InterContinental Hotels Group PLC (IHG) Q4 2014 Earnings Report, Transcript and Summary

Okay. Good morning, everyone. Thanks for joining us today. Welcome to our 2014 full year results presentation. So before I hand over to Paul, I'd just like to start with some of the highlights and prospectus on the market. 2014 was an excellent year for IHG, and we delivered a strong financial performance, which Paul will talk about in more detail shortly. We made excellent strategic progress. We acquired Kimpton Hotels & Restaurants, opened the first EVEN Hotels in the U.S., and just last week, opened the first HUALUXE hotel in China. Alongside this, we developed our more established brands, achieving many growth milestones, which I'll talk more about later on. And our disciplined approach to capital allocation saw as return over $1 billion to shareholders in the year. So where is the hospitality industry today, and how is the outlook? As we've seen for many years now, tailwinds for the sector remain very favorable. Demand continues to be driven by global GDP growth, increasing disposable income, demographics, the globalization of travel and the growing number of outbound travelers from emerging markets. The industry is also becoming increasingly branded, driven by both consumers and the capital markets. And this is a backdrop where our strategy and strength position us well to win in the future, explaining why we have a 13% share of the active pipeline globally with only a 5% share of existing supply. In our largest market, the U.S., we continue to experience favorable industry dynamics. GDP growth remained strong, driving demand to record levels. And supply growth is still considerably below the long-term average, driving strong RevPAR performance. However, today's macroeconomic environment outside of the U.S. seems to be more uncertain and variable than it has been for some time, with an unfortunate mix of falling oil prices, the strengthening U.S. dollar, heightened potential for a Eurozone crisis, continued terrorist activity across the Middle East and the specter of a hung parliament in the U.K. Having said that, as we look into 2015, we're confident that we'll continue to deliver against our strategy and the strong momentum in our business positions us well for continuing out-performance. So I'll now hand over to Paul, who'll talk in more detail about our financial performance in 2014. And I will return later to discuss our strategy, with a particular focus on our brands and how we're using technology to enhance the customer experience across the guest journey. Paul?

Thank you, Richard, and good morning, everyone. We are pleased to report another year of strong financial performance with growth in fee revenues across each of our 4 regions as global demand for hotels operating under IHG's brands increased once again. As in previous years, the year-on-year comparability of our total revenue and operating profit are distorted by the impact of owned hotel sales, significant liquidated damages, the performance of managed leases and foreign exchange movements. I will therefore focus my attention this morning on our underlying performance, using constant 2013 exchange rates as this gives the best explanation of our financial outturn. We have converted our strong fee revenue increases into significant underlying profit growth with careful cost management and our continued focus on concentration resources in today's priority markets where we see high returns and long-term growth opportunity. Nearly 90% of our 2014 room openings were in these locations. I talked last year about our desire to maintain an efficient balance sheet, and net debt closed the year within our target leverage range, following the special dividend paid in July, with our interest charge increasing accordingly. I'll talk more about our capital allocation strategy and debt position later on. Our effective tax rate increased by 2 percentage points to 31%. As I have previously guided, we expect it to remain in the low to mid 30s for the next few years. Average shares outstanding declined following the share consolidation midway through the year and the completion of the share buyback. In aggregate, this enabled us to increase our underlying earnings per share by 12%. Demand growth in almost all of our key locations around the world led to further increases in occupancy rates, which across the year averaged 69.1%, the highest we have ever experienced. Given this level of occupancy, we have increased average rates by 2.7%, largely through optimizing our guest mix, which has driven comparable revenue per available room, up 6.1%. Growth in developing markets and the impact of hotel ramp-up means that our total estate RevPAR is a little lower at 5.5%, particularly due to bringing in lower RevPAR hotels in Asia, Middle East and Africa and Greater China. Across the year, net room count increased by 3.4%, with much of this growth driven in the fourth quarter. We opened 41,000 rooms and removed 18,000, representing 2.6% of our opening balance, as we continued to focus on optimizing the long-term attractiveness of our brands. In aggregate, our RevPAR and net rooms growth allowed us to increase our fee revenue by nearly $100 million to $1.3 billion. Each of our 4 regions increased their fee revenues with a particularly strong performance in Greater China despite the more challenging RevPAR environment we're seeing there. This demonstrates again the merits of being able to deliver growth through both same-store performance and new unit additions. I will now talk to the performance in each of our regions in more detail. Firstly, the Americas, where demand in the United States has been at record levels for 46 months in a row. We have capitalized on this to drive occupancy to levels just short of our prior peak in 2006 and to increase rate by a further 3.5%. With this record level of demand in mind, driving the highest possible average rate for our owners through optimizing our revenue management systems at property level is a key focus. In addition to a nearly 8% increase in fee revenues, we saw a strong performance from our small number of remaining owned assets, particularly at Holiday Inn Aruba, following refurbishment, leading to an overall increase in underlying revenue of 10%. Underlying profit was up 8%. With the devaluation of the Venezuelan bolivar, a $3 million headwind, and reported overheads increasing by $12 million, partly due to $4 million of additional development costs, driven by our strong signings performance and an unusually high level of large claims in our healthcare schemes. The refurbishment of InterContinental New York Barclay is progressing well, and the hotel is expected to reopen in 2016. We incurred costs of $5 billion in relation to our 20% joint venture share of the hotel's operating expenditure, and we expect to incur a similar cost in 2015. Our net rooms growth of 1.9% was our best in the region for 5 years. With the further strengthening of the U.S. lending market and a high level of investor interest in the hotel sector, we have continued to see strong demand for our brands, both newbuild and conversion projects. Against this backdrop, we increased our signings by over 10% on last year. And with over 90% of our high-quality pipeline expected to open in the next 3 years, our growth prospects, the Americas, continue to look attractive. I'll now talk a little bit more about the strong performance of the Holiday Inn brand family and why it continues to lead the market. You may remember, last year, I showed you some analysis on the resilience and outperformance of the brands through the cycle, and this has continued into 2014. Holiday Inn Express had the highest share of newbuild openings of any brand in the industry at 11%. And the overall brand family had a 28% share of openings in the upper midscale segment, 7% more than its closest competitor. Focused on quality for Holiday Inn and Holiday Inn Express means that these new openings are consistently averaging up the RevPAR of both brands. For hotels that we've opened since 2009, the RevPAR growth has been considerably faster than for the other comparable hotels in both estates. These new hotels represent approximately 20% of our U.S. Holiday Inn brand family and contribute to its significant RevPAR premium to the upper midscale segment, currently $5 or over 7%. Strong rates outperformance demonstrates that guests are willing to pay more to stay with a brand that they trust, which, in turn, delivers superior returns for our owners. Moving on now to Europe, where we have benefited from our long-term disciplined focus on priority markets in key cities which, together, contribute 85% of our fee revenue. The improving economy in the U.K. drove high occupancy across the board, with double-digit RevPAR growth in the provinces driven by rate, which still remains well below the prior peak in real terms. Germany benefited from continued growth in domestic economic output and a rise in employment, which allowed us to achieve steady growth in both occupancy and rate. We were encouraged by our signings of 2,300 rooms there, the highest we have ever achieved in this priority market. We have invested in local development resources and deployed recyclable CapEx from what has historically been the market to achieve asset-light growth in. And we're starting to see results from our approach. Russia and the CIS is currently a more challenging market due to the geopolitical and economic situation, including the devaluation of the ruble. But we continued to outperform the industry for what is still a small part of our business. Total underlying profit in Europe increased by 3%, suppressed by the refurbishment of InterContinental Paris Le Grand in the first half and the difficult trading conditions in Russia and the CIS, which are expected to continue this year. We have recently streamlined our mainstream European managed business, which will result in the transfer of most of our U.K. managed hotels to franchise contracts. Around 20 transferred last year and a further 40 or so will change over in the first half of 2015. The new structure will both bring greater efficiency to our U.K. business and allow us to expand our brands more easily. This will accelerate our growth and drive greater long-term profitability in one of our key priority markets. Moving now to Asia, Middle East and Africa. Our most geographically diverse region, where Japan, Australia and the Middle East contribute around 65% of our profits. But we see excellent long-term growth opportunities in developing markets, such as Indonesia. Our focused development strategy continues to deliver strong growth with 4,200 room openings in the year, of which over 1,000 rooms opened in both India and Indonesia. In Indonesia, where levels of demand continue to be very encouraging and RevPAR increased by over 9%, we now have a pipeline of nearly 7,000 rooms. Our growth in this market demonstrates the flexibility we have, allowing us to be nimble and switch focus between our priority markets as economies start to mature. Our new openings in EMEA are launched in the locations where RevPAR is below the regional average, where they dilute the average RevPAR. And as a result, our total growth was 1.6% below the comparable number. This will continue as we execute against our strategy to grow in these markets for the long term. In support of which, we are investing in additional local market development resources. Moving to Greater China, where we continue to lead the industry and are rapidly delivering on our strategy of building a domestic hotel business. Against the backdrop of more muted industry growth with the Chinese government's austerity measures continuing to impact the industry, we still grew comparable RevPAR, as our brand strength and operational excellence to industry outperformance of 2.5 percentage points. Total RevPAR decreased by 3.4% due to new openings in lower than average RevPAR markets. Our underlying profit growth is somewhat flattered by a number of individually small one-off upsides totaling $5 million, which will not repeat in 2015. This was largely counteracted by trading at InterContinental Hong Kong where the redevelopment around the hotel and local protests affected demand. So whilst effective revenue management maintained occupancy, profits fell by $5 million. The construction work will continue in the medium term, so trading is expected to remain at a reduced level. We signed 16,000 rooms in the year, of which over 2/3 were Holiday Inn brand family hotels, evidence of continued delivery against our strategy to grow our mainstream brands into Tier 2 and Tier 3 cities. We have established a leading scale position in China, and in 2014, we opened 11,000 new rooms. Our most ever and more than double that of our nearest international competitor. This helped to drive net rooms growth of 14.1%. While some of our competitors have needed to adopt partnership models in China, we have retained full control over our brands and management and continue to deliver market-leading rooms growth. We always relate back to the fact that our business is driven by RevPAR and rooms. In China, it's been rooms growth that has driven key [ph] revenue increases over the last 5 years. Since 2009, nearly 80% of our growth has been driven by new openings. Stronger RevPAR growth will come in the future when new development slows down and demand continues to expand. But for now, we are continuing to build on our first mover advantage through adding high-quality units in strong locations across China. While some of these new rooms reduce reported RevPAR growth, they're profit enhancing. To allow us to continue to delivering this level of growth and to recruit and train the required level of staff, we will be investing an additional $5 million into the China-managed business from this year. Our scale position in China means that in Tier 1 cities, we already have nearly 7,000 more rooms than our nearest international competitor. And we're leading the way in Tier 2 and Tier 3 cities where we have the strongest pipeline and the longest -- and the long-term opportunity is greatest. Nearly 2/3 of our Holiday Inn brand family room count is now in these markets. Demand growth in these cities is high. And by 2022, around 80% of the fast-growing Chinese middle class are expected to be in these locations. Whilst we are the biggest international hotel company in the country, we only have a presence in 1/4 of these markets. It's worth remembering just how big these cities are. For example, the Tier 3 city of Xianyang, with a population of over 5 million, would be one of the 10 largest cities in the United States. Yet, our Crowne Plaza is the first and currently only internationally branded hotel in that city, highlighting a long-term opportunity for new branded rooms in these markets. I'll now move on to talk about the progress we've made with increasing our fee margins. Our disciplined approach to expansion, focusing on priority markets, low capital intensity business model and investing for the future in proportion to growth continues to allow us to increase our profit margins. The increase in margin was slightly higher than usual in 2014, with growth of 1.5 percentage points, helped by the stronger-than-expected U.S. RevPAR environment, and performance in greater China, which benefited from the previously mentioned one-off upside. Through leveraging our scale and focusing on productivity improvements, we intend to continue growing margin over the medium term. However, we will balance this with investing behind critical business capabilities to maximize top line growth as well. These include development resources to sign more hotel contracts and people to manage the greater scale of our business in high unit growth markets, such as China. Given the recent strengthening of the U.S. dollar and our distribution of revenue and costs, we also expect foreign exchange to be a translation headwind on reported margin. There are more details in the appendices, but I just wanted to flag that the impact of FX translation on our 2014 operating profit was around $9 million. And using current rates, the impact would be a further $7 million. Considering this and our focus on reinvestment, in the next few years, we expect to keep our margin growth more closely aligned with our long-term trend of around 1 percentage point per annum. You'll be familiar with the messages on this slide, I'm sure. But I wanted to take the chance to reemphasize our disciplined approach to capital allocation. We remain committed to maintaining an efficient balance sheet with an investment grade credit rating. We believe this equates to a net debt to EBITDA of roughly 2x to 2.5x. And having started the year at around 1.5x, we are now, post the Kimpton acquisition at 2.6x, a level we are comfortable at in current economic conditions. We will continue to reduce the asset intensity of the business. And in the fourth quarter, we formally accepted the offer of EUR 330 million for InterContinental Paris Le Grand. The transaction is currently going through EU antitrust approval and, we expect to receive proceeds in the first half of 2015. In line with our usual practice, only when funds have been received will we comment on their use. Our strategic review of other major owned assets is still ongoing. I talked in detail at interims about how I view our capital expenditure in 3 distinctive categories: maintenance capital and key money, recyclable investments and system-funded investments. Looking at each category in a little more detail. The largest proportion of capital expenditure will be spent on maintenance and key money, which is expected to total approximately $150 million each year, and in 2014, amounted to $154 million. The need to invest in hotel maintenance will reduce as we sell further owned assets. But we will continue to deploy funds in developing corporate infrastructure and key money to access strategic hotel development opportunities. Our other 2 categories both incurred gross outflows, but over time, they breakeven on a net basis. Recyclable investments are used to support new brands and growth into priority markets in instances where we can establish long-term fee revenue. Gross funding is expected to be $50 million to $150 million a year, and in 2014, amounted to $60 million, including $12 million related to the Barclay. Net recyclable CapEx was $12 million, after disposals of investments made in previous years. While we expect these investments to even out over time, this type of expenditure is lumpy, making the be outflows and inflows difficult to forecast. Gross system fund investments are expected to be approximately $35 million a year, and in 2014, amounted to $57 million gross and $37 million net as we continue to increase our investment in our sales and marketing infrastructure, in particular, technology, which Richard will talk more about later. This spend is funded through CapEx and the system funds then reimburses IHG over time through surplus working capital. In total, in 2014, we made gross investments of $271 million, which was just over $200 million on a net basis. Whilst our medium-term gross CapEx guidance of $350 million remains unchanged, I expect that over time, our net investment will be much closer to our permanent maintenance capital and key money of around $150 million. Our strong underlying results mean that we are proposing growth in the final 2014 ordinary dividend of 11%, which will result in full year ordinary dividend growth of 10%. This is in line with our consistent sustained growth over the last 10 years and reflects the confidence we have in our business model, while remaining very alert to the short-term challenges that exist in some of our markets. To conclude then. I have summarized our 2014 cash flow to reiterate our focus on executing our capital allocation strategy and maximizing returns to the shareholders. We generate significant cash from operations, which we then used to invest in the growth of the business. Our gross CapEx was covered over 2x by our underlying operating cash flow, with our permanently invested maintenance capital and key money covered almost 4x. Disposal proceeds and a re-gearing of the balance sheet generated further cash inflows has enabled us to distribute over $1 billion to shareholders last year. And we will continue to maintain this disciplined approach going forward with the aim of striking the right balance between investing for growth and returning funds to shareholders. I will now pass over to Richard, who will talk more about our strategic progress in the year.

Thanks, Paul. Okay. So our winning model, combined with a targeted brand portfolio underpinned by disciplined execution is driving superior returns for IHG shareholders. In the context of the changing macroeconomic environment I talked about earlier, our proven strategy puts us in a position of strength. In 2014, we continued to focus on enhancing our portfolio of preferred brands, as well as investing in technology and the digital elements of the guest's journey, which gives us a direct and personal relationship with consumers. This runs across all of our brands and we've pioneered in this space. I'll return to it later. But first of all, I'll talk about the progress we're making with our brands. I've spoken many times before about the in-depth research we undertook to look at the universe of guests' needs and occasions, a vital underpinning that continues to advantage us in the marketplace. Understanding these needs informs how we evolve each brand experience, as well as how we build our portfolio in order to build trusted and long-term relationships with our guests. The acquisition of Kimpton has helped us fill some of the white space in our brand offering, and it caters for a broad and varied range of guest needs with its differentiated boutique offer. It's an excellent fit in our portfolio and perfectly complements our organically developed boutique and lifestyle brands, Hotel Indigo and EVEN Hotels. And last week, we opened our first HUALUXE hotel, a brand which I'll talk more about shortly. But first, I'd like to cover the momentum behind our more established brands. The Holiday Inn brand family continues to be IHG's engine for growth. Holiday Inn offers the perfect mix of business and pleasure for our comfort-seeking guests. And Holiday Inn Express is the ideal choice for the smart traveler, offering them a great night's rest while helping them to be productive on the go. It's the largest hotel brand family in the world with the largest pipeline. Considering it's been around for more than 60 years, this demonstrates the enormous power of the brand and highlights the way that we've kept it relevant through the major brand relaunch a few years ago and some subsequent innovations. Holiday Inn continues to win coveted awards, including the J.D. Power Award for Guest Satisfaction for the fourth consecutive year. The brand's universal appeal is demonstrated by the fact that it's the only mainstream brand with a meaningful presence on a global scale. And we're taking both brands into new markets. In the past 3 years, Holiday Inn Express has entered 9 new countries. And last year alone, the brand opened its first hotels in Russia, Nicaragua and Puerto Rico. And we've had similar success with Holiday Inn, with recent openings in Ecuador and Oman amongst others. The brand family now has nearly 750 open properties outside the U.S. and over 250 in the pipeline. At the same time, we continue to strengthen our position in established markets. In Greater China, for example, we celebrated the opening of the 50th Holiday Inn Express property, with a further 50 in the pipeline. And the outlook remains strong, with the brand having its best year of signings since 2008. And here are photos of some of our key openings in 2014 in these new markets. Innovation in the guest experience has been a key factor in Holiday Inn's longevity and growth. We successfully rolled out our open lobby concept across 5 countries in Europe and continue to transform our food and beverage experience. This is delivering strong financial performance for our owners with year 1 returns of around 20%. In the U.S., in addition to the open lobby, we are piloting a new restaurant concept, Burger Theory. This is part of the fast-growing specialty burger segment with a bar-centric rustic design. At our initial pilot location in Atlanta, the hotel saw top quartile guest satisfaction scores and a greater than 30% increase in its food and beverage revenue. Following successful trials, this concept is now on offer at 15 hotels and is being rolled out further. We also launched a new branded design solution for Holiday Inn Express in the U.S. and Canada. The first hotel with this new room opened in Salt Lake City just a few weeks ago. And whilst the design is not yet mandatory, 80% of hotels that started renovation projects since the 1st of November have signed up for it. Moving now to InterContinental, our international luxury hotel brand. This is another brand, like Holiday Inn, that has been in existence for over 60 years and remains very relevant to today's guests. At double the size of its nearest competitor, InterContinental has unrivaled scale and delivered another strong year of openings and signings. And in 2014, it was voted the World's Leading Hotel Brand in the World Travel Awards for the sixth consecutive year. We opened flagship InterContinental properties in Double Bay Sydney and Lisbon, which you can see on this slide, along with artist's impressions of 2 recent landmark signings in the U.S. with high barrier-to-entry strong RevPAR markets. We signed a new luxury property in downtown LA with 900 rooms. And when it opens in 2017, it will be the largest InterContinental Hotel in the Americas region. And last month, we signed an exciting new project in Washington, D.C. with the same owner as our Willard InterContinental. The Crowne Plaza brand supports ambitious career-focused travelers. And we continue to strengthen the proposition for our brand refresh, which centers around making business travel work for our guests. Brand refresh and repositioning is not a quick process, giving third-party ownership of the hotels and the need to schedule and fund capital expenditure. Having said that, Crowne Plaza opened its 400th property in 2014 and continues to have great potential for future growth with nearly 100 hotels in the pipeline in 25 countries. We added 27 properties to the pipeline last year alone, the majority in priority markets, including 10 in the U.S. The brand refresh helped to drive 10% revenue growth in the Americas, the largest year-on-year increase in the region for the brand since 2006. The refresh is focused on improving the guest experience, specifically when it comes to rooms, food and beverage and fitness. And these initiatives have been rolled out to around 80% of our hotels in the U.S., Canada and Europe. At our analyst conference last November, we unveiled our next-generation guestroom, an innovative design to meet the changing needs of today's business traveler. The new room introduces a uniquely angled bed design to maximize usable space and insulated wall panels to reduce noise levels and support a great night's sleep, one of the brands core hallmarks. We're currently trialing the room with guests in Atlanta where 84% of guests said they think more highly of Crowne Plaza than they did before and they felt more rested and more productive, an encouraging start. Last week, as I mentioned earlier, we opened our first HUALUXE hotel out of our pipeline of 24 hotels. The brand was designed by our China team in China to meet the needs of Chinese guests and was based on our extensive market insight, experience and leadership. It epitomizes the finest elements of China's world-renowned hospitality. The first hotel is located in Yangjiang, a fast-developing business and leisure destination with a population of around 3 million. The property will be the city's first hotel to be run by a global company. The fact that we've not opened the first hotel in a Tier 1 city highlights that the brand has been designed for domestic, not international travelers. The image on this slide is of the second HUALUXE hotel scheduled to open in the first half in Nanchang, a gateway city in southeast China with a population of 5 million. The HUALUXE brand has been well received in the market by owners and potential guests. With a strong pipeline of more than 20 hotels, we are on track with our vision of taking it to 100 cities in Greater China over the next 15 to 20 years. The Chinese outbound market continues to represent a significant and growing opportunity and is expected to reach 150 million travelers by 2020. To capture a greater share of this, we plan to introduce the HUALUXE brand into key international destinations, such as London, Paris and New York over time. Moving now to Hotel Indigo, which was launched 10 years ago and was the first branded boutique among the major hotel companies. It's a pioneering brand that continues to go from strength to strength, with excellent momentum in the U.S. where its RevPAR premium to the industry peer group has grown by 20 percentage points since 2010. Our global expansion has also accelerated, with the portfolio of opened hotels outside of U.S. more than tripling in size over the past 3 years, as the brand continues to attract high-quality opportunities in new gateway cities. Some of our key openings and signings from last year are shown here. We opened hotels in distinctive and authentic neighborhoods in Paris and St. Petersburg. In January, we opened our first Hotel Indigo in the Asia, Middle East Africa region on Wireless Road in Bangkok. And we had our greatest number of signings in 7 years, including a new flagship property in Manhattan. With a pipeline of more than 60 hotels, we expect to double the size of the portfolio in the next few years. Moving on now to our acquisition of Kimpton which closed a few weeks ago. I'm sure you're all familiar with the rationale behind the deal, but just to recap quickly, Kimpton is the largest independent boutique hotel brand in the fastest-growing segment of the industry. Its hotels were in the most attractive cities in the U.S. And combined with Hotel Indigo, we have the world's leading boutique and lifestyle business. In the time since the transaction completed, we have appointed Mike DeFrino, previously the Chief Operating Officer, as Chief Executive Officer reporting directly to me. We've also retained key members of the senior management team. And whilst still at an early stage, our integration plans are progressing well. Kimpton is an exciting business, where the employees and owners have enormous passion for the brand and what it offers to its guests. Kimpton's expertise in operations, design and restaurants will add a lot to our existing business. And conversely, we can accelerate the growth of Kimpton in the U.S. and elsewhere through our owner relationships and revenue generation systems. Making sure that we protect what is unique about Kimpton and ensuring the owners and customers understand that is crucial to its future growth. And here are some images of some of the great properties already in the Kimpton portfolio. So as I said earlier, our winning strategy is underpinned by investment in technology platforms. So I'll now talk a little bit more about how and why we're focused on digitizing the guest offer to be flexible and maintaining our industry-leading position in what is a rapidly changing landscape. Our approach to technology starts as ever with understanding our guests and their needs across the entire guest journey. We know the market and we have a deep understanding of the current trends that will enhance the guest experience. For example, we look at differing demographics and their needs. Our research, some of which we described in our most recent trends report published last month, tells us that baby boomers and millennials broadly have similar needs when they travel. They stay in many of the same brands but interact differently with their surroundings. Baby boomers are highly interactive. They want to talk to people. Millennials, on the other hand, tend to be much more self-sufficient, using technology to handle the entirety of their stay with minimal human interaction, what we call the invisible traveler. Our priority is to own the stay experience through the strategic use of both on property and mobile technology. We then look across other areas of the guest journey where we can add real value and have a differentiated consumer-focused proposition. Guest reviews, for example, which impact the dream and share element of the guest journey and are based on feedback from real guests at IHG hotels. IHG has a strong record of innovation and leadership in technology, but to continue winning, we have to invest smartly to support our plans across the guest journey. We'll maintain control over intellectual property and customer data, to partner or outsource where appropriate. So we see 4 key trends in the always-on world. The convergence of technology at all price points has fueled global growth in smartphones, which now drive roughly 1/3 of all website traffic. China is already the world's biggest e-commerce market. And here, consumers have pretty much skipped desktop PCs altogether, going straight to mobile. There are now nearly twice as many smartphone users in China than all Internet users in the U.S. And there's an active debate about the level of personalization versus privacy. Smartphones are location enabled. And whilst this feature can be disabled, many consumers are very willing to give access to personal data for unique tailored benefits. And this enables us to personalize many different aspects of the journey, depending on who the traveler is and what their needs are. Through access to social media, guests are making travel decisions based on more than just price and value. They're looking to reviews, recommendations and feedback from other guests as a key driver of the decision process on where to stay and which brands to favor. The Internet of Things is another trend that offers enormous potential. With some 75 billion devices forecast to be Internet-enabled by 2020, there is the ability to transform the in-hotel guest experience. We have a long track record of innovation in this area. This started with our development of the first ever centralized reservation system, Holidex, and IHG being the first company to offer online bookings. We were also the first in the industry to have an app on all mobile platforms and we continue to evolve. Our scale supports delivery today and enables the innovation for tomorrow. In 2014, our website alone generated $4 billion of revenue, putting us amongst the top Internet retailers in the U.S. We also have a social media presence in over 200 countries. We are leveraging our scale to invest further in these areas and the systems that underpin delivery. The technology is fundamental to driving superior experiences across the entire guest journey, and we have a clear roadmap to ensure we continue leading the way. To deliver compelling and engaging digital content to our guests, scalable; technology foundations need to be in place which have the flexibility to handle the rapidly evolving trends I've been talking about. And this has to be supported by deep data insight and standardized property level capabilities. This framework gives us the foundation to transform the guest experience to make it more interactive through digital content, which we continue to evolve across all our direct channels to engage with customers and drive revenue contribution. To enable more engagement with our brands at the dream stage of the journey, we have new digital marketing capabilities that allow us to target potential and current guests more effectively. For example, we're utilizing programmatic media buying, which allows us to specify the profile of consumers we want to target and at which stage of their guest journey. Alongside this, we are delivering innovative multibrand campaigns to our Rewards club members, campaigns such as the Big Win included over 1 million automatically tailored offers and utilize specific insight on each guest profile and stay history to drive revenue over $360 million in 2014. We continue to make enhancements in the plan-and-book stage, and this is delivering results. In the fourth quarter, digital revenue grew by over 13%, materially increasing our direct channel contribution to hotel revenue. And our websites are being updated as we move to responsive brand-led designs that better target specific guest needs. I've already spoken about the consumer movement towards mobile. And with our #1 rated app, we're perfectly positioned to meet our guest needs. However, we're not complacent, and we continue to evolve our offering to make it more interactive, particularly during the guest stay, a part of the journey we truly own. In 2014, we standardized on-property hardware across all our U.S. estate, which enabled the launch of mobile check-in and checkout. The service is already live in over 500 hotels and will be rolled out across the rest of the U.S. this year and then extended globally. It's exclusive to IHG Rewards Club members, strengthening its consumer proposition. We expect this type of offering to constantly evolve. And we're already piloting mobile room key technology that allows guests to completely bypass the front desk when checking into their room. The guest's stay goes beyond just the in-hotel experience so we're delivering mobile solutions that support their broader travel needs. Recently, we launched the IHG Translator, a language tool which allows guests to travel like a local. And as with mobile check-in and out, is a free benefit from most loyal members. Our continued focus has helped drive our mobile bookings up 50%, to just short of $1 billion in 2014, accounting for 18% of our digital delivery. This is boosted by the increasing usage of our app, with year-on-year download growth of 80%. There are huge benefits from our ability to drive traffic through our mobile app. Evidence shows that guests that book through this platform become more loyal and it is the lowest cost channel with no intermediation. To drive even more interaction with these guests, we're piloting beacons in 20 of our hotels in China and expect to launch more broadly in the first half of 2015. Beacons are set up in the lobby and restaurants, and allow us to send location tailored notifications and information to our mobile app users. We're also rolling out new CRM capabilities, which utilize our Rewards Club members profiles so we can deliver a more personalized experience at the hotel by understanding our individual guest preferences better. Personalized interaction with the guest is a key part of the future, and these initiatives are just 2 examples of how we are delivering against this need. Delivering along the entire guest journey is pivotal, and to illustrate why our mobile app is so highly rated, I wanted to take a moment to demonstrate how it does just that. We now have a single IHG app which consolidates all of our brands into 1 place and provides a true one-stop shop. It continued to lead the way across the industry due to both the apps range of offerings and reliability. With the consumer's desire for ease and efficiency, you can see why it's been so popular. The InterContinental Concierge Service provides guests with the ability to explore different destinations with insider tips on the best spots to visit in the city. The innovative search functionality enables quick booking of hotels frequently visited or located nearby, whilst the simple booking engine allows you to mix points and cash and to confirm with 1 click. Prior to arrival, a guest can check in remotely, indicating when they expect to arrive. Whey a stay is complete, guests can view their bill digitally before checking out again with a single click. Finally, the feedback portal provides the ability to share reviews with social networks instantly. So as a recap. IHG is incredibly well-positioned to continue to outperform in an industry that has compelling, long-term demand drivers. Over 90% of our operating profit is generated from franchise and management contracts, with around 85% of these fees linked directly to hotel revenues. Though rooms growth and RevPAR both important to us, we saw our strongest fee revenue growth last year in Greater China, closely followed by the Americas. There's strong momentum in the business and 2014 was another excellent year of delivering against our clearly defined strategy. Our brands, some of the largest and most preferred in the industry, lie at the heart of it. We acquired Kimpton, continued to innovate with the recent opening of the first HUALUXE and EVEN Hotels, and further developed our established brands. And we'll build on our history of first in innovation and technology to support our market-leading digital content to meet changing consumer behaviors and sustain our industry-leading position. We have once again demonstrated our commitment to returning funds to shareholders, and we're focused on continuing to do so into the future. Looking into 2015, we face continuing macroeconomic and geopolitical uncertainties. We are confident that our strategy for high quality growth, coupled with the momentum of the business, positions us well for continued strong performance. Thank you. So with that, Paul and I will be happy to take your questions. For those of you listening to the webcast, you also have the opportunity to send your questions in online.

Now for the fun part. Questions. Jamie?

Jamie Rollo from Morgan Stanley. Three questions, please. First, on the net systems growth of 3.4%. That's a little above the sort of informal guidance you've been talking about. And you had a very strong fourth quarter for signings. Are you confident enough to suggest that, that figure might be even higher this year? Secondly, on the net CapEx guidance, now that's quite a big change from $350 million to $150 million. What's giving you the confidence you can recycle a couple of hundred million dollars a year? And I appreciate it's quite lumpy, but that's quite a big change. And then finally, on the restructuring in the U.K., $45 million exceptional, was that cash? And what sort of return are you getting from that?

Paul?

Thanks, Jamie. So in terms of the net systems growth, we're much more encouraged by the 3.4% that we achieved this year. That was a combination of 6% opening, so gross, and then a lower level of removals. And that level of removals was sort of bang in the center of our guidance of 2% to 3% removal per year. It is a bit lumpy year-by-year. So we saw that last -- we saw that in 2013. But if we can keep the removals between 2% and 3% and if we can achieve the level of signings that we've seen in the last few years, then I think we'll see continued strong progress there. In terms of the net CapEx, we talked at the interims around the buckets and where we spend and that we have the maintenance and key money is the -- it's really the permanent CapEx in the business, which in aggregate, is around $150 million. And then we've got recyclable CapEx which varies. And last year, we spent some and then we got some back with only $12 million, which is the Barclay spending. So that $150 million is the permanent. It may up in some years to $350 million, but the balance of it, we should get back in future years either through recycling or through the way the system fund depreciation works, it comes back to us as cash. So that's just a timing difference. And in terms of the U.K., that is restructuring a contract that we signed when we sold a portfolio in the U.K. back in 2005 for GBP 1 billion. The -- it is a cash charge, it was a contingent liability at the half year, and I talked about it then. And it will allow us to grow our business in the U.K. more rapidly and to avoid some cost growth that we would otherwise have seen. So we think we'll get a good return on it over time.

Can I just follow-up on the first one? Did you say in your presentation that 90% of the U.S. pipeline is expected to open in the next 3 years? Is that off the pipeline or the construction element?

That's off the pipeline.

Vicki [ph]?

Just on Germany, you talked about success on signings. Just curious to know, is that market changing now? Are banks sort of starting to get it in terms of management franchise contracts? And is that true across anywhere else in Europe? And then just secondly, on this sort of breakdown of OTA share, I think you often give a figure as to how much distribution is going via OTA, so if you could update us there?

Just in Germany, if you're operating in 100 countries, you got ups and downs and things going on. I think in Germany, the reality is our success there has been about a real focus on how we grow there. You remember a couple of years ago or 3 years ago now, we reorganized to create Europe as a standalone region. And part of the objective was we saw an opportunity, which maybe we hadn't been tackling. So having a team that's very focused on Europe, which does have some different ownership dynamics in some other markets, certainly on the continent where leasing is more prevalent and there's a different group of owners. I think in Germany, we've kicked started a few hotel developments, and we've worked really hard on working with a different group of owners, so we're really gaining share there on the revenue side but also on the supply side by, I think being -- just tailoring our operations much more effectively. That's really what's behind that. In terms of OTAs, our OTA share is around 13% now, which obviously is significantly less than own direct bookings and our mobile bookings. With OTAs, our position has always been, if the business is incremental and profitable, that's good business. The hospitality industry's always had intermediaries, whether they're online or offline or wholesalers. And so our push in the last couple of years at OTAs has been to get rid of the low rate business. The opaque business is much less profitable and focus on better quality higher rate business, which is really what you've seen which is what's driven up that percentage. It's more about rate than anything else. Okay, Tim?

Tim Barrett from Nomura. Just on supply, can you talk about what percentage of the pipeline is under construction? That's normally data you give. And industry-wise, do you see any changes in the supply environment this year or next? And then I had a follow-up on the fourth quarter. There was a small slowdown in growth. Did abnormal weather or any one-off issues have any impact for you?

Okay. I'll talk about first the supply chain. And then Paul, maybe you can pick up there. Do I think if we're seeing anything particularly different, no, I don't think so. I think one of the -- we've continue to see big supply growth in China and other parts of Asia. But as we've talked about many times before, we do very well when there's a growth in supply because we're actually the brand owner. We're driving our presence in the markets, 75% [ph] towards from 13% of supply, that's a very good dynamic for us. And then China RevPAR growth was 1.6%, I think. We grew fees 9.5%, so that's exactly talking to why the model works. The bigger issue always for us is demand, but not supply. I think in the U.S., there's been obviously a lot of focus on supply growth in the U.S. because it's been so low. And I think even now, we're forecasting below or the we're not forecasting -- the industry is forecasting below 2% to 2015. So it may tick up a little bit, but again, we've got a greater share of supply than we have -- of pipeline than we have with existing supplies. So again, that's probably a good thing for us. It comes back to us being able to drive our revenue line. It's nothing major that we're seeing anyway.

No real change in the proportion that we're seeing under construction as well, and that's been fairly consistent. Yes, up 45%, yes with around 60% of it financed. So that's coming through well. In terms of the quarters and how the hotels were opening, if that was the question, Tim, apologies if I misunderstood. The first quarter of 2014 was a little slower. It was weather impacted in the U.S., in particular. And the fourth quarter, we had a really strong quarter of openings. I think we opened more hotels in December in the U.S. than we have for many years, which again, does come down to -- are the ground conditions right, can you get everything done. So we're very pleased with the adds in 2014.

Okay. I was asking about RevPAR in Q4, any. . .

I'm sorry. So yes, RevPAR in Q4 in the U.S., 7.5% RevPAR growth, which we are pleased with. In China, it was a little weaker, which we initially saw through the year and we talked about. The Tier 1 cities continue to do very well in driving RevPAR, Tier 2 and Tier 3, where demand is still very high. It's double-digit demand. You still got a lot of supply coming in, so you're going to see more volatility. We've been driving our occupancy up. And we've been outperforming the market, which is the really important thing. But rate's still tougher then, but we saw very strong growth in our business there because of the number of new units that we've added.

James Ainley from Citi. Two questions, please. Can you talk about recent dollar strength? And whether you're seeing any appreciable impact on visitation to the U.S., your U.S. hotels? And then moving onto the weaker oil price, again are you seeing a sort of pickup in domestic travel? Or are there any historic correlations you can share with us on the impact of a lower oil price on your business?

So what was the first question, James?

On dollar strength and whether there's impact from visitation.

I think Paul talked about some of the dynamics around currency, but I think it's certainly too early for us to see any impact on dollar strength. So I think what it will be, if it affects anything, it will affect leisure travel later on in the year, we're not seeing that. I think on the oil price, again, it's relatively early days. A lot of travel business on leisure is booked in advance. It does take time for these things to work through, but I think lower oil price on balance will be good for the industry, certainly be good for us. And we know that gas prices impact very quickly the amount people drive in the U.S. And Holiday Inn is primarily a drive-to brand. So lower gas prices will benefit us. We've seen very clearly that as the local airlines have evolved that certainly, for leisure travelers, they sort of have, tend to have a budget they're going to spend. If they're spending less on air travel, finally, those fuel surcharges come down they're likely to stay longer or stay in better hotels, so I think all of that's going to be beneficial for the industry. Okay, Geof?

Geof Collyer from Deutsche. A couple of questions. On the Big Win $500 million benefit you claimed, is that substitutional? Or is that incremental? And how can you prove it? And then secondly, a lot of the things that you're doing seem to be benefiting new members, how do existing -- how do nonmembers find out about the benefits? And therefore, how do you drive up the loyalty program? And then 2 sort of subsidiary questions. Hotel Indigo, at 20 percentage point increase in rate, is that just a young brand feeling more confident and growing to the rate that it should be trading at rather than some spectacular outperformance? And then finally, if you could just add a bit more color around the health claim comment and what sort of cost that was to you?

Okay, I'll take the first two. Paul, maybe you take the second. So the Big Win it was $360 million, I think. We can round it up to $500 million, that's okay. A lot of that is incremental. I think always with these things, you do your best to evaluate how much is incremental, how much is substitutional. There's always going to be an element of substitutional, but because of the way these promotions are run digitally, that the data, the ability to look at control groups is better than you get in a typical ad campaign. So a large part of it is incremental. It's also very beneficial because it drives cross brand behavior which is one of the reasons why we relaunched Rewards Club last year, so it's got a double benefit for us on that front. And on loyalty, I think as we look at the planks of a commercial strategy around how we drive revenue, which is ultimately, is what owners are looking for us to do, drive revenue cheaply. Loyalty is a very big plank on that alongside digital, because that -- it clearly -- loyalty just in and of itself is helpful if you're getting a greater share of wallet because you have guests who are loyal to you. You also get a lot of data, enables you to talk directly to those customers, enable you to drive cross brand and get a bigger share of vacations. So it's a very big plank of our strategy is to drive revenues. And obviously, we encourage the hotels to sign up new guests. The one of the big rewards for front desk staff all around the world in every brand is to sign up new guests into Rewards Club. And as you drive things like free WiFi to guests, to members, and you've got those notices up, when you're advertising it, it drives sign up. And so it's -- it's been very successful and it works extremely well. And you're seeing it -- there's no question, it's one of the differentiators for big brands. With 84 million members, we are the biggest scheme. And it's a massive barrier-to-entry to those who don't have multi-schemes because it's very hard to create and replicate them. You see that even with some of the quite big brands out there who just haven't done this, haven't had a scheme very long. It's a real struggle to grow it to the scale of ours.

Just in terms of your questions on the healthcare scheme and Indigo. So the healthcare scheme operating in the U.S. on a self-insured basis, so we collect premiums effectively across the business, across our hotel. And it's actuarially calculated to what will be enough to meet any costs of claim. This year, we just had a particularly bad run of large claims, which meant that we had a higher than average cost. We do get some small variance year-to-year normally it's not enough that we'll pull it out, but we have this year because it's a little bit more than normal. And in terms of Indigo, I mean Indigo is now up at 60 hotels. We are taking it into some of the higher RevPAR markets, so you are seeing some differentiating coming through from that, it's had a strong RevPAR performance, but it's still a relatively, although it's 10 year old, it's still a relatively new brand growing out.

And your other point was about premium to the market, not rate, of course rate is a big piece of it. So obviously a few years ago, it was below in terms of -- it's now running at quite a big premium, which is what you see as you scale up the brand is it starts to benefit from our revenue-generating systems, which I think is what gives us confidence is we launch these new brands or as we take the Kimpton into the portfolio.

It's Simon Larkin from Bank of America Merrill Lynch A couple of questions from me. First of all, could you update us on the progress in your relationship with Amadeus? And how the work you're doing with them links in with your technology presentation this morning? Secondly, could you also just quickly remind me how fast through you actually are at the brand refresh at Crowne Plaza and any performance stats you can give us to show that it's working and the performance gap versus payor group is improving?

Yes. Thanks. First on Amadeus, there's nothing new to say on that so. What we signed was sort of cooperation agreement where we sat down together and said what might we be able to do. And let's work through that. And that's what we're doing. And these things take time as we look at what their interests are or what we need. And I think we've got a very clear digital strategy. And one of the points I made is that in order to deliver some of these cooler things to guests in the hotel, you have to have a powerful and standardized foundation. And so those are the things that one's looking at. And again, I think I said it and it is important that we're not a technology company, we're not a software house. And our industry's had a habit, and we've been the same of doing a lot of development ourselves. So the important thing is you own the intellectual property where it's a competitor advantage. You own the business rules that you use to operate the business. And anything else that is, effectively, commodity, you partner or outsource. And that's the philosophy that we have around technology. So we'll continue working, then we'll see if we can get somewhere. And when we do, then we'll let you know. But progressing as we would have expected. In terms of Crowne Plaza, I gave a few stats in there. And certainly, in terms of revenue, we have 10% revenue growth in that brand in the U.S., was significant in '14. We're continuing to grow RevPAR ahead of the market with that brand. We're continuing to sign hotels, so with 400 opened and another 100 or so in the pipeline and significantly 27 signings are set in the year. It's continuing to attract both customers and owners. Okay? Ian?

Ian Rennardson at Jefferies. Just on the Internet, I noticed that Hyatt is now giving free Internet to absolutely everybody, is that something you would see as inevitable? And if so, how much do you think that might cost you in lost revenue and profit over time? And coupled with that, what do you see as the next sort of big industry area for this sort of amenity creep.

We already give free Internet in a lot of our hotels in a lot of markets, particularly Holiday Inn Express, but in some others, too. The reason that we give free Internet to Rewards Club members is, one, to reward them for being a member; and two, as the way to attract more people into the scheme. I don't know Hyatt's particular numbers, but whether you have a much, much smaller scheme, there's not much point in just giving it to scheme members because you don't cover enough of the guests. In terms of what it costs us, it doesn't cost us anything because it's paid for by the owner. But actually, more importantly, one of the reasons why the owners were happy and confident to go with this is that it's part of the overall brand offering, and ultimately, that gets reflected in what customers are prepared to pay, how often they come back. And also the way we're moving more and more now -- and again you've got to get the infrastructure right. If you get free basic Internet, but you can charge for high speed and you've all seen, I'm sure, in a lot of hotels that can actually be a revenue generator. And people expect it. If you can spend $0.99 on a McDonald's or $3 on a cup of coffee and get free Internet, it would be at a bit absurd for hotels to think it was going to, in any way, be different. In terms of the amenity creep, it's not a phrase I like really. I think much more about enhancing brand values and that sort of thing, but that is how you have to think because if it's just something that is purely a cost and doesn't -- to owners and doesn't benefit the guests, then there's no point in doing it. But to the extent that it again enhances the experience and that you can package it within what the brand stands for and charge for it, then it's beneficial. And you could even think about flat screen TVs, right? In the last few years, every hotels gone flat screen TV. You couldn't isolate an ROI on that, but it's an expectation of customers. So that guest insight that I go on about, is all about actually understanding what matters and making those choices about where you invest, which is why we're talking so much about digital today and some of the other innovations, the sleep experience [indiscernible] actually sleeps. Not on innovation, but actually that's what people are paying for. Wyn?

Wyn Ellis from Numis. Just a quick one on, I was looking at your -- the breakout of net debt by currency. And it's been quite a significant change there, there's a lot more sterling debt, I just wondered any particular reasons for that? Or what's the thinking behind it?

We've got 2 sterling bonds, which we've had for some years, one 2016 and one at 2022 maturity. So it's a balance of that against the drawings that we've gotten and how they've been swapped that would impact on our net debt, but there's nothing to read into that or anything material.

It's Tim Ramskill from Credit Suisse. A couple of cost-related questions, so in the peer [ph] just finished in 2014, outside of the U.S., it looks like most of the overhead lines was sort of flat or may be slightly down, so that's little different than perhaps what we might have expected. Is there anything specific that explains that? And then sort of related to overheads, if we think back to 2009, you have the ability to take quite a lot of cost out of the business. Where we're at now, clearly, things are great. But if we were to face a more challenging environment, how much flexibility is there in the cost base at this stage? And then just because we've you and it's topical and it's always interesting to hear what you think, obviously, Airbnb remains sort of a potential elephant in the room, I just wonder how you guys think about it. What your potential responses are for that business growing?

I'll take the Airbnb one and Paul, maybe you can pick up on the cost one. Yes, I think it's clearly topical, it's been a fast-growing business. I mean, there's many aspects to it. I think if you -- one of the, [indiscernible] has probably talked about it before. But even in the U.S., one of the most hoteled markets in the world, about 50% of citizens never stay in a hotel. And if you talk to the Airbnb guys, what they'll about is growing the market. And a big chunk of their business -- I don't know the number but a big chunk of it is people who wouldn't normally stay in a hotel. Airbnb is an alternative to staying with your mother-in-law and you don't want to necessarily stay in hotel but you'll rent an apartment next door. And that's -- so there's definitely a growth in the market there. Clearly, they operate with a different sort of customer at quite a low level of the market today. And I think if that grows and our customers who are loyal to our brands start seeing that as an opportunity, it's something we would essentially look at. We're extremely good at branding. We're extremely good at distribution. We're extremely good at technology so if it's a market that's genuine, we'd seriously look at it. I think that the discussion in the industry is much more about level-playing field, which I think is really appropriate for any industry whether it's digital versus traditional or anything else. And of course, the regulation that we're subject to around fire-life safety around building code, around security. All of those things needs to be fairly spread across all companies operating, particularly when they put themselves out there as a major player. So they talk about -- I got asked on the interview this morning, the media, the Airbnb has got a million rooms, that's more than your 710,000 rooms. And they put themselves out there as a big company so I think customers expect something. And it's very important that the regulators follow that, particularly something which is becoming more of an issue around zoning and planning. We're highly restricted from where we can build a hotel quite rightly. And I think the Airbnb hotels, people taking multiple units in the middle of residential areas, which -- I mean the U.K. government's talking about permitting which I think is going to cause some big community backlash, we're already seeing that. So I think, fairness of regulation is important even though it still a very small business at the moment. It doesn't really affect us, I think that's an appropriate way forward. Do you want to pick up on cost, Paul?

Yes, in terms of the cost base, we've been very focused on growing the margin over time, which we've done for the last 11 years, I guess now, about 13 points. So we were always focused on efficiency. There's a couple of things we've talked about in recent years that have helped us, some of the programs around our global technology business, streamlining some of that and which helps us avoid some costs coming through in that and behind some of the programs we've done in our global human resources infrastructure, which has given us better management information, which has also helped, as well as just a culture of cost efficiency. So that has helped us partly in the U.S. where we had some sort of larger one-off items, have a good result in that area. We are, in 2015, so we're going to put some investment back into the business so we can continue to grow the top line. Look, in terms of comparison to 2009 and what could we do, I guess maybe like investment banks, a lot of our costs are people and we've got the people that we need to grow the business in this current economic climate. But there is an element of variable costs in that because it's people.

Can I just ask one more question? Can I just come back on the sort of cost comments for the year just gone? I know there was an exceptional cost related to restructuring, I think it was HR and technology piece. Has that brought a saving in the year? Or is there a saving coming from that going forward?

Well, in the year and going forward, it's an ongoing program, which has helped us avoid cost increases that we would have otherwise seen, yes.

It's Nick Edelman from Goldman Sachs. Just 2 questions, please, both on China. Firstly, just in terms of RevPAR outlook for 2015, is there anything clear in terms of supply outlook that would suggest that the fourth quarter run rate will continue into 2015? And then secondly, in terms of the ongoing RevPAR performance now on a comparable basis, for your own hotel owners, how does that compare with either their expectations or their cost inflation in terms of -- is their hotel profitability lower than their plan? And does that, in the near term, affect your signings at all?

No, I think in China, there's no precedent in China in any way. So it's hard to, I think, give specific forecast. I think the important thing for us though is you can see and we -- Paul shared some of the data on our relative outperformance in China, on our level of signings, our level of openings. Our RevPAR performance has consistently been outperforming the market. So I think China maybe one of those markets where you had maybe a more polarized view of winners and losers. And because we've been there a long time, we have a great portfolio of owners. We have brands that have been tailored. We have a unique brand we've just launched. We're in an extremely good place to win, and I think you're seeing the results of that. Forecasting quarterly RevPAR in China is well, I guess we do it. But when -- it's not something that I think would be our most accurate forecast around the group. So I think you have to take a long-term view with China. And you look at infrastructure, GDP growth, the creation of the middle class demographics, on any measure, as we've talked about on many occasions over the years, China is going to be a great hotel market. It's already our second largest market. In the shorter term, everything we're doing is enabling us to win share, supply and revenue share in that market. And I think that's how you need to judge us and that's what's really been driving our success. So very confident about it. And I think -- I do think the 9.5% revenue growth on a 1.6% RevPAR growth really talks to the strength of our business down there. And the last point I'd make is that the owners there take very long-term views of their investment. They're very sophisticated, owners in China these days. They meant -- certainly way more than 10 years ago. They look at the business exactly like any other owner. A lot of the hotel developments are necessary parts of mix use. So unlike the Europe and America where they're very standalone there, they are almost -- they're very rarely standalone, so they ended up with a different dynamic. And fundamentally, they want to make money, and that's why they come to IHG rather than to anybody else. Anything else? Is that on track?

Just in terms of the question on expectations of owners and around cost increases. I think the RevPAR in the U.S. certainly was higher than I think most owners expected going into 2014, particularly in the leisure segment. So I think there was positive news from them on the revenue side. And in terms of costs, the energy costs have come off from where they were. And we're not seeing too much people costs increases, so I think most of our owners have had a good year in 2014.

Thank you, everybody.

Till next time.