and higher temperatures and whatever. It is just a long-term trend of people, especially the more affluent, wanting to travel and wanting to travel to Europe. I think Europe is 4 out of the top 6 destinations in the world with the highest inbound travel. That is not changing.
Elie Maalouf: We are growing with that trend, and we are growing a lot in Southern Europe, which is Portugal, Spain, Italy, Greece, all the way over to Turkey. There is a lot of demand for the enterprise strength that we bring for our brands, for the international travelers, especially US travelers that we bring. I personally meet with a lot of the investors and owners in Europe that are delighted to see the performance. I just walked over with our board this week to our new voco London Bloomsbury conversion from another global brand, and how delighted the owner and the general manager were about the immediate and significant improvement in performance, rate, occupancy, IHG One Rewards visitors, travelers, decrease in OTA. We have already done multiple hotels with them. We are going to do more. This is a trend in Europe. One, of continued strong inbound travel, international travel.
Elie Maalouf: Number 2, opportunity for conversion of not just independent, but other branded hotels to our brands. Expansion mostly, I would say, in Southern Europe. So we are very pleased with that. Look, we are of course disappointed with everybody to see some of the tensions in some cities, particularly in France. France is only 1% of our system size. We hope and we think it will pass, as it has passed before, by the way. It is not the first time there have been disturbances in France. We hope it is the last time, but it is not the first time, and it has passed before, and France continues to be one of the strongest, I think number 2 destinations in the world for inbound tourism, and we are confident it will continue to be so.
Michael Glover: In terms of fee triangulation, if you want me to take that one, LE. As you know, as this is a trading update, we do not get into the finer details of the fee revenue triangulation. That said, as our review remains unchanged from the H1 results, we should still expect the triangulation gap to narrow over time. The main driver of that is the increase in our system growth, as we discussed at H1. There is always going to be a slight lag when you are accelerating net system growth, as we have really since 2021. Newly opened hotels take some time to reach stabilized occupancy, room rates, and overall hotel revenue levels. Most agreements also have some fee structures that step up over the first few years of the operation.
Michael Glover: As a result of all that, the full fee revenue contribution from recent openings are only partially reflected initially, but builds up over time as the hotel matures and the fee structures move up. There will also always be some noise in any given period. This include differences in liquidated damages, hotel renovations, or hotel closures. Of course, at the H1, the triangulation included the impact of the war in the Middle East and the impact on our incentive management fees and things of that time. As we said at the time, neither of these should be viewed as permanent as recently hotels mature and contribute to a greater proportion in the period. I think, we still feel very comfortable that it is going to continue to narrow over time.
Elie Maalouf: It was driven mostly by our accelerating the system size growth fifth year in a row, which is a good thing to have. I am not eager for that to discontinue, by the way. Your question about business travel. Look, it has been strong. It is strong globally at 4%, stronger even in the Americas at 6%. That is a reflection on the strength of the US economy. Look, what is happening in the US, you have strong corporate profits. S&P profits have been very strong, it is up double digit year to date. GDP growth over 2%. Employment is still at record levels. Corporate investment, leaving aside government investment, corporate investment in technology, data centers, energy, pharmaceuticals, manufacturing, construction. Then you have government investment, the defense. All those sectors are growing, and we are very exposed to the industrial segments, travel segments in the US.
Elie Maalouf: I would also look at our group business, which is up double digit, 10% globally, 12% in the Americas. Half of that business is also corporate travel, meetings, events, conferences. Your own research, I think at UBS, we looked at recently shows that 2027 expectations are nearly double digit higher for travel budgets. I think it was 9.9%, right, Jarrod? 9.9% expected growth year over year for corporate travel.
Jarrod Castle: That is correct. Yeah. Correct.
Elie Maalouf: We do read your material.
Elie Maalouf: Remember it. There is a general positive sentiment around corporate travel, and we are benefiting from it.
Jarrod Castle: Great. Thanks very much.
Operator 2: Your next question comes to line of Jaina Mistry from Barclays. Your line is open.
Jaina Mistry: Good morning, Elie and Michael. I have three questions as well. The first one is on FY27 annual interest guidance. It is very helpful that you quantified that. From where you sit today, does the wider algo of high single-digit fee growth, 10% EBITDA growth, and 12% to 15% EPS growth still hold for next year despite the increase in interest costs? Second question is around Q4 specifically. The news flow around geopolitics and Saudi Arabia, France, the risk of protests in the wider European region. Are you seeing any cracks in demand there, or is the booking curve slowing in any way in Q4? Then very last question on net unit growth. Really helpful comments earlier from Jamie's question. I guess one of your peers last night lowered their net unit growth guide for this year.
Jaina Mistry: It sounded like they were flagging higher interest rates, fewer transactions, and that kind of impacting conversions. Can you say a few words on why you at IHG feel so confident this year and next year and maybe why you are less impacted from the higher rates business than maybe some of your peers? Thank you.
Elie Maalouf: All right. Michael will take the first question on interest, but the quick answer is yes, the algo still holds. Over to you, Michael.
Michael Glover: Well, let us just take a step back and remember the growth algorithm we laid out in February 2024. As Elie said, there is no change to the 12% to 15% earnings per share guidance in the algo. Through this algo, we aim to deliver high single-digit fee revenue growth per annum on average over the medium to long term. We do this through a combination of RevPAR and system growth. Given the highly scalable nature of our business model, we expect this high single-digit fee revenue growth to translate into approximately 10% EBITDA growth per annum on average. As our business continues to grow and compound, we generate more and more cash each year, which we then allocate first towards reinvesting in the business and driving future growth. Then second, towards sustainably growing the ordinary dividend.
Michael Glover: And then third, returning surplus cash to shareholders in the form of buybacks. And importantly, while maintaining net debt to EBITDA in our 2.5 to 3 times leverage range. As a business, we continue to grow. As we continue to deliver on our growth algorithm, and as we aim to keep leverage in the target range, our overall debt balance and interest will grow each year. This is more than offset, however, by increasing EBITDA and cash flow and then returning capital to shareholders via the share buyback as we replace higher cost equity with lower cost debt.
Michael Glover: While we said in the stock exchange this morning that we expect our adjusted net interest expense to increase between GBP 40 million and GBP 60 million pre-tax next year, it is also important to remember that this assumes another year of growing the business and executing on our growth algorithm, which aims to deliver that 12% to 15% adjusted earnings per share growth per annum on average over the medium to long term. While most analysts have appropriately noted an expectation of further buyback in 2027, I think consensus as it sits today is around GBP 980 million, which is in line with our growth algorithm and balance sheet targets. Consensus also needs to reflect the interest cost and the assumed reductions in the share count in order for this to be appropriately reflected in the algo. That is why we gave out that interest expense number today.
Michael Glover: But I think it is important to put it in the context of everything else that is going on. As we said, there is no change to that 12% to 15% earnings per share guidance in the algo.
Elie Maalouf: No. RevPAR grows, fees grow, EBITDA grows, cash flow grows. That allows us to invest in the business, also do more buybacks. That has to also keep us within. We are staying within our leverage ratio also means leverage grows, therefore, interest grows, but it is all within the algo of 12% to 15%. Your second question on Q4. Well, we are in Q4. We do not give guidance. What we did say and what we are saying clearly today is we are confident in consensus and that we can see consensus moving up a little bit given the strong performance we have had year to date, and especially in Q3 with the strong RevPAR. And we are comfortable with that too. So that is about all the guidance we are going to give about Q4. Sure. Look, there are disturbances around the world. There is, of course, the Middle East conflict has not resolved yet.
Elie Maalouf: It is not at the level of tension that it was in March or April. It is not resolved yet. If it gets resolved sooner, that is better, but it is only 5% of our business. If it does not get resolved as soon, we are still happy that the 95% of our business is doing very well and making up for that in the near term. We are highly confident that as soon as there is a resolution, the Middle East will continue go back to its trajectory of growth and success. It bounces back very quickly. You already saw that in this year, in Q3. As soon as there is a little bit of resolution, the business bounces back very quickly, and we are confident that will happen.
Elie Maalouf: You might have seen the news in the last day or 2 that there is already more oil coming out of the Gulf now than there was before the conflict. While there is still some tension, there are ways to also continue the economy around the world despite the tension. I think there are workarounds that are resolving some of the issues. We are confident in Q4 globally, despite there are some tensions in some parts of the world. On Q4, we are not by any means a read-across to what you might have heard last night from some other hotel company, and it is not always a read-across, right? There are other hotel companies earlier this year that downgraded their net unit growth, and we have actually been upgrading it.
Elie Maalouf: We started, I think consensus was 4.2% at the beginning of the year, and now it is 4.8%. While maybe others have been downgrading, ours has been upgrading, and we are confident in where consensus is today, where we feel underpinned at that consensus, and we are not putting a ceiling on it. We feel like our teams are working very hard through the end of the year to open up every one of the many hotels we have in pipeline, so we are not putting a ceiling on it.
Michael Glover: The other side is we go into 2027. We have great visibility into the progression of our pipeline and especially now that you have more conversions in that pipeline. That gives us confidence that 2027 can continue to accelerate, but that is also then underpinned by the Department of the Air Force and what we are doing with the Department of the Air Force. We do not know exactly how all those are going to come in and when they are going to come in, and all those rooms, and how many rooms that is going to be, which is why we have not given you the clear numbers on that. We will when all that gets finalized. That is what gives us confidence on where we sit today, both on 2026 and 2027.
Elie Maalouf: On your point about interest rates, interest rates are a bit higher. Historically, if you go back long term, they are not at levels that they have not been before. In fact, the 10-year is probably where the 30, 40-year average is, plus or minus. The industry has had many good years before. What you start to see when interest rates do rise, in some cases, you start to see some selectivity. Owners start to move to the stronger performing brands like ours. That is why you see our conversions continue to increase. Roughly half of our openings and half of our signings around the world, and more than half of our openings in the US are from conversions. We are converting from independent, we are converting from other brands. There are winners and losers in these times, and we are definitely feeling on the winner side of it.
Elie Maalouf: We have more conversion brands. We are signing more conversions. We are opening up more conversions. Most of them are coming from other brands in the US and around the world. You can call it a flight to quality in these times, but we think we are benefiting from it.
Jaina Mistry: Very clear. Thank you.
Operator 2: Your next question comes from the line of Leo Carrington from Citi. Your line is open.
Leo Carrington: Good morning. Thank you. If I could first ask just on the Americas region, you highlighted the strong growth in groups. Is there any reason to expect that this kind of outperformance won't persist into the rest of Q4 and also Q1, given your visibility for this demand type is potentially a bit better than others? Secondly, in the quarter, I noted in the trade press a few larger signings or a few signings of hotel groups like in Australia and Japan for you, and a smaller one for Vignette Collection too. Is this a normal tempo that I've just picked up on, or has there been an acceleration in these kinds of opportunities? Lastly, away from the quarter, can you just give an update on how the Noted Collection brand has been received among owners?
Leo Carrington: I can see it now in your pipeline, and I suppose you've had almost a year out in the market with this. Thank you.
Elie Maalouf: I'm going to start from your last question. Well, we're very pleased with the reception for Noted Collection. We're getting the first signings. We've got a lot of interest. I don't think it's been a year. We launched it this year. I don't think it's been anywhere near a year, and we're pleased with the momentum that it's having. Look, all of our conversion brands have really reached rapid success. You look at Noted Collection, it's already got half a dozen signings and a couple of openings. You look at Vignette Collection, we've got over 88 hotels open and under development in just a few years. Garner has over 230 hotels open under development, way ahead of our projections in over a dozen countries. voco, nearly 300 hotels open under development around the world, well ahead of our projections when we launched it.
Elie Maalouf: Our collection and conversion brands have been successful, and that's given us the confidence in following owner demand to launch Noted Collection. We haven't taken it to the US yet. It will be there at some point. But it's in Europe, and it's moving east from Europe, where there are even greater conversion opportunities. So we feel confident about the trajectory that it will have, consistent with the success of our previous and successful collection and conversion brands. On our signings, look, we're pleased that year to date, it's another year of signings acceleration year to date. We're ahead of last year when you adjust for the Ruby deal that we did last year. It's pretty broad-based. We're pleased with the success we're having in Asia and Europe and in the Americas.
Elie Maalouf: We've got a broader portfolio of brands, a stronger enterprise, a loyalty plan that's delivering 67% of room nights around the world, 73% in the US. Great technology ecosystem that we reviewed at the H1. All of those are value proposition for owners that they appreciate. By the way, strong RevPAR performance is something they really appreciate too. That's driven by the strength of our enterprise. Yes, our markets have been favorable in general, except for a few that we've discussed, but I think we're outperforming the market and delivering strong revenues at low cost of distribution to our owners that they benefit from. Our whole enterprise is creating value for owners, and they respond by partnering more with us for growth.
Michael Glover: Leo, if you want me, I can maybe just talk a little bit about groups. As we look at groups, obviously, we've had an incredible performance. I think over our past periods, we've talked about how group performance on the books has been really strong. As we sit here today, if we really look on a total basis for revenue on the books, we do have a little more visibility with groups. It's still up mid-single digits. Still looks like groups are going to continue to come in, feel really good around that. Really that's across the board and across all regions. Yeah, we're feeling really good around how groups are coming in.
Leo Carrington: Thank you, Michael. Thank you, Elie.
Operator 2: Your next question comes to line of Alex Brignall from Rothschild & Co Redburn. Your line is open.
Alex Brignall: Morning. Thanks so much for taking the questions. I will do three. The first one I will do is Muse, just because I am astonished no one has asked it so far. A few travel companies and other wider companies have blocked it on fears of the idea that it goes and just tries to find you the cheapest option and keeps checking for you. How would you kind of think about agents that self-book out, and how you might work with them? Thank you. The second two on similar topics that have been mentioned already. In terms of key money expectations, you do not give full quarterly results, so is there any change in where you are for this year, and for next year, how should we think about modeling key money?
Alex Brignall: In terms of what you have talked about in terms of this ramp-up in contract signings at NUG, can you just talk to us about the proportion of contracts or new signings on which you have offered ratcheting contracts? I think that that is the piece where the royalty rate change is coming from. If you could talk about what proportion of contracts had ratchets in them previously and where that is now, because that might help with the modeling. Thank you.
Elie Maalouf: Okay. On Muse, look, we are in conversations with all the platforms, the hyperscalers, the frontier models as this. We have our own, of course, artificial intelligence strategy and models and agents and on our website and our app, we already have conversational search. We are in conversations with everybody. We are in conversations with Meta. We have not come to any conclusions on what an eventual collaboration could look like, if any. I think what others have decided to do is really down to them, but we do not have really an update on that.
Elie Maalouf: I will tell you one thing is we are very confident in our artificial intelligence strategy to make sure that our channels are the preferred ones for our travelers, for our guests, for our IHG One Rewards members, that we continue to take share of bookings for our direct channels while working with other players, other distribution partners, because we have always said that for the hundreds of millions of bookings that we need every year to drive the best RevPAR and the best yield for our properties, we need multiple distribution partners while always favoring and strengthening our direct channels. On key money, no, there is no change either in the outlook for this year nor in the capital guidance for next year. We are comfortable that our capital allocation is the right one to make us competitive and also drive the shareholder returns that we aim to do in our growth algorithm.
Michael Glover: Just to be clear on those numbers, Alex, we have said $200 to $250 million for this year, and we will continue that guidance for 2027 and up to $350 million in capital. As Elie says, no change to that for either year.
Elie Maalouf: On the ratchets, as you call them, that is not a term I was familiar with, but let us use that one. There is nothing new there. I joined the company in 2015. We did these fee ramps for new opening hotels so that there would be some glide path as occupancy starts from zero and builds up for a couple of years. There is nothing new there. We will not disclose for competitive reasons, I am sure you will understand, exactly how many deals we do in what form. It would be inappropriate for us to do so. It is no more, no less than where you used to be, and there is nothing new there.
Elie Maalouf: We brought it forward in the last few periods of discussions to explain how when we are opening up more hotels, when our net system size growth is accelerating for the fifth year in a row, that is one feature. Not the biggest feature. The biggest feature is the revenue ramp-up in a hotel. That is another feature that can create that deferral of fees in what is called the triangulation. They are not fees that are lost or anything, it is just a deferral as the hotels ramps up. The introduction and deployment of these ratchets, or fee ramps, as we call them, are nothing new, nothing greater, nothing less than they have been for over a decade, and probably longer, because I only joined 11 years ago. Thank you, Alex.
Alex Brignall: Brilliant. Thank you so much.
Elie Maalouf: We look forward to having you join us with our senior leaders meeting here next week.
Alex Brignall: I am looking forward to it.
Operator 2: Your next question comes on the line of Kate Xiao from Bank of America. Your line is open.
Kate Xiao: Good morning. Thank you very much for taking my questions. I also have three. The first one, can I just confirm on your commentary on EPS? Obviously, you said you are very confident in achieving this year's consensus EPS. You also mentioned that the better RevPAR should lead to a bit of uptick in EBITDA numbers flows through. Can I just confirm that that should also flow through to EPS, hence there could be a bit of upside to consensus EPS numbers as well? Is that understanding correct? The second question is on NUG. Obviously, you have done 3.3% year to date, which is 20 basis points better than last year. Any seasonality in particular for this year you could share with us, especially into Q4, anything that could be positive or negative on a year-on-year basis? Any color there would be appreciated. Question number three is on credit cards.
Kate Xiao: A couple of weeks ago, we saw the announcement from Chase that they are launching a new card with you guys, and I think that is the highest annual fee card. If I am not mistaken, they are raising the annual fee for your existing cards as well. I just wonder if that is something that is already kind of in your plan, in your 10-year agreement with them. Or was that based on kind of your performance, hence could be incremental to your guide of $120 million by 2028? What is your expectation of the first year ramp of these cards and programs and spending? Thank you very much.
Elie Maalouf: All right, Kate. Thank you for your questions. I will turn it over to Michael for your EPS questions, and I will take NUG and credit card.
Michael Glover: Okay. Yeah. Sorry, I thought you were going to do the credit card first. On the earnings per share question, yes, absolutely. We have actually talked about where consensus sits today. We have given an indication that we could see, in my prepared remarks, some improvement in that given where full year RevPAR consensus sits and what we have delivered to date. If you look at where consensus for profit sits, it is at $1.403 billion. Obviously, there was a Q3 RevPAR beat. We feel like that will continue to flow through. Then, of course, that flows through into earnings per share as well, as we could see that tick a little bit higher. Certainly, we have talked about 2027 and the interest cost. Also, remember, as we plan for that and we look at what interest cost comes into, it also assumes some rolling share buybacks.
Michael Glover: Of course, therefore, your WENOS will also continue to reduce, and earnings per share will accrete on top of that. Remember, importantly, leverage stays the same. We are not relevering this business to do that. It stays in that 2.5x to 3x range.
Elie Maalouf: Thank you, Michael. Your question on net unit growth for this Q4 and this year. First, I start by saying, we are very pleased that this year, 2026, will be another record year of development and the fifth straight year of accelerating our net system size growth. That is what we are trying to do, is be consistent, grow our system growth sustainably, keys with fees, and do the right deals to get the right growth that drives the algorithm. It is keys with fees that drive the algorithm, that are driving EBITDA and eventually driving EPS. At Q3, we were at 4.9%, as you know, 3.3% year to date. Last year, at the same time, we were at 3.1%. So we are growing faster and we are already in a stronger track.
Elie Maalouf: Consensus, as I mentioned earlier, has already moved from 4.2% to 4.8%, so we are going upwards in expectation, not downwards as others may have been noting. Q4 is always our biggest openings quarter proportionately, and this year is headed for another typical strong quarter of openings. We do not need to do anything extraordinary in Q4 to reach a consensus or even go ahead of consensus. It just needs to be, and it is shaping up as a strong quarter of openings, proportionately similar to other years. So we are confident that this underpins the current consensus, and we are not placing a ceiling on it, as I said earlier. Our teams are out there pushing for every hotel, for every room, working with every owner to get quality hotels open by 31 December, and we feel very good about it.
Elie Maalouf: Underpinning the future also are strong signings that are ahead of last year, strong openings that are ahead of last year, and that gives us continued confidence in our momentum to accelerate net system size growth. On the credit card, it has been a successful launch altogether since we entered into new agreement with Chase and MasterCard a couple years ago. Expanding our credit card portfolio has been on our roadmap, and not just in tiers of cards, as this new Select card is, but also across countries. We are now in the UK with a debit card. We announced a deal in Japan with a credit card. There will be other launches in other countries. The new IHG One Rewards Premier Select credit card has gotten off to a great start. It is a $350 annual fee. It is already getting strong initial customer interest.
Elie Maalouf: It is performing much better than we expected in the proportion of card selection among people who are signing up for IHG One Rewards co-brand cards. I personally just got approved yesterday. It was probably a close call, but I got through. I would not characterize this as anything new in our strategy. We always plan to expand the credit card portfolio geographically and by tier. As we premiumize IHG One Rewards, as our portfolio goes further into luxury and lifestyle, as we enroll more high-spending customers, there is more demand for higher benefit cards that also sometimes come with a higher fee, and we are very pleased with its initial uptake. Thank you, Kate.
Kate Xiao: Thank you very much.
Elie Maalouf: We can go to the next question.
Operator 2: Your next question comes from the line of Estelle Weingrod from JPM. Your line is open.
Estelle Weingrod: Hi. Good morning. I got two questions. The first one, are you worried about where airfares are heading, which in the context of all the geopolitical tensions and inflation not easing, could weigh on the consumer going forward? And just another question on China. Talking about RevPAR, you mentioned weather and holiday timing. I guess it's not easy to quantify, but should we expect RevPAR to return to a more sort of flattish to slightly positive territory in Q4, and how do you see China evolving into next year? Thank you.
Elie Maalouf: Thank you, Estelle. Airfares can be volatile. A lot of the airfare increases obviously are related to the oil price increases. The bad news is that the airfares are up for airlines and for travelers perhaps, but the good news is that it's from a, what we would consider a visible and temporary factor. When we see resolution to this conflict, and we'd hope that there will be resolution soon to this conflict, you'll see the airfares. You'll see the oil price come back down. There's already, as I mentioned earlier, improving oil supply, and then when the conflict subsides, you probably will see lower oil prices, which will lead to lower airfares. There's nothing structural about the higher oil prices. It's conflict-caused. We think that that reverses at some point.
Elie Maalouf: The more important thing is that we are not as exposed to airfares as you would think. I mean, most of our travel at IHG is domestic travel, is drive-to travel. Most of our travel in the US, 95% of our travel in the US is domestic. Most of that is drive to. A lot of our travel in Europe is drive-to travel. Over probably 90% of our travel in China is domestic. A lot of that is drive and train. Air travel is part of it, but it's not the majority part of it. The other thing is that the travelers have shown a lot of resilience to these higher airfares. Despite the fact that they've been higher, demand has been very strong. I was just talking to the CEO of a US airline.
Elie Maalouf: I won't name who, and they said that. Many of them probably are in the same place, but this one CEO, one of the major four airlines, was saying it's going to be a record year in demand, a record year in revenue. People are paying for the fares. It's the oil price that might affect their results differently, and that's what they're saying publicly, that demand is strong. Front cabin, back of cabin demand is strong. We don't see that being a long-term issue because what's causing the higher airfares is a short-term issue with the conflict. We're not as exposed to that as destinations and maybe groups that are much more indexed to air travel than we are. We're much more indexed to domestic and non-air travel customers.
Elie Maalouf: On China, we're confident, one, not just in the long term in China, but also that some of the anomalies of Q3 will reverse in Q4. We're not giving guidance on what Q4 could be, but it's shaping up as a better quarter than Q3 was, definitely. We see no scenario under which we're not in positive RevPAR territory for the full year in China. Beyond that, the fundamentals are strong in China. I know not all the headlines are as positive as they can be, but if you look at things in totality in China, it's still a GDP growing at 4% to 5%. What they announced last week, record exports again. Strong technology industry, probably only rivaled by the US, whether it's in artificial intelligence, renewables, batteries, automotive, electric vehicles. Not every sector is doing very well in China, but many sectors are.
Elie Maalouf: You have a growing middle class with a population that isn't growing, but GDP is growing. GDP per capita is growing. That means the middle class is growing, and travel is growing. In China, we are double digits ahead in domestic travel in 2019 already by 2025. Not even 2026. That's 2025. We are double digits ahead in international travel in 2025, and even more in 2026 than 2019. Travel has recovered and continues to increase. What affected Q3 in part, we're not saying it's the only effect, was also the strong outbound travel, which we benefit from. There were double digits growth in RevPAR in Vietnam and South Korea, and most of our Southeast Asian countries where people are staying at IHG hotels at a strong rate.
Elie Maalouf: We do benefit from the China outbound, which you have to see as part of our strong network and investment in the future. China will be the largest domestic and international travel market in the world at some point. It's already number 2 or 3 in international outbound, and it feeds the rest of our network, whether it's Southeast Asia, Middle East, Europe. Not so much the US today, but the rest of the world, yes. It is an important market for us, not just in China for China, but in China for the rest of the network.
Estelle Weingrod: Thank you.
Operator 2: As a reminder, if you wish to ask a question, please press star followed by 1 on your telephone and wait for your name to be announced. That is star 1 to ask a question. Your next question comes to the line of Tim Barrett from Deutsche Bank. Your line is open.
Tim Barrett: Hi, both of you. I had a couple of things left, please. Just going back to that refinancing balance sheet question. I guess what wasn't asked was the strategy behind the bond issue and your strategy. Clearly, a bigger business means more net debt. Why did you go so early on the refinancing it, and does that mean there's just some dual running in the new guidance? My second question, Continental Europe, we haven't talked about very much. It looks like you've lagged STR a little bit in Continental Europe, so I just wondered if you could give some color on your exposure there. Thanks very much.
Michael Glover: I'll take the refinancing question. We did refinance those bonds earlier this year. We do that in advance to de-risk some of the payments as we go into 2027. We have done that as a practice for the past several years. We also look at where EBITDA is and where we want to, and the kind of leverage we want to maintain. We had a great result, a great interest in the bonds and also pretty much a great timing. Our next bond comes due in May 2027, which will obviously use the proceeds of the bond as we do that. The carrying cost in the short-term is pretty narrow because you have the cash, of course.
Michael Glover: Then, of course, as we go in, we use that next year to fund all the different things we talked about, including share buybacks and repaying expiring bonds as well. We're well-placed. As we look at this year, we're heading to be in the low end of our net debt-to-EBITDA range. As we get into 2027, we're in good shape as well. I think we've done a good job there, and our balance sheet is really strong at this point.
Elie Maalouf: Thank you, Michael. On your question about Continental Europe. We're very pleased with our performance in Continental Europe. RevPAR up in Q3 at 3.8%, year to date at 3.7%, reflecting the strength of international inbound into Europe. I think you may be comparing our results to STR Europe data, which I believe includes Turkey. We did very well in Turkey, but for us, Turkey is in Middle East. When we looked at our Middle East results, which we said improved to broadly flat, we did very well in Turkey, which helped improve the broadly flat in the Middle East, despite the GCC being down double digit, right? We benefited from a strong season there, but that counted somewhere else. I think in like for like in Europe, we're very pleased with our performance and believe it's very competitive.
Tim Barrett: Okay. Makes sense. Thank you both.
Operator 2: Your next question comes to the line of Simon Lechipre from Jefferies. Your line is open.
Simon Lechipre: Yes. Good morning. Two questions, please, on Middle East. First of all, we are hearing that many hotels are cutting rates in order to protect volumes. How do you feel about that?
Elie Maalouf: Excuse me. So sorry. Excuse me, Simon. Can you speak up and more closely? We are not picking up everything you are saying.
Simon Lechipre: Okay. Sorry. Hopefully that is much better now. We are hearing that many hotels in Middle East are cutting rates in order to protect volumes. How do you feel about that, and what would be your thoughts in terms of potential recovery and how long it can take for RevPAR to recover to pre-war levels given rates being cut? Secondly, just on the pipeline in Saudi, can you remind us of your exposure specifically to the country? I have 8% in mind, but if you can confirm or rectify. Given the recent attacks, do you see risk in terms of opening but also in terms of timing of new projects for the coming quarters? Thank you.
Elie Maalouf: Okay. Look, the market, as we said in the Middle East and the GCC, I think that is probably where you are most focused on. We said it was double digit down in Q3, and given the recent escalations, probably could continue to be down until things get resolved. It is very resilient, and I think the rates will just follow. When demand is down, you are going to see some hotels. We do not set the rates for hotels, as you know. We make rate recommendations, but every property sets its own rates. They are going to compete in the best way that they can, but we are pleased with how our hotels are competing in the market. Actually, looking at our market share, our revenue index, penetration index has been very strong in the region, and we are competing very well. You are going to see it is dynamic pricing.
Elie Maalouf: They will price appropriately to draw in more demand when demand is softer, as it is now, and price up when demand comes back. It is what they need to be doing to capture the share that they need within a certain market environment. We think that the market is behaving rationally and economically at this point in the region. Our pipeline in Saudi is something we are very proud of. We have been growing our business in Saudi. I think it will continue to grow. Of course, there are going to be probably some delays to some projects. We are not aware of any cancellations right now in the market. I am going to be actually in the region later next week, meeting with partners, and we are interestingly still in serious conversations on many new projects, many new deals that we hope to be announcing and concluding soon.
Elie Maalouf: It really has not come to a standstill, as some people would think. It continues to grow. There could be some delays in some projects, but we are confident that all of our projects in Saudi and in the broader Middle East will open.
Michael Glover: Thank you.
Operator 2: As a reminder, if you wish to ask a question, please press star followed by one on your telephone and wait for your name to be announced. Your next question comes from Jaafar Mestari from BNP Paribas. The line is open.
Jaafar Mestari: Hi. Good morning. I have three, if that's all right. Sorry to labor the point on EPS, but I see EPS of $5.79 in your company-compiled consensus, which is already above 15% growth. I just wanted to clarify, when you say towards the top end of 12% to 15%, do you mean 16.5%? Otherwise, it seems in line. Related to that, and I promise there's a more interesting question after that. Related to that, on the net finance cost guidance for 2027, as you correctly said in your prepared remarks, this is a feature of the model. This is what you do every year, literally for the last three years in exactly the same format. You give us a number for the buyback, but you also tell us how much the finance costs are going to increase.
Jaafar Mestari: The refinancing, if anything, has been exactly the same timing as in the previous three years. I am very curious what led you to do this ad hoc update in October, because you usually wait for February and give us both parts of the equation at the same time. How big is the buyback, but also where are the finance costs going? Do you think it is a bit bigger than usually? Do you think consensus is a bit ahead of itself this year, for example? Lastly, just in terms of the room openings, the brands that the group has been launching organically have had very good traction, started by your predecessor, but then more under the current team. If I take all of them together, about a third of your openings are Garner, voco, Vignette, et cetera.
Jaafar Mestari: They are less than 20% of your pipeline, and I know some of them are reliant on openings, so the pipeline may understate the growth potential. But yeah, just curious if those can continue to ramp up. Some of them would look like they are starting to plateau. Not the most recent ones, obviously. Do you need to launch more? Do you see new segments where you can fill the remaining gaps in your portfolio, please?
Michael Glover: Yeah. Thanks, Jaafar. I will take the earnings per share question. Yeah, the current consensus sits at 579, and what we have been consistently saying is that should tick up a bit as RevPAR gets funneled through all the models, as most of the consensus RevPAR is below where we feel like the full year will come in, certainly as folks put that through their models. Then we would expect EBITDA to come down through that. We have not indicated a very large increase in earnings per share, but that additional earnings that come through would flow through into earnings per share. Then as we look at the timing of why we announced the additional interest expense, we probably were maybe a little late last year in doing that, and we have visibility of how that is going to come in.
Michael Glover: If we look at where consensus sits today, it is almost, for 2027, almost at the same rate as what you have. For 2026, just a slight uptick. So we wanted to make sure that folks had that. There is nothing really other reasons or meaning behind that. As you said, we have been very consistent. We just wanted to give you that new number as we know it today.
Jaafar Mestari: Super. Thank you.
Elie Maalouf: On your question about, thank you. On your question about the growth of our conversion brands, I think what you have to keep in mind is, first, they are all doing very well. I went through the statistics earlier, so I will not belabor them, but they all have very strong pipelines. What happens with many conversion brands and conversion deals is they come in and come out of the pipeline very quickly. I mean, some, not many, but some do not ever hit the pipeline because we sign them, and they are in such good condition, they will open up in that quarter. I think the first Garner in Shanghai signed and opened in that quarter because it had just been opened as another brand. It just was a brand new hotel really. It never hit the pipeline.
Elie Maalouf: You will see the opening, but you do not see it in the pipeline, and therefore you might get that impression that there is not enough in pipeline. In general, many of them will open within the year. They will sign and open within the year. From beginning of the year to end of the year, they will not be reflected in the pipeline at the end of the year, but you will see the opening. That is actually not a bug, that is the feature. That is a feature of conversion and collection brands, is they are quicker to open, and therefore you will not get the same much higher pipeline than openings feature, which you do with new build. Yes, it is nice about new build because you see the pipeline growing, but it takes more years for them to open and more years for the fees to come through.
Elie Maalouf: Conversions are solving for a different issue. For properties that are in very good condition, that can join IHG One Rewards without having to adapt completely to one of our hard brands, to one of our much more prescriptive brands, but that can also open more quickly, require less investment, and bring fees faster to us and performance quicker to the owner. It is not a distortion. It is more of a feature that you may not build up the same pipeline because they are opening up more quickly and not staying in the pipeline as long.
Jaafar Mestari: Clear. Thank you.
Operator 2: There are no further questions on the conference line. I want to hand back to Elie Maalouf for some closing remarks.
Elie Maalouf: Well, thank you everybody. Many thanks to everybody on the call. To remind you that our Q4 update and financial results for the 2026 financial year will be announced on Tuesday, 23 February 2027. Thank you all, and goodbye.
