IHG(IHG) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics - Revenue for the fee business increased by 6% to $850 million, while operating profit for the fee business grew by 10% to$ 517 million [5] - Fee margin expanded by 180 basis points to 60.6% [6] - Operating profit reached over $0.5 billion, up 12%, and EPS also grew by 12% [4] - RevPAR accelerated in Q2 to 3.2%, leading to H1 growth of 3% [3] - System size grew by 4.9% gross and 3.2% net, adding 126 hotels and reaching 955,000 rooms across 6,400+ hotels [3] - Record-breaking signings of over 57,000 rooms, up 67% YoY, driven by strong brand momentum and the NOVUM Hospitality agreement [4] Business Line Performance - Fee business revenue increased by 6% to$ 850 million, with operating profit up 10% to $517 million [5] - Conversion opportunities represented over half of all signings, contributing to the strong growth in signings [4] - New build signings increased by 23%, reflecting improved developer confidence [13] - The Garner brand added 15 signings, with projections to reach over 500 hotels in the next 10 years [14][36] Market Performance - Americas RevPAR grew by 3.3% in Q2, with the U.S. up 2.5% and Canada, Latin America, and the Caribbean up 9.4% [8] - EMEAA region delivered RevPAR growth of 6.3% in Q2, with the U.K. up 2.5%, Continental Europe up 4.8%, and the Middle East up 9% [9] - Greater China saw a 2.5% RevPAR growth in Q1, but it eased to a 7% reduction in Q2 due to tougher comps [9] - Asia Pacific markets were particularly strong, with double-digit growth driven by outbound tourism from China [9] Strategy and Industry Competition - The company is focused on expanding its brands in high-value and high-growth markets, with a record-breaking 57,000 rooms signed in H1 [33] - The NOVUM Hospitality agreement doubled the company's hotel presence in Germany, one of Europe's largest hotel markets [37] - The company is investing in new formats, updated designs, and service standards to refresh existing brands and accelerate growth with newer brands [34] - Conversion signings have increased significantly, representing over half of all signings in H1 2024 [38] Management Commentary on Operating Environment and Future Outlook - The company is confident in the medium- and long-term growth outlook for China, expecting the number of middle-income households to double over the next decade [11] - Management expects full-year EPS growth to be higher than EBIT growth, in line with consensus expectations [8] - The company is on track to return over$ 1 billion to shareholders in 2024 through dividends and share buybacks, representing over 7% of the market cap at the start of the year [4] Other Important Information - The company declared an interim dividend of $0.532, consistent with a 10% growth rate over the last two years [4] - Free cash flow for H1 2024 was$ 132 million, down from $277 million in H1 2023, due to the spending down of the system fund cumulative surplus [22] - The company expects to achieve full-year system growth of around 4%, including contributions from the NOVUM rooms [13] Q&A Summary - No specific Q&A session was recorded in the provided content [74]