Good morning, and welcome to today's Third Quarter Trading Update to 30th September 2022. My name is Bailey, and I'll be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions-and-answers at the end. [Operator Instructions] I would now like to pass the conference over to our host, Stuart Ford, Vice President and Head of Investor Relations. Please go ahead, when you're ready.

Many thanks, Bailey. So good morning, everyone, and welcome from me to IHG's conference call for the third quarter of 2022 trading update. So I'm Stuart Ford, the Head of Investor Relations at IHG, and I'm joined this morning by Paul Edgecliffe-Johnson, our Group CFO. Just to remind listeners on the call that in the discussions today, the company may make certain forward-looking statements as defined under US 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. For research analysts and institutional investors, who are listening via our website, can I remind you that in order to ask questions you will need to dial-in using the details on the bottom of page two of the RNS release. The release together with the usual supplementary data pack can be downloaded from the Results and Presentations section under the Investors tab on ihgplc.com. I'll now hand over the call to Paul.

Well, thank you, Stuart, and good morning, everyone. Before turning to the trading update, I just wanted to acknowledge the other statement out this morning regarding my stepping down as CFO. It's been a huge privilege to spend almost two decades with IHG and be part of the many achievements and successes that the business has had so far, and to have played a role in setting up a very bright future with the breadth of our portfolio today, our scale and the strength of our enterprise platform. But now is the right time for me personally and professionally to take up a new career opportunity. I will be here for another six months. So in that time, just like today, it is very much business as usual. And when it comes to my leaving, I know that I'm doing so with IHG very well-positioned for further success. With that, let me turn to the subject matter of the call, our third quarter trading update. I will start as usual with a review of our trading performance. You would have seen that we're still providing monthly RevPAR data in our release, as well as giving you both the year-on year movements and the performance relative to 2019. RevPAR for the quarter showed further strong momentum. On a group-wide basis, it was up 28% on last year and up 2.7% on 2019. The latter compares to quarter two, which was down 4.5%, while quarter one was down 17.7%. So we've seen another quarter of excellent sequential improvement. Within the quarter, all three months were positive. In our data, seen through the period and continuing in the most recent weeks since demand has remained robust. And we know from the long history of industry data that there are strong correlations with employment…

Thank you. [Operator Instructions] Our first question today comes from the line of Jamie Rollo from Morgan Stanley. Please go ahead. Your line is now open.

Thanks. Good morning, everyone. And Paul, congrats on the new role at Flutter. Three questions please. First of all, just on what sort of 4% for this year net unit growth, you talked about organic opportunities in the past the company's signed some sort of lumpy business in terms of alliances with casino operators, US Army hotels, but they've been quite low revenue generation. So I'm just wondering what the sort of fee contribution might be from these organic opportunities whether that should be in line with like normal organic openings? Secondly, you talked a bit about finding stepping up in Q4, but how are you feeling about the sort of 5% net unit growth aspiration for next year? And then finally just on the technology breach, I was really wondering whether there is any implications for the relationships you've got with some of the owners, any sort of additional CapEx you -- what they might need to give in? And also whether there was any impact on your US RevPAR, because I think you said you are up 6%, the market was up more like 12% on the mid-scale, so was there some sort of one-off impact affecting that? Thanks.

Thanks, Jamie. And, yeah, thank you for your comments on the Flutter movement, but six months still here, so plenty to do. In terms of growth this year, so we're pleased with the openings that we've had and we are really pleased with the success we've had in reducing removals, which I think we know has held back our net unit growth compared to some of the peers. So the work we did last year to remove some of the Holiday Inns and Crowne Plaza is really paying dividends for us. So openings coming through and more openings will come through in the fourth quarter. And then we're working on a number of opportunities where owners are talking to us, because they have seen all the work that we've done on our systems and our enterprise platform, they know we've got the industry-leading tech capabilities. All the work we've done on the loyalty program with the relaunch there. And there's just a lot for them to like and particularly through the pandemic some owners have said, you know, this is just harder than it used to be. So we would like to have access to the platform, in terms of the fee contributions that we would make from a deal like that, yes, they are sort of at or above what we would make on an average room. So this isn't a low value bulking up if you like. And also we have said this is organic, so i.e., we're not going out and sort of buying something. So it's genuine rooms additions, but on a larger basis not done yet. So I can't be 100% certain, it will get done by the end-of-the year, but I am very hopeful, let's put it that way. And in terms of 2023,…

And the relationships with owners and initial CapEx hope we needed to catch up which?

Thanks, Jamie. I mean, the owners, I think, understand because they know that all companies are constantly being subject to criminals trying to infiltrate their systems. So I don't think it's news. And in terms of additional CapEx, no, I mean, we have a very strong tech platform. We're in the cloud ahead of our competitors. And so there's an awful lot of investment that's gone in over the years. And which, as you know, some of our largest competitors are now having to face into the need for them to make that investment, but we're ahead on that. So nothing, no further investment required that I've identified to date, at least.

Thank you very much.

Thanks, Jamie.

Thank you. The next question today comes from the line of Vicki Stern from Barclays. Please go ahead. Your line is now open.

Yeah, good morning. Just firstly coming back on the sort of outlook for openings next year. How are you thinking about signings and openings against the backdrop of higher interest rates now and just generally tough financing? And perhaps you could sort of answer that with a bit of comment on how that plays out differently, perhaps across the different regions, I imagine, US, own a profile slightly different, for example, to those in Asia? And then just related to that what portion of your pipeline is actually financed and actually what does no need to sort of prove to you in terms of financing before you're willing to sign them up? And then just finally on the balance sheet, so you've got potentially an additional $400 million or so of cash, thanks to FX movements. Just how are you thinking about the Group's capacity to use that as we go into next year? You previously mentioned that you are happy to sit at the higher-end of that leverage target range in normal economic times, not sure how normal these are, but just any comments on how we should think about your objective within that range as we look into next year? Thanks.

Thank you, Vicki. Yeah. So in terms of how owners are going to respond to a higher interest rate environment. I mean, this has gone back to the interest rate environment that I think many of them are used to before we were in a period of super low interest rates. And hotels can make a very strong return. So they can still make even if you're paying debt costs 40 -- 400 basis-points ahead of what it used to be to get debt for either construction finance or permanent debt. You can still make a very good levered IRR in that. The challenge is getting hold of debt. And that is definitely harder than it was. And I don't think that's going to ease up in the very near-term. So what we'll then see is, the best brands are those that are getting the finance, we do have the best brands. And I wanted to have one portfolio of brands to take into an environment like this, it will be ours, because they're very proven on ROI basis. We have a lot of extended-stay brands and brands in the upper and mid-scale and towards the low end of that with Holiday Inn Express in avid, which are very good cash generators. So I think that we're going to do on a relative market share basis very well there. And you are right that the difference of that around the world will be slightly varied because it tends to be mostly in the North American market where owners are accessing to the regional banks versus in Asia, it tends to be more personal relationships with banks and perhaps linked to other business interests, so there may be more access to financing out there. So I think that we'll do well…

Great. Thanks very much.

Thanks, Vicki.

Thank you. The next question today comes from the line of Jarrod Castle from UBS. Please go ahead. Your line is now open.

Thank you, and good morning, Paul. Just sort of where are we actually on 2H net unit growth now? I mean, how do you see it? It seems like it's been a bit of slippage there. And then just coming back to the unauthorised attack on your computer systems, there were some reports about lawsuits against the company related to this. Can you give an update there? And then thirdly, just your ability to deal with inflationary pressures and some -- if there has been further measures on the cost-cutting front that would be useful. Thanks.

Thanks, Jarrod. So in terms of unit growth, I was quite pleased with the openings in the third quarter but there is more to do in the fourth quarter, and there's a lot of hotels those are close to opening. So we need to get those opened by the end of the year. There's lots of hotels kicking in EMEAA that are ready to open and large hotels. So I think we will see a step-up in the fourth-quarter. It is challenging in China with all the restrictions there. And there's 3,500 hotels which are pretty much ready to open, but it's just challenging to get them open right now, so they're just sort of stored up if you like. In terms of lawsuits, one of the realities of doing business in the US is that there will be lawsuits. So I think that's just something that we very used to and it's ordinary course business for us. So I wouldn't read too much into that. In terms of the inflationary environment, well, clearly we want our owners to be making as much money as possible and that the increase in both building materials and operating supplies and equipment and labor costs and all impact on owner profitability. So there's a lot that we do, both through procurement looking at doing global deals with the likes of Unilever to buy Dove, for example, and to secure the supply-chain, but also through our own recruitment channels where we identify talent for a lot of our hotels and pass them on. So there's a lot that we do that to help owners maximize their own profitability. In terms of IHG P&L, as you know, we've been investing into the business for multiple years. And if you think back to sort of 2018,…

Okay. Thanks very much.

Thanks, Jarrod.

Thank you. The next question today comes from the line of Leo Carrington from Citi. Please go ahead. Your line is now open.

Good morning, Paul. Thank you. Two questions for me. Firstly, can you expand on the ADR trends, please, with some color and perhaps regional color as to how the mix of leisure and sort of corporate rate has evolved through the quarter? And then taken in the mix of your earlier comments on the holiday periods looking good, to what extent do you think November, December RevPAR can resemble September, October’s performance versus 2019? And then as a second brief follow-up on openings, has the Q3 conversions brand mix been similar to that which you saw in H1? And then thinking about 2023, do you think the conversions mix would move north of 30%? Or is 30% sort of the right level for next year? Thank you.

Thanks, Leo. So I think that really start -- since we started to come out of the pandemic, a lot of the growth has come from rate, and it's been encouraging how the revenue management, discipline and IHG and across the industry has worked so that when there is demand, people have gone for the maximum rates available. I think that's been a very effective strategy. And we see no sign of any loss of pricing power. So each month, rate continues to come through. And as demand continues to increase in all of the segments, so leisure, but also in corporate transient and in group, then it creates more compression and that allows us to continue to be very aggressive in rate. And so, I continue to be encouraged by that. And when I look at my latest data, and I think we all know that booking windows are short in this industry. So what I can see coming through and what I can see coming through in terms of bookings probably only gives you visibility of a few weeks. But demand pricing continues to be very good. So can I be certain of what happens in November, December? Well, I've only got limited visibility, but there's nothing that tells me that we don't see the same trends coming through as we've seen in the third quarter. In terms of conversions, yeah, our conversion brands are performing well. I think we've got now a really good mix of conversion brands that allow us to play in the deep pools of opportunity there. And -- but you want to have the right mix between new build openings and conversions, so what will happen to that rate in 2023. Well, it kind of depends on how many new builds there are as well as how many conversions there are because that will drive the proportionality. 30% is a good number. I'd be quite happy with that. Obviously, if you saw new build significantly slow down, you were getting higher. That isn't how I choose to get there. Conversions obviously do come into the system more rapidly, so they can be very attractive, but so can new builds.

Okay. Thank you very much, Paul.

Thanks, Leo.

Thank you. [Operator Instructions] The next question today comes from the line of Alex Brignall from Redburn. Please go ahead. Your line is now open.

Good morning. Thanks very much. Thanks, Paul. A couple of questions. Firstly, on just the conversions in Q4. One of the big pushbacks this morning has been how that can be sort of eight weeks left and they wouldn't be signed or converted. So I guess anything you can tell us on the nature of how long it would take from the point of signing to turn them into opened IHG-branded hotels would be really, really helpful. And then just maybe a little bit more on the interest rate environment and typically what that has -- what you've seen historically in terms of the impact on the rate of your signings. It's been a long time since we saw sort of quick increases in borrowing costs. And whether it's the case of that being sort of shocked back to the signings in the short term and then sort of no longer-term impact? Or whether it's just sort of a linear impact of that as it goes up, you see a little bit slower signing? Thanks very much.

Thanks, Alex. Yes. So as I said, we are looking at a number of opportunities. And as you can imagine, with the nature of these sorts of opportunities, I can't be too explicit. But I would be very hopeful that we will be able to get these actually into the system by the end of the year. So to say there's no guarantees because nothing's done until it's done, but that's certainly my intention and ambition, so that we would get at least a high proportion of the rooms from that into the system and such that it would get me up to my targeted aspirational level of 4% for this year. But I totally understand people say, I don't know what it is, so I'd really like some more information. We'll give that to you as soon as we can. In terms of the interest rate environment, as I said earlier, yeah, you've got the combination of the interest rate environment and the actual availability of debt capital from regional banks, which play in. And then you've got owner behavior. So owners would like to get their hotels financed, they'd like to get their hotels opened. What you tend to see is, when there's less financing then there is less supply in the industry. And when you see demand continues to be strong, that means that occupancies go up, rates go up, hotels that are operating do even better. And then those -- owners of those hotels have an even stronger case to bring to credit committees at banks, say, well, look how well my existing hotels are doing. I really want to open up a new hotel because there's an opportunity here. And that strengthens the argument to credit committees. And then they tend to then be keener to lend. So over the last 20 years, I've seen this happen in a few cycles, that you may see periods of demand, less supply and then it equalizes [indiscernible] a lot of lending happen, and you see the supply environment take off again. I can't call exactly when that will happen, but I have no doubt that it will happen in due course.

Paul, thank you very much and good luck in the new job.

Thanks very much, Alex.

Thank you. There are no additional questions waiting at this time, so I like to pass the conference over to Paul Edgecliffe-Johnson for closing remarks. Please go ahead.

That's great. Thank you, Bailey. And thanks everybody on the call, and really good to have all the questions. And just to let you know that our fourth quarter update and the financial results for the full year will be out on Tuesday, the 21st of February. So I look forward to talking to you all then, if not before. Bye for now.