Good morning, everyone. Welcome to IHG's 2019 Full Year Results Presentation. I'm Heather Wood, Group Financial Controller. And I'm joined this morning by Keith Barr, our Chief Executive Officer; and Paul Edgecliffe-Johnson, our Chief Financial Officer.As you can see we're holding today's results presentation by webcast and we'll be taking you through some slides. You can find the link on our corporate website and on our stock exchange announcement. So if you haven't already, please do log on so you can follow the slides. The replay of this presentation will be available on our website.So let me remind you that in the discussions today the company may make certain forward-looking statements as defined under U.S. law. Please refer to this morning's announcement and the company's SEC filings for factors that could lead actual results to differ materially from those expressed in or implied by any such forward-looking statements.I will now hand the presentation over to Keith.

Thanks, Heather, and good morning, everyone. In a moment, I'll talk about how we are executing against our strategic initiatives and accelerating growth and Paul will take you through our financial performance in 2019. However, I'd like to start by addressing the evolving situation around the outbreak of the coronavirus.Having led the China business and lived there for a number of years, it's tough to see the impact this outbreak has had on so many people's lives. We're working closely with our hotel teams, local authorities and the government to provide our full support wherever we can. And our top priority remains the health and well-being of our guests, colleagues and partners on the ground.One thing I do want to say is how proud I am of our colleagues and how they have stepped up and reacted to this. Our people across the region are doing an incredible job in very difficult circumstances, including our InterContinental Hotel in Wuhan where we are hosting medics and response teams. All of our hotels around the world have been provided with the support and guidance they need to respond and we have strong processes in place to help us manage this challenge.From a group perspective, Greater China is an important part of our future and we see a compelling growth story for the longer term, with the region representing around 30% of our current global pipeline. However, today it is a smaller part of our business overall, representing 15% of our open rooms and less than 10% of our operating profit.There will clearly be some impact on our business, which we started to see coming through in late January. We are still building a clearer picture, but we are currently seeing less travel in the region, which is leading to reduced occupancy and…

Thank you, Keith, and good morning, everyone. First, starting with our headline results from reportable segment. Revenue increased 8% to $2.1 billion and operating profit increased 4% to $865 million. On an underlying basis, so excluding current year acquisition, individually significant liquidated damages and at constant currency, we grew revenue 6%.Underlying revenue from the fee business were 2% and operating profit grew 5%, driven by growth in our net system size and disciplined cost control. Fee margin was up 80 basis points. I will come back to the drivers of this shortly. Adjusted interest, including charges relating to the system fund, increased by $18 million to $133 million.This is lower than my previous guidance of $150 million, principally due to the non-cash revaluation of contingent consideration from acquisition, which we now exclude from our adjusted numbers, given its volatile nature. As expected, our reported tax rate increased to 24%. In aggregate, this performance enabled us to increase our adjusted earnings per share by 3%.Looking now at our levers of growth. We added 65,000 new rooms to the system, a record level of opening. At the same time 18,000 rooms were removed, as we continue to focus on the long-term health and quality of our established brand. These additions and removals brought net system size growth to 5.6% or 5%, excluding the rooms added from the Sands partnership in the Macau market. We signed 98,000 rooms, taking our total pipeline to 283,000 rooms, with 40% currently under construction.RevPAR was slightly down for the year or flat, excluding the disrupted Hong Kong market. This RevPAR performance, combined with 5.6% net system size growth, resulted in a 2% increase in underlying fee revenue. When looking at fee revenue, both year-on-year rooms growth and comparable RevPAR are good proxies to understand how growing our…

Thanks, Paul. I'd like to first spend some time looking at the fundamentals of our industry. It's a fast-changing dynamic sector that continues to see growing demand with industry revenues up 5% over the last three years. Within this, we're seeing a shift to scale brands. The top three branded global players of which IHG is one, now have 17% of the open rooms globally and notably 44% of the active pipeline. That's an incredibly strong position to be in, and it means we will collectively continue to take share and increase our relative scale against the rest of the industry.In terms of the key drivers, we know that hotels are an attractive asset class and owners want to partner with the big branded players. With our scale and continual investment behind our brands, such as lower build costs for our new prototypes, we are helping our owners to maintain their high returns even with rising cost pressures.Consumer trends are also shifting with increasingly more demand for brands, which can offer a mix of consistency and distinctive high-quality experiences. The innovations we're rolling out across our existing brands continue to resonate with guests and each one of our newer brands target an underserved segment from both an owner and guest perspective.Furthermore, consumers are increasingly looking for a seamless technology experience and have a growing preference for sustainable practices both key focus areas in our strategy. Its considerations like these that are informing all the actions we're taking to enhance our offer right across both the guest journey and the life cycle of a hotel.Remember that two years ago we set out our strategy to make our model work harder and ensure we remain an industry leader for years to come. Whilst we still have much to achieve, we have already…

[Operator Instructions] Our first question comes from Richard Clarke of AB Bernstein. Richard, your line is now open. Please go ahead.

Good morning. So three questions for me. I guess the first one is the obvious one. What specifically are you seeing on coronavirus in terms of the impact on the Chinese hotels? What are you seeing in terms of the occupancy declines there? And then any impacts given your big Chinese footprint on the, sort of, wider APAC and wider market? And maybe expectations based on what you're seeing so far for the full year.Second question, we've seen luxury do extremely well in the U.S. in the fourth quarter. But InterContinental doesn't seem to follow that. So just wondering whether you could sort of help us on that bridge as to why InterContinental's underperforming there.And then lastly Hilton suggested a small, sort of, tentative optimism that some of that small group travel that's been impacting you so much was beginning to pick up based on their booking numbers. Is that something you're also seeing something maybe we can get a little bit optimistic about for 2020?

Thanks, Richard. I will take the first and try to cover coronavirus in kind of in a broad comprehensive answer on how it's impacting the business. So again first our focus has been on taking care of our customers and our colleagues. There are some amazing things happening on the ground. Our hotels in Wuhan as I noted are actually hosting the medics. One of our hotels is making the meals for the workers that were assembled in the hospital. So we're highly engaged across Greater China looking after that.So taking a step back and just give you context about group RevPAR and impact on profit and then how that clicks into China. I think as you well know about a 1% in group RevPAR is about $13 million of EBIT on a full year basis. And this is an evolving situation in China and across the business so it's pretty hard for us to predict where it will go. It's -- China today is less than 10% of our group operating profit. We right now have about 160 hotels closed or closed to arrival.And not surprisingly we're seeing significant reductions in occupancy in the month of February across the entirety of the business. So to try to put some numbers to that. Based upon the current level of disruption year-on-year, we're seeing about a $5 million fee impact for the month of February in the China business -- in the Mainland China business. Our fee revenue for the full year is around $100 million for Mainland China. That kind of phases Q1 is one of the lower quarters and it gets progressively more as the year goes on with Q4 being one of the strongest quarters in terms of fee realization as well.So again, we're seeing $5 million in…

Absolutely. So with InterContinental in the Americas markets it is not fully penetrated into that market. So it's not in every single one of the micro markets there. If you think that we've got about 50-odd InterContinentals across the Americas as a whole quite a lot of those down in the -- in Central and Latin America. So then it becomes very micro-market-by-micro-market dependent so it's hard to take a straight apples-to-apples comparison there. I think really that's what's going on rather than anything more brand-specific.In terms of Hilton's comments on their first quarter, well, look obviously we don't give guidance. So that's the first thing. So we wouldn't comment on what they've seen in a couple of weeks. They are also obviously more penetrated into the group market -- the large group market so they have that additional forward visibility there. We're more into the smaller groups market which tends not to give us quite so much booking pace information. But that said there's nothing structurally different between Hilton's business and our business. So if there were any pickup then we'd expect that it would be relatively, sort of, linear. But nothing I can add on that today.

Maybe just a quick follow-up. I mean we've had a couple of the other companies talking about some delays in construction in China. Is that something you would also mirror with regarding 2020?

So it's a great question, Richard and it's one that's hard to quantify. We've actually already opened I think five or six hotels already this year and we signed a number of hotels. So the business is still moving ahead. There clearly could be the potential for some disruption in two fronts. One is FF&E availability. So if they can't be manufactured and delivered.Secondly, if some of the workers are not able to return to the site. But this is a delay and not a stop. Remember that. So effectively there could be a slide from December into January next year or a little bit of Q4 into Q1 next year, but the long-term strength of the business is extraordinary in Greater China and it continues to reflect just the pace and acceleration of signings and openings and growth. I mean so we're long-term very, very bullish on China. And this is a short-term dip and impact that will recover as it has previously.

Great. Thank you very much.

Our next question comes from Vicki Stern at Barclays. Vicki, your line is now open.

Hi, morning. Just one more on coronavirus and then a couple of others. You touched on the sort of impact outside of China in Asia more broadly. And I appreciate that it's pretty difficult to tell with lots of things moving around. But just are you seeing anything outside of Asia in terms of sort of European or U.S. business being touched not just from the sort of Chinese outbound tourism element, but just is Asia tourism outbound overall reduced right now?Second question, on margin growth, again, sort of, trying to strip out the impact of coronavirus. If we weren't sort of dealing with that this year, would you generally be expecting this could be another year of sort of 80 to 120 bps of margin growth performance?And on cash returns, obviously, given the uncertainty of coronavirus, it's certainly not a surprise that you haven't announced anything today on cash returns, but again, sort of, trying to sort of look forward to when that might be behind us. Would you still in principle be happy operating in the upper part of that two and a half to three times leverage range at this point in the cycle? Are there any sort of acquisitions or further investments that might require any significant sums of cash? Thanks.

Thanks Vicki. I'll take the first one and then I'll let Paul handle the second two questions. I guess I'll go from west to east. No impact on the U.S. And again remember that the thing about IHG is whilst we are in 100 countries and territories, we're principally domestic businesses. So, the key drivers are domestic travel and so -- and the shape of our portfolio in the U.S. is again principally in the mainstream. So, we're not seeing any impact. There's clearly going to be some level of international inbound impact to the U.S., but it would be on the margin for IHG. So, no impact on the U.S. market.Similar to Europe, I mean, again, we're principally domestic markets there. There will be some impact, but we haven't seen anything significant at all that we can even quantify. So, you're really looking much more into Greater China and then into the Asia-Pacific market in the countries that are adjacent there. And those are all being driven principally by either outbound travel from China or travel restrictions in the region. And those will really be driven by how long coronavirus is sort of in this kind of when is it considered to be contained? But again it's all manageable.And the strength of our model as you know is -- I'll come back and I'll use China as an example. We were talking about today. If you think about the China results for last year, you saw a minus 4.5% RevPAR in Greater China, but you saw us grow 2% in revenue and 16% in profit underlying.So, I mean, I think that just speaks to our focus as an executive team in the last few years of leaning into adding new brands, accelerating growth, recognizing in a muted RevPAR environment, or even macro events like this, we can still grow the business grow revenue and grow profits and that's a key focus. And so I think it's really paying dividends for us.But again, more broadly, I expect it not to see significant impact outside of that region. I'll let Paul talk about margin and cash.

Yes. Thanks Vicki. So, I mean our focus remains the same. We're very focused on costs in the business as we have been for multiple years ensuring that we make the most of what we have. We invest where it helps drive the growth and you've seen us do that and that's paid off significantly in terms of more signings and more openings.But broadly, we have the sort of cost base that we need in each of our regions. And that cost base is very scalable so as we add more hotels as we have a high level of openings; it's able to support those hotels. And that's what allowed us over the long-term to drive this very high level of margin accretion.I would expect that over time it will continue to be 80 to 120 basis points. It may oscillate. I've said that before. So, you may see it be a little bit less one year, a little bit more one year. In 2019, on an underlying basis, we saw 160 basis points of growth. And so no I don't aspire to do that every year because we need to make sure we're investing behind the strong growth that we're seeing in the business. But broadly, over time, still comfortable with the 80 to 120 bps.And then look in terms of the cash returns hopefully our philosophy and our actions over the many years shows our intent there. No change to that. Still happy to be in the top end of the range? Yes, I mean if you look at the global economy, the global economy remains strong very low interest rates around the world, lower for longer, so happy to be towards the top end of that range.And M&A opportunities or further investments, our CapEx with -- permanent CapEx around the $150 million mark is about the right level still. So, no change to that. In terms of M&A, when we bought a number of things in recent years and there's a lot of work that we want to do with those to allow them to fulfill their potential, so likely to be more focused on that than any opportunities that may come up, but they're relatively limited in the industry at the moment. And so I think we've actually managed to take down some of the best brand opportunities that are out there and our focus is on growing those organically. Thanks Vicki.

Perfect. Thanks very much.

Our next question comes from Jamie Rollo from Morgan Stanley. Jamie, your line is now open.

Yes, thanks. Good morning everyone. First question was just on some of the sort of benefits you saw in the second half of the year. It looks like there was the LD income by full $10 million insurance proceeds, but also some of the margin growth in America and China looks very high. I mean it looks like costs fell by about 10% in those two regions. So, I'm just wondering whether some of those reverse in 2020, whether you are reinvesting the savings and whether you can continue to grow profits this year?And then on the other question was just on signings which are sort of down year-on-year for the last three quarters. And the pipeline I think it was the first drop in about a decade. So, really wondering what's caused that? Clearly openings are good. But is there any sort of nervousness amongst owner or lenders? Thank you.

Thanks, Jamie. Yes. There's a little bit of a noise and we called this out at the third quarter just to try and explain some of the things that were creating that. In terms of the insurance proceeds that you referred to really that's just our business interruption insurance making good on profit we would have otherwise received at a hotel that's off-line effectively. So it doesn't impact the continuity of fee income. It just makes sure that something that would otherwise not have been there is there.The cost savings that we've taken out through our $125 million restructuring plan are all being reinvested back into the business. And that's really important for us that we do that. It continues to drive growth. So although, you will sometimes see an element of cost may move one year from a regional cost base to a central cost base and that can explain some of these variances there's nothing that's fundamental there. There is -- we haven't been cutting costs that we need to put back in, in 2020 if that was the -- which I think was the thrust of the question.And then in terms of signings, actually very pleased with the 98,000 rooms that we signed. We did see in 2018 a supercharged avid performance. We only allowed the brand to be signed up right at the end of 2017. So there was a pent-up demand there. And so we saw a huge number of avid signings. If you normalize for the avid signings and take them out year-on-year, then it's signings in 2019 actually up 7%. So we're really pleased with that.And obviously we saw a high level of openings in particularly the fourth quarter of 2019 and that's what's impacting on the pipeline. As more rooms get open and if the openings are higher than the signings into the pipeline then you'll naturally see that just come off a little bit.

Just on the first question. I suppose all I'm trying to ask is I mean your fee income looks like it grew by about 1% in the second half of the year underlying 1% total fee revenue. But your fee profit looks like it was up 6%. And I was wondering can that sort of -- that disconnect continue really?

Well half-on-half then there will always be some variation. You may see some things are in one half and then they're not in another. And some income that comes into one half and doesn't come into another. I think if you look at the underlying trend over the years, there's nothing particular that I'll pull out nothing that I think would impact on -- other than what we've talked about previously around some of the IFRS 16 benefits we got in the German leased the liquidated damage we received. But I think that's all out in the market there's nothing else that I'd call out today.

Okay. Thank you.

Thanks, Jamie.

Our next question comes from Jaafar Mestari from BNP Paribas. Jaafar, your line is now open.

Hi, good morning. Three questions please for me. The first one just going back on the virus impact on the net openings. You sounded pretty dismissive of any impact on your openings. I think you had mentioned well maybe worst case a few of the openings move from Q4 to Q1 next year. So just to be clear on that, if there's a potential for I think one-third of your hotels are closed, if there's potential for a property to open and to be in the middle of disruptions, do you still think you're going to go ahead with most of the openings? And just to clarify if there is a risk to one quarter in 2020 in terms of openings in China, do you think it's Q4 or do you think it's actually Q1, Q2 everything freezes and the openings don't happen, but then they'll catch up in H2? That's the first question.And then just on the net openings, it's very honest of you two to flag the benefits of some of the large portfolio deals or partnerships. Just wondering over the medium term, are you going to be looking to do more of those? There's an area where my own estimate is you haven't necessarily had very large market share, which is with very large REITs doing portfolio deals. Now that the brand portfolio is more complex, more comprehensive do you think structurally you're going to do a couple of the very large 5,000-room deals every single year?And then just last question. You've talked a lot about the top three brands and a lot about the very recent launches. Maybe just a word. Is there anything on Staybridge, Candlewood even HUALUXE that you can do to accelerate the signings there similar to what you did with the very large brands in the last two years?

Great. Yes, thanks very much. Yes and I didn't want to be dismissive, but it was more about our view is today based upon what we know, it's short-term delays. So again, we were talking -- our teams every single day right now in Greater China are contacting the owners, working through to the pipeline. Interestingly enough, China has our highest percentage of hotel rooms under construction at -- 60% of the pipeline is under construction. So the hotels that are under construction are going to open. It's a question of -- from month-to-month, quarter-to-quarter depending upon the season.So there may be a short-term dip in terms of system size openings in China, but these are just short-term delays and should normalize themselves because the government will be -- is highly invested in seeing the tourism industry grow in China. These properties continue to open too. So again everything we're hearing on the ground is that there's -- these are just going to be short-term delays that may materialize. Paul, do you want to talk about kind of our thoughts about the partnership?

Absolutely. So I mean in terms of the opening -- in terms of the net system size growth, we're really pleased with that 5.6%, but we did call out that that benefits from the Las Vegas Sands deal that we did back in the second quarter which added a lot of rooms. I think if you look at progression over the years, we've moved from our net system size growth being in the mid-threes now on an underlying basis to being five and we've talked about our ambition to be industry-leading. And if you look at what we're doing with signings, if you look at the scale of our pipeline then I think we're certainly on track for that. And that's after taking out a higher level of room than our competitors in the industry are doing.Over the recent years, it averaged about 2.2% and that's significantly more than others are. This quality is so important to us and making sure that we are taking out the lower performers, so that we can ensure that the guest experience is consistent and is very high. In terms of the ability to mass convert and other portfolios, again it comes down to the question of quality. So if the hotels are good enough to be under our brand then we'll certainly consider it but we wouldn't want to take in hotels that will average down the quality. So that's the key determinant really Jaafar. If the portfolio is right then we'll certainly consider it. And Keith back to you on the other brands.

So I mentioned in my comments, how we're taking the learnings from the new brands avid and Atwell Suites and how we're taking the customer insights and doing that to product design to be able to move faster. And so we have now -- that team has done an extraordinary job with those brands.Now we're leveraging that. We just launched a new prototype for Candlewood and new prototypes for Staybridge, more efficient build costs, much more contemporary design to help continue to accelerate growth. But the Staybridge opened its 300th hotel last year, Candlewood opened its 400th hotel last year. Staybridge saw about 44 hotels being signed, Candlewood 22. So we expect with the new prototype, the continued great performance in the segments that we can hopefully see those brands accelerate growth going forward. They're just exceptional brands.EVEN had a great year last year. We signed 11 hotels. We really are seeing some fantastic performance in the existing estate. We're focusing on how can we refine that execution to drive even stronger returns for owners to accelerate growth going forward. And HUALUXE had a really positive year of signings as well too with a number of events and I think I have a flagship opening up in Xi'an too.So we're very focused about -- we've been really prioritizing, launching new brands to get -- to capture the segment of those markets, strengthening our existing brands and now working through the rest of the portfolio. So it's natural for us to lean into Staybridge and Candlewood and EVEN and HUALUXE going forward to maximize performance.

Thank you very much. And maybe just going back to the other portfolio comments. Again very honest of you to saying on a completely adjusted basis, let's say room openings of 5%. But you already flagged one-offs in 2017 and yet on the reported numbers you did see an acceleration. So is there any reason why we should say, well actually the underlying net openings are 5%. So for full year 2020, let's think about an acceleration from 5%? Or is it realistic that you accelerate from the 5.6% to reach 6%? When you say industry-leading, it sounds like it's between 6% and 7% from what industry leading peers have been doing.

So the reason for calling out that it is 5% excluding Sands is that I think that it would be fair to expect progression from the 5%, but the 2019 number did benefit from that Sands deal, which we may find other opportunities to do deals like that but we can't guarantee that. So I would expect to see progression from that.In terms of what's industry-leading, I think that if you look at Marriott they're a little shy of 5% now and Hilton are doing 6% and a bit. But that, of course, includes their master franchise with Patina, which is a slightly different -- in China, which is a slightly different arrangement.So if you normalize for that it's high-five. So yeah, I mean mid to high-fives is probably industry leading. And look as Keith has talked about before, there is potential for some shift out of quarter four, I guess of 2020 into quarter one of 2021 in terms of openings. So that may have some sort of an impact. We'll keep that under review. But certainly expect there's further potential from our 5% in terms of our net system size growth in future.

That’s okay. Thank you.

Thank you, Jaafar.

Our next question comes from Alex Brignall of Redburn. Alex, please go ahead.

Good morning. Thank you. Just a couple mainly on RevPAR pricing I guess. So Q3 I think Paul you called out the weakness in the U.S. would probably be maybe an early indicator that the U.S. economy might be a bit weak. And that hasn't kind of transpired but RevPAR has been a little weaker. And some of that's coming in small group I think, which the OTAs are saying that they're seeing a little bit more. So I guess does it kind of manifest? And what do you think is causing the overall weakness to RevPAR not for yourselves, but for the industry data that we see for big hotels?And then the second question. So I guess kind of comes back to that also is on brands, you've called out the increasing importance of brands Keith, but some of your peers that are based in brands are getting less important and other industries definitely argue that that's the case. So I guess I'm trying to reconcile your views on your specific brands with those that other people have said? Thank you very much.

So in terms of the quarter-by-quarter RevPAR in the U.S., we try and give the best indicators that we can as to what we're seeing in those quarters. So I talked to in the third quarter about the weakness in the small group market and also the weakness in the industrial segment of the U.S. economy, so particularly manufacturing and automotive and that that's down. Demand from sectors is down, which is if you look at what's happening in the U.S. economy, you will see that various segments are down and then other segment like the new technology segments are seeing much higher growth.So there's a mix in the economic growth in the U.S. and that then has an impact on hotel demand. And in the fourth quarter, we're seeing a continuation of those. I also called out that we're seeing an increase of supply in the Upper Midscale, because it's such an attractive proposition for guests, owners. And as more demand comes in there then owners are building more hotels and opening up more hotels. So we're seeing around 3% growth there with demand growth about 50 bps shy of that and that's having a little bit of an impact as well. That will get absorbed in due course. If you look at the forward projection, it's expected to come back into equilibrium. It may just cause a little bit of noise before we get back to the equilibrium. And in terms of brands, Keith?

Yes, correct. It's a fascinating question because when we talk about brands we're probably talking something more than just the Holiday Inn or InterContinental. I think we're talking about the branded relationship of the key players. So going back to my comments, we've got 17% of existing supply about 44% of the pipeline. So clearly the industry is shifting over to the biggest-branded players for a variety of reasons. And I think it's underpinned by customers and by owners, driving it both in that direction.So from an owner's perspective, the biggest branded players, A, can create the greatest value for owners versus the smaller companies and independents. Additionally from a financing perspective, the biggest-branded players are always going to get the most preferable financing treatment from a lender standpoint as well too. And so, it's the power of scale. It's the power of our purchasing programs, driving down contributions. So, okay so, there's the owner piece pushing it to branded.From a customer perspective, it's about the totality of what we deliver with our platforms and with our brands. And so, it's going to be looking at the things of A, the scale of the company. So, we're in the locations where people want to be. So, you can have a great brand, but if you're not everywhere, then it doesn't really work from a travel perspective. And the scale that we have is critical underpinned by a great branded experience. So, each one of our brands is quite differentiated against its brothers and sisters in our portfolio. And they've gotten sharper and better overall delivering better experiences. And our customer satisfaction scores continue to go up. That's underpinned by the platform of loyalty and our technology platforms.And so it's a combination of those experiences of being in the locations, it's having the right brand portfolio, the right technology and the loyalty, which is the totality of the brand experience, which creates value and loyalty with customers. And then, you layer in other things like credit cards and timeshare as well. So, we're just much deeper ingrained into the lives of our customers than just -- and other industries where it can be commoditized quite easily.

Okay. Thanks. I guess as a follow-up to that just -- I think it relates to both questions. The OTAs are seeing a lot more small hotels, which aren't part of the STR data added to their system and those hotels are seeing kind of growth. So, is there -- do you kind of look at it and think, maybe outside of STR and the big hotels where brands are taking share, we're losing some traffic to some of the smaller properties? Or does that not kind of come into your thinking?

I don't really see it. I mean, we're seeing more and more -- like when we launched voco, I mean the whole premise was that, there are a number of high-quality independent hotels that are going to want to come into the scale platform of IHG and we have 33 already out of the gate too. So, I see that being a key driver coming into it overall. So, I guess, we don't really see any impact from small independent hotels. And -- but then we can also do unique partnerships too, so, whereas with Mr. & Mrs. Smith that loyalty extension we've done from 500 of their hotels coming in as a partner for our platform. So, in markets today, where we don't have a hotel they can earn and burn. We can also show the value proposition and the strength of our platform to those hotels and who knows over time what may happen.

Fantastic. Thanks, so much.

Thanks, Alex.

Our next question comes from Monique Pollard from Citi. Monique, your line is now open.

Hi, good morning everyone. Just a couple for me if I could. Firstly, just on the Macau Sands partnership. Just to be clear that doesn't generate material incremental fee revenue for the group, does it? It's just a partnership about redeeming loyalty getting loyalty members engaged? And the second question, given the impairments that we've seen in the U.K. portfolio, perhaps you can particularly address how we should expect that U.K. portfolio EBIT to progress in 2020? Is that going to be a year of negative EBIT?And then finally, when we're thinking about the net rooms growth and given that the -- as we talked about before that the pipeline isn't growing anymore. I understand the sort of 5% and acceleration from there. Are there any things that you're seeing on China? Clearly growth's still good there, but that could concern you over the next year at least in terms of the pace of signings given the level of disruption?

So, just hitting those. In terms of Macau, no, we called out at the time that this is a deal that is -- it's more like a pay-for-performance-type arrangement. So, it can generate attractive income for us. It depends on how much business comes through our channels into Las Vegas Sands complex there. So, it's a lower financial take for us than our usual rooms' arrangement because, it's a very different and complex arrangement, but it is very good for our loyalty program members and that's a key driver of that field.In terms of impairment and the U.K. portfolio, the accounting under IFRS 16 is that, that doesn't effectively hit the P&L. So, I wouldn't expect to see any impact to the 2020 impact -- 2020 P&L. And in terms of the net rooms' growth, I mean what we would quite like to see in a way is the pipeline reducing because, we are getting rooms moving through it as quickly as we possibly can because, we make money when we have hotels open. So, we are signing at a very rapid rate. And ex-avid, the signings were up 7% in 2019. The more rooms that we can get open and the faster we can do it then the more income that comes into the group. So, no I mean, there still is a lot of demand even in -- even currently we're signing a number of deals in China.

Yes. No I'm just going to add on that. I was just looking at the numbers. So you think about in China, we opened six hotels in January and signed 11 hotels. In February, we already opened one hotel and signed three as of a week ago. And so I mean business is still moving ahead in China. And again as Paul said earlier, we're talking about short-term delays. And again it will depend upon the length of coronavirus and so forth. But the long-term fundamentals in China remain absolutely strong. I mean, just the scale of what that industry will look like the number of new rooms that will be added over the next decade or more, it's extraordinary. So, this is again a short-term blip in China. Maybe we should have long-term confidence in the scale and the value in that market and being a leader in that market.

Thanks.

Thank you.

Our next question comes from Stuart Gordon from Berenberg. Stuart, your line is now open.

Good morning. A couple of questions. First one, just in 2020 in deletions, should we expect this to have a run rate similar to recent years? Secondly, on avid, I mean it is doing reasonably well, but you do still seem to be trailing quite a way behind sort of True's openings and signings. Is that a gap that you think can be closed? And how could you go about that? And just on that U.K. portfolio again. It does appear as if that portfolio did miss targets by a fair bit even allowing for Brexit. Was there any sort of exceptional delays anything that was happening there that should turn around in 2020? Thanks.

So in terms of exits from the system, we've talked about before that 2% to 3% is the right sort of level of removals for us to do on a year-by-year basis to make sure that the brand stays as healthy as it can be. Actually, over the last three or four years, it's been around pretty consistent at 2.2%. And nothing that I can see in 2020 that would significantly move it outside that range. We may always see an opportunity to take out a few more hotels. And if we do and we think it's the right thing with the brand then we'll do that, but nothing that I'd call out today on that.In terms of the U.K. portfolio, when you bring on a new set of hotels and then you're converting them into your brands, which we did and so you are doing some refurbishments, doing some improvements then it is always quite challenging, and getting the hotels fully ready to come under the voco brand under the Kimpton brand took on occasion a little bit longer. We have very exacting standards and requirements before something can take on our brand. That slowed things down a bit.And we saw some cost increases in the fourth quarter. Energy costs and input costs, food costs, et cetera. And then just a lower level of demand with the uncertainty in the market that impacted as well which hopefully now there's more clarity on Brexit et cetera that 2020 will be clearer on that.And look in terms of avid we're really pleased with the performance there. It's hitting all our internal expectations. True, obviously did launch before. At the time, there was a higher level of signings in the market. If you look at our market share of mid-scale and Upper Midscale pipeline signings, and we've increased that quite significantly. So yeah, we're very happy with what we're doing there.

Yeah. No, I would agree with what Paul said there. And just to put it into context. And I hate to ever give a compliment to a competitor. But remember, they were the only high-quality game in town for that segment. And so now there are two players for it. And so we're both taking up share in that segment overall and there are overall fewer signings in – happening in the U.S.

Okay. Thank you.

Thanks, Stuart.

Our next question comes from Julian Easthope from RBC. Julian, please go ahead.

Hi. Good morning, everyone. I've got three questions as well. The first one concerns the fee structure for 2019. If we take a look at it base fees increased by $18 million, incentive fees actually fell $9 million and central fees rose $15 million. So do I take it from an incentive fee perspective they fell about 6% that the IBFC of the – of your managed hotels actually fell last year by around 6%. It was obviously made up for in central fees. I just wonder, if you could give some sort of further guidance as to how that's likely to go because it's obviously about 12% of your fee revenue now?And the second question surrounds – you've also got about 5% new rooms coming through. Can we assume therefore looking at the sensitivity that you would actually need a three to four point decline in RevPAR just to maintain profits? So it would actually require quite a big RevPAR reduction to actually see a decline in profits year-on-year. And just as a point of clarification on the last bit, your China business are there any minimum guarantees in there that was likely to sort of significantly enhance the losses in this difficult period? Thank you.

Thanks, Julian. So in terms of fee structures, which – we don't have a significant amount of incentive management fee income. Our business is much more orientated into revenue share. So it's a franchise contract. And then on our – the management contracts that we have we always try to orientate that to take a share of the top line. And then there is some share of the bottom line to the IMFs as well. What you may find sometimes is on a portfolio or the previous year we've got over a certain threshold so then we get almost a super incentive fee. And if we don't achieve that in the same way in the next year then you'll see some variability. So it's not about the overall cash flow out of the portfolio and being able to read across on a more linear basis as I think you're trying to do there. It can just can be a little bit lumpy. There can be some noise in those numbers.In terms of what level of RevPAR reduction, you'd need to see to -- for EBIT to go backwards, there's always a blend in where the rooms come in. So that 5% rooms addition won't add on a proportional basis, a 5% growth in the revenues. So you're right. It's probably somewhere around that sort of 3-ish percent depending on what we were able to do on costs decline that you'd need to see before you'd see EBIT go backwards.There are levers that we can pull as we've talked about before. But structurally having the benefit of multiple levers of growth is something that we're very focused on. And in China, no our contracts are very simple there really. It's franchises or it's management contracts. So the management contracts are pretty standard. So I can't think of any that have got those sort of minimum guarantees on them. Thanks, Julian.

Thank you. Thank you.

Our next question comes from Ben Andrews from Goldman Sachs. Ben, please go ahead.

Hi, there. Thanks for taking my questions. So just one for me please. Your net CapEx for the year was about $60 million higher than medium-term guidance and about $45 million higher year-on-year even though the gross CapEx is similar. Could you provide a bit more color on the year-on-year changes in CapEx, especially the higher maintenance CapEx and how we should think about the net CapEx figure in 2020? Thank you.

So, I mean, in terms of the CapEx, we said we will spend up to around $350 million a year, but on -- but our permanently invested CapEx will be around that $150 million mark, which is a combination of key money and then maintenance into hotels, into corporate IT systems, into offices and then into any remaining owned and leased hotels that we have. So there was a little bit more CapEx that went in around the principal estates of that U.K. portfolio that we've talked about to make sure that those hotels are the exemplars of the brands that we wanted to be.Remember the whole point of doing this portfolio deal was to have the shop windows, so we can demonstrate what our brand looked like to owners. And as I mentioned earlier that's been super successful for us in terms of driving demand from owners for voco and for Kimpton.And I wouldn't see any changes to that $150 million of permanent CapEx going forward. There will always be a little bit of variability year-by-year, but I don't think the structure will be changed there.

Thank you.

Thanks, Ben.

[Operator Instructions]

Great. Well, thanks everyone. Since there doesn't appear to be any more questions, I really appreciate you taking the time to join us today and look forward to continuing to engage with you throughout the year. But it's been a really solid year last year and a great momentum into this year, and we'll continue to work with our teams across the business to manage through the challenges in front of us. So, thank you very much and have a great day.