Hello everyone and welcome to the IHG Full Year Results to December 31, 2022. My name is Nadia and I'll be coordinating the call today. [Operator Instructions] I will now hand over to your host, Stuart Ford, Vice President and Head of Investor Relations to begin. Stuart, please go ahead.

Many thanks and good morning, everyone, from me and welcome to IHG's conference call for the 2022 full year results. I'm Stuart Ford, Head of Investor Relations at IHG and I'm joined this morning by Keith Barr, our Group Chief Executive; and Paul Edgecliffe-Johnson, our Chief Financial Officer and the Group Head of Strategy. Just to remind listeners on the call 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. For those analysts or institutional investors who are listening via our website, may I remind you that in order to ask questions, you will need to dial in using the details on Page 2 of the RNS release. The release, together with the presentation and the usual supplementary data back can be downloaded from the results and presentation section under the Investors tab on ihgplc.com. I'll now hand the call over to Keith.

Thanks, Stuart and good morning, everyone. In a moment, Paul will talk you through our financial performance. But first, let me share some key highlights. The 2022 was another year of strong trading and our teams continue to make significant enhancements across our enterprise platform performance and future growth. We delivered on our strategy, working closely with our hotel owners to grow their business and capture demand. I was particularly pleased that the strong momentum continued in the second half of the year, leading to RevPAR and profitability exceeding 2019 levels. Looking at our performance around the world. The Americas region surpassed 2019 levels in the second quarter with RevPAR up 9% by the fourth quarter. Our EMEAA region also saw excellent sequential improvement following the listing of travel restrictions and caught up with the Americas to also be 9% ahead in Q4. Trading in Greater China was more difficult due to the COVID restrictions still in place throughout most of 2022. Following the recent listing of these, the inherent desire to travel, both for business and leisure has been clear to see. During the Chinese New Year break in January, 300 million trips were made in China, representing close to 90% of 2019 levels. In terms of system size, our adjusted net growth was 4.3%, with gross growth of 5.6%. We opened 269 hotels and signed 467 leading to our pipeline increasing 4% year-on-year and being equivalent to 31% of today's system size. Reflecting the strength of our enterprise platform, we added our 18th brand, of Iberostar Beachfront Resorts. This significantly expands our resorts in all-inclusive offer, widening of choice for our guests and loyalty members. With this new type of long-term commercial agreement, we've created a new exclusive partners category and we continue to explore similar opportunities to drive further system growth and high-quality feed streams. Our operating profit for the year grew by 55% and net debt has come down further. Together, with the confidence we have in the strength and continued growth of the business, we are pleased to propose a final dividend 10% higher than 2021. We're also announcing a further share buyback program to return an additional $750 million of capital to shareholders which will reset our leverage back into our target range. Our strategy over the last 5 years has significantly strengthened our brand portfolio and seen substantial investments to innovate our technology, loyalty and distribution platforms. Our performance reflects the focused delivery of that strategy which has enabled both our growth and our sustained competitive advantage. I will talk more about this later in the presentation. But first, let me first hand over to Paul to take you through the details of our financial results.

Well, thank you, Keith and good morning, everyone. Starting as usual with our headline results from reportable segments. Revenue of $1.8 billion and operating profit of $828 million increased 33% and 55% against 2021, respectively. The operating profit of $828 million was held back by the strength of the dollar which is detailed in the appendix on a year-over-year basis was a $17 million headwind. The operating profit result also included $5 million of costs related to the Iberostar agreement. There is expected to be a further $10 million to $15 million of integration costs in 2023. Underlying revenue from the fee business increased 28% and operating profit by 43%. Our adjusted interest expense reduced to $122 million. For 2023, we expect it to revert to between $130 million and $140 million. Our effective tax rate was 27%, down 4 percentage points which predominantly reflects how our group profit base has returned back to pre-COVID levels. Going forward, we would expect our effective tax rate to stay around this level. Taken together, this performance resulted in an adjusted EPS almost doubling to $282.3. And as I will come on to show in a moment, once again, we converted over 100% of these earnings into free cash flow. Turning now to our drivers of performance. The strong return of demand in most of our markets led to overall occupancy 8.5 percentage points higher than 2021, while sustained pricing power throughout the year saw rate improve by nearly 18%. This resulted in group RevPAR increasing by 37% on a comparable basis. Total underlying fee business revenue grew by 28% and with a difference in performance primarily due to non-RevPAR-related revenue streams, such as central fee income being broadly flat. When looking at 2022 versus 2019, the 2 measures are closely aligned. RevPAR…

Thanks, Paul. On many occasions in the past and most recently during the pandemic, our industry has shown both its resiliency and enduring growth characteristics. The industry has come a long way since COVID-19 brought global travel to a standstill but there's still further recovery in international, corporate and group travel ahead, giving us the benefit of more demand still to return. The reopening of China is a significant tailwind which will greatly benefit domestic, inbound and outbound travel. While domestic travel in China has already begun to bounce back rapidly, the recovery of inbound and outbound travel is likely to be more gradual. In broad economic terms, employment levels remain high. The majority of household balance sheets remain healthy and inflation is fading in most markets, all of which support our confidence in the outlook. In terms of headwinds, on the demand side, the industry remains challenged by reduced air travel capacity and ticket prices. In China, for example, international flight capacity remains at less than 5% of 2019 levels and is likely to remain low for some time. There is no escaping that there are macroeconomic uncertainties and these may impact corporate travel budgets and leisure spending at some point. However, Economists latest view support more of a soft landing and we shouldn't forget that. For our industry, the timing is such that we will benefit from many areas of demand still returning. On the supply side, for hotel owners, the availability and cost of financing is impacting new hotel development, limiting new supply growth in some key markets. Some labor challenges also continue, although there are signs of these easing. So while both the industry and IHG cannot be immune to economic cycles, we are confident that the current industry tailwinds and outweigh the headwinds, both in…

[Operator Instructions] And our first question today goes to Jamie Rollo of Morgan Stanley.

Three questions, please. First, could you talk a bit about the U.S. performance in fourth quarter RevPAR update that sort of 5 to 7 points weaker than the market and the upper mid-scale segment despite sort of churning off the weaker hotels a year earlier. Secondly, is the company still formally targeting industry-leading net unit growth this year? I guess that would be sort of 5%, 5.5% as per Hilton. But could you talk a bit about that? And maybe you touched on the development environment in China. So what do you mean by that? And then thirdly, on the system fund, the $100 million EBIT loss which is all in the second half. The statement talks about the relaunch of the note scheme but it seems to be a revenue shortfall because revenues were down 5% on the second half of '19 despite RevPAR being sort of up mid-single digits. So what's causing that revenue drop, please? And any indications on system fund for this year?

Yes. And -- so I mean the U.S. performance, you've got to look on multiyear basis to see quarter-by-quarter what's happening. And of course, the challenge of comparing us to the industry is that our hotels are not necessarily in exactly the same locations. But as we look at it on a brand-by-brand basis and compare our brands against our competitors' top brands, another very strong year with no underperformance visible. So we're very pleased with the performance in the Americas in 2022.

Jamie, it's Keith. I'll pick up growth. So when we talked about 2022 and getting to our growth of over 4%, we said that was going to be stretching and that's when we started the year. And then clearly, there were more headwinds that developed during the year, whether that could be what happened in the lending environment, what's happened with interest rates. And clearly, the lockdowns in China because China has been a significant portion of our net unit growth over years, often in the 10%, 11%, 12% range, came in at 6%. So it was going to be challenging to get there. We did get there, though, because we focused on different ways of growing this business, bariatric resorts being a great opportunity for us to bring in an asset-light partnership which will being significant fees overtime. So I think going forward, we still aspire to be in that industry-leading range of growth. We've always said that's kind of in the 4% to 5% range when you kind of look at what the peer set is. Again, a lot is going to depend upon what happens in China. And we'll talk more later on probably about the demand side of China has come back strong. Now it's going to be the construction side and the pipeline side which will come at a slower pace as things are reopening as construction crews are starting back up. Projects are kicking off and so forth, too. So we still [indiscernible] industry thinks in that 4% to 5% range and we'll be aiming to be probably at the lower end of that in 2023. But again, it will always be lumpy for us potentially because of the opportunity to do strategic deals. So if we did another exclusive partnership, we could be higher up in the range. And again but I think we aimed at the lower end of that for 2023 but we're going to keep pushing ahead because we -- fundamentally, China will get back to growth which will be a significant tailwind for us.

And then in terms of the system fund, Jamie, I think there's a couple of things there. One, when the accounting change a few years ago, as I know you'll remember, we used to effectively do it on a cash accounting basis because the system fund is either a profit or a loss for us. It's just how much cash it generates and when we deploy that. And we try to sort of match the cash in and the cash out so that we're not basically just taking owners money that they're giving us to spend on their behalf. And so if revenues as recognized are lower than the cash that we received, we're okay with that. And remember, revenues are recognized when points are consumed, not necessarily when points are created under the revenue recognition rules there. So you can get a delay there. But over time, we run the system fund to a breakeven basis, certainly on a cash basis.

And the next question goes to Vicki Stern of Barclays.

Firstly, on the U.S. RevPAR, I guess the industry data we see has been a little bit softer just in the last few weeks. Anything to fact that you're seeing by way of any slowdown, be it leisure, business travel and just sort of more broadly your thoughts specifically on the U.S. outlook? Related to that, just thinking more globally, I guess your U.S. peers have guided for RevPAR year-on-year sort of 6% at one % and 8.5% at the middle of the other. I guess your mix is more similar to bit higher, I think, in fee contribution from China. But how would you sort of RevPAR [ph] outlook, given what your peers have commented on so far? And then just finally on the share buyback, how are you sort of landing on the $750 million, obviously, I guess, at the top end of your leverage range or upper end of your leverage range on a trading basis. But more broadly, how are you thinking about cash returns going forward in the context, obviously, you have a higher interest rate environment from here and what's the right leverage given that?

Great. Thanks, Vicki. So in terms of U.S. RevPAR and what we're seeing in current demand levels, as I think Keith mentioned, we're not seeing any signs of slowdown in demand or the rate environment. And it's always a little difficult comparing it against prior years. But when we look at forward bookings, when we look what's on the books and we look at our indications of corporate negotiated rates, bookings further out, it still looks very, very strong. Of course, we continue to monitor it to see if there's any signs or anything but still a very strong environment. In terms of guidance for 2023, yes, obviously, we don't have formal guidance. But we typically perform very close to what Hilton and Marriott do. And as you say, our business mix is closer to Hilton. So that seems a reasonable proxy and China will come back strongly. And I think, again, as Keith mentioned, we've seen very strong demand there with the spring festival seeing demand at 90% of the 2019 level. So a lot of recovery to come but very encouraging signs so far.

Thanks, Vicki. In terms of the share buyback, I mean it was a conversation at the Board level, how do we utilize catch right to invest in the business, grow the ordinary dividend and return surplus cash to shareholders. And based upon where you look at where consensus is today, how the trading outlook is and the tailwinds that we have, we were quite comfortable that the $750 million put us right in the range. Now it is a reset to make sure that we got back in the range because we were lower than we were expected to be. And we will continue to make sure that we look at future performance to continue to return surplus cash to shareholders as well, too. But effectively, I mean this is how, as Paul and team and I have been kind of rebuilding and engineering this business over the last 5 years, this is the outcome that we were expecting to achieve. Grow the ordinary dividend every year and consistently from free cash flow, return capital to shareholders, not through asset sales but through the operating performance and free cash flow generation of the company and we're quite confident that's going to be the way moving forward.

And just circling back on that, any sort of different view then on the absolute level of leverage, just given higher interest rates currently?

No, no, we're quite happy with that range that we previously provided.

The next question goes to Richard Clarke of Bernstein.

Three, if I may, first 1 just following up really on what Vicki asked there. If I sort of look forward to where you'll be in a year's time and you even just repeat your free cash flow and EBITDA, you achieved in 2022. It looks to me like you'd be slightly below your 2.5 to 3x leverage target. So is there sort of scope to do further investment, any working capital outflows, CapEx, anything we should think about? Or could that buyback actually even be accelerated as the year goes on? Second question, you obviously hinted on the call that Iberostar could be the first of a few partnership deals. Is this a sort of a new venture for you? Why do you prefer that way to grow rather than M&A or organic growth? Is there some scope there as well? And what kind of deals might you look at in that space? And then the third one, just I think there's a little bit of confusion out there sometimes about what the competitive landscape looks like in China with regarding the wider industry, what are you seeing in terms of the number of rooms that have come out of that market aside from yourselves and the other branded players, has that market noticeably shrunk in terms of room numbers over the last few years? Or do you just see that as a temporary effect?

Thanks, Richard. I'll take the first and then Keith will comment on the other 2. In terms of where the buyback would take us to -- I mean, it requires a prediction of what the EBITDA in 2023 is going to be doesn't it? But we think the $750 million announced now which would add to 0.8 turns on to the 2.1 that we end up with the 2022 numbers is a sensible place to start and it does give us capacity to continue to invest in the business which we've always said is the most important thing. I think as you listen to Keith and I talk about how we think about the business, we need to make sure this is a strongly invested business that can continue to support the growth that we generate. So we do invest back into the business but then we continue to have significant amounts of spare cash and we return that. If there was more as we went through the year, yes, we'll continue to monitor it as we always do. But I think this will take us most of the year to get through based on the level of liquidity in the stock anyway. So I hope that helps, Richard.

Great. Richard, good to talk with you. It's hard to remember what's happened over the last 5 years as the lot's happened. But I remember, was sitting in a room with many of you and Paul talking about how we were going to transform IHG through launching some brands organically through acquiring some brands, strengthening our technology platform and our loyalty program and so forth. That was the strategy we were executing on and the team did a brilliant job on that. Had a little thing called COVID come in the middle of it but we came out of it even stronger. And that's still our strategy effectively is leveraging our enterprise platform to organically launch brands and segments where we see, selectively do M&A if it's appropriate where we think it's the right way to access the customer segment and opportunity. And now because of all the investments we've made in technology and in loyalty and distribution in the platform, we can now grow through exclusive partners as well, too. People want to join IHG because you're seeing the scale and the strength we have a 77% enterprise contribution. We have a loyalty contribution over 50% of room nights and accelerating, bringing in 12 new million members a year. It's things that smaller companies just can't do and we can come up with some very creative solutions in an asset-light approach. Again, at Iberostar a bit of OpEx last year, a bit of OpEx this year. And by 2027, it's going to be producing $40 million of fees to the P&L and a similar amount coming into the system fund to help support it too. And so it's a great way to grow the business and leverage the investments that we've made. But we're going to look at all…

And just to follow up on the last question there. So are you seeing lots of independent exits in the Chinese market, either converting to yourselves or just closing?

There are some hotels that have closed. We haven't seen it being on that yet and we are seeing definitely conversions into our brands. I think we signed a Vignette, a couple of Vignette potentially in China into that play. We have a great new signing. We mentioned it early on. The Regent Shanghai on the [indiscernible] will be one of the most iconic locations in all of China. A couple of other regions we've signed are going to be in some of the most iconic architectural designs in all of China. So that's got great momentum. There's definitely going to be some supply that comes out. I think it will be a question of hotels that were alternate use and maybe local brands or independents, what happens with those products when they come back into the markets overall. But the great news is we're seeing demand come back which is good for everyone.

And the next question go to Jarrod Castle of UBS.

Great. Just coming to your churn rate on hotels. It was 1.3% versus historic 1.5% and you're now talking 1.5% going forward on this call. You've obviously undertaken quite a big cleanup of the portfolio. So is there room for it to be below 1.5%? Why we're going back to historic rates, I guess. Just on kind of the Iberostar kind of deals. I mean trying to get an idea of what the competitive landscape when you put yourselves forward to sign such a deal? And what is, I guess, your unique selling point compared to others if you might be talking to those kind of organizations? And then just lastly, fee margin. Is it still -- should we still be thinking in the kind of historic guidance range for fee margin for '23?

Yes. So churn rate, 1.3% removals this year, lower certainly than I can remember over my last 19 years. And we've said that on an underlying basis, so i.e., when you take out the Holiday Inns and Crowne Plaza which was a higher rate as we were cleaning up that portfolio for a long time, it's actually been the 1.5%. I think 1.5% is probably the right level going forward and that will be an average. So some years, you might see it a little higher, in some years, it might be marginally lower. So it will blend out over time to around that 1.5%. What's important is having a healthy estate. And 1.5% gives us the capacity to take out hotels that we don't think are representing the brand as we would like it to be represented or perhaps the owner has got an alternative use for the land, et cetera. So I think that's about the right rate of exits. And on fee margins, obviously, higher now and the Americas had a very strong performance on fee margin in 2022. EMEAA and China will grow back probably wouldn't be pushing the Americas margin in '23. I think we need to make sure that business is well invested into. But I would expect to see margin accretion in EMEAA and China. And then going forward, this business is run to generate margin. It's a scaled platform business. So it will naturally accrete margin over the last 19 years, on average, it's about 125 basis points. And I'd expect that we will continue to accrete margin as we move forward.

Great. And then I guess, what's the -- what's IHG's unique value proposition to be able to attract groups like Iberostar? I mean, we've talked about it for a while about the enterprise platform we've built. It is 1 of the most powerful in this industry and it's got materially stronger over the last 5 years. And so wanting to be part of that sort of enterprise platform. Additionally, I think we're more international than some of our competitors. And the fact that we actually have probably some deeper relationships internationally and closer to the market because most of these exclusive partnership relationships will be international. They will not be necessarily U.S. focused because of the tenure of the marketplace overall, too. So I think it's the relation. And I think it's just IHG's reputation and how we work and how we partner. The way we have done M&A, whether it was with Kimpton or whether it be Six Senses or Regents, the way we've treated those brands and protected them, we are seen as being a very good steward of brands and a very good company to partner with. And that's very important when a company like [indiscernible] understands their commitment to sustainability and can be a really, really good partner too. So, I think it's a combination of enterprise platform. We're more global and focus in nature and also the reputation we've built out there to be a great partner.

And the next question goes to Alex Brignall of Redburn.

Just two, please. So signings, I think we hope to be a little bit [indiscernible] is obviously quite a lot lower than the group average. And I wonder whether that is a negotiating point when you're trying to look at these future deals and whether when we think about future deals, they'll come at lower royalty rates Iberostar has, therefore, how we need to model that, if that's going to be a building block of your net unit growth in the future?

Thank you. So signings. I think Q4 signings, we were very focused on getting the Iberostar deal across the line. And we were lighter in 2 markets, I would say for slightly different reasons. We were lighter in EMEAA than we expected to be because there are some fairly large deals that have been moved from Q4 last year into Q1 this year. So you will see a step-up in the EMEAA region in signings. That's just a question of timing. It was literally trying to get the number before year-end and now they're happening in Q1. And then China has been a significant portion of growth now. We have grown market share in China. So we continue to have the leading position in China from an operating platform and from a share of signings, there just were fewer hotels signed in China last year overall. So again, those are 2 areas we would expect to see an acceleration coming into 2023 to drive further growth. And then in terms of the royalty rate, these are very complicated partnership deals because they're distribution relationships, there's a royalty rate to it as well. And each 1 is going to be slightly unique. I think we will be transparent with you as we announce them as how you think about them overall because I think some could be more lucrative, some could be very, very similar to this overall. Paul might have another comment or two.

Yes. I think the point I'd make is that the fees per room we're getting on this are higher than average. And if you think about the nature of a franchise contract is that we've created a brand and then we charge a fee to someone to use the brand -- that isn't the case here. This is Iberostar have the brand; they're now working as an exclusive partner with us. So, you wouldn't expect exactly the same nature of contract but I think the key thing is that we are getting a fair payment for what we will deliver to them and making fees greater than our average fees is very pleasing. And we'll generate, as Keith said earlier, more than $40 million on the P&L and growing a similar amount on the system fund. So very, very pleased with the deal.

Maybe just one follow-on to that. On conversions in general, it seems like a lot of the conversions and Iberostar will be an example, are sort of smaller, less known brands to larger groups, franchise or groups. So that's continuing the trend of the bigger groups taking a bigger share of the total pie rather more so than independent conversions. Is that like when you think about these kind of bolt-on deals, is that the way that you think about it? It's effectively some mass conversion deal of a sort of existing smaller brand that just sort of joins your group and becomes another brand of yours?

Well, if you think about the nature of the industry and what it takes to succeed, you've got to have very strong technological capabilities. You've got to have a very strong loyalty program, et cetera. So this platform that we have and only a few others really have at this sort of scale is what differentiates the majors. So I think you will see more of these smaller brands wanting to work together with the majors because then they get the benefit of that platform. So yes, I mean, I think we've seen that for many years and it makes sense that it would continue to be the direction of travel.

And the next question goes to Jaafar Mestari of BNP Paribas.

I've got two, if that's okay. Just firstly, going back on the system fund comments. I appreciate the high-level view is there's timing differences and accounting differences and revenue EBIT matters less than cash flow. All that's very clear. Still keen to understand the swing in the headline EBIT a bit more. And just to clarify, for the last couple of statements now, you've been saying there's increased investments in consumer marketing, loyalty and direct channels. Are we just actually describing what's happening, system funds growing, taking more revenue and as a result, spending more in those as it should? Or are you in any way saying that there's extra investments into consumer marketing, loyalty and direct channels. Just to clarify on that. And then secondly, on the brand momentum at avid, the openings are happening, there really doesn't seem to be much momentum in the signings in the last couple of quarters outside of the property. Your opening, it looks like the pipeline is actually dropping by a couple of properties. What's the plan here to reaccelerate avid? You mentioned that transaction history would help. But what evidence do we have right now to make a strong point that avid is more than a niche brand that has plateaued early?

Great. Well, thank you. On the technical accounting piece, I might have Paul chime in if he needs to. But philosophically, the -- what the amazing part of our business, as you know, is the system fund is grows every year as revenues grow and that gives us increased capacity to invest into the business. And when COVID hit, we took a significant amount of cost out of the business, as you would expect. And then we were quite thoughtful about how does that cost come back in? Strategically, you could kind of just sprinkle it a bit of everywhere and bring things back up and we said, actually, let's try to figure out what are the big things we can lean into. So the capacity we saved during COVID enabled us to transform the loyalty program with significantly more investment lean more into technology, lean into more into consumer-facing marketing campaigns. And so it was basically finding those efficiencies and then leveraging the system fund to drive performance and drive transformation. And then as the system fund continues to grow, we'll continue to look for efficiencies to continue to reinvest back into the business, too. But we're very, very well positioned today a better position day than ever before in terms of the system fund.

And in terms of avid, look, we remain very confident on the future of avid. Keith talked about the number of owners who have now built and then sold on their avid for very good profits and they are the best advocates for us because they talk about what a great deal it is. It's relatively inexpensive to build and it's quick to build on a small land parcel. It's preferred by guests. The economics for an owner are very good to operate it. And then there's a very good cap rate when it's sold. We just need the U.S. construction market overall to step up again and that will come when more debt capital gets made available in the U.S. because it's a great proposition. And it's something that a lot of our historic owners of Holiday Inn Expresses are very interested in. So you've got the right owner base. It will just take a little longer.

And just a quick build on there and why do you have confidence? I mean, a, we came out very, very strong with the brand. Owner demand, customer and the performance are great. The comps on these asset sales are amazing in terms of the levels of return owners are getting and that's just going to make it more attractive. If you look at some of our competitors who launched brands during the financial crisis, they just bumped along for a period of time. And then as lending came back because the strong customer proposition, strong owner proposition, they then accelerate and scale. So that's what will happen with avid and Atwell over time. It may not be this year or next year. But again, it's -- you're going to see that acceleration. And long term, they're incredibly big segments with strong returns for owners and they're great brands. And so it's just a question of when does lending come back and you can just get -- you can look at our competitors and see when they launch brands and how they didn't move for a while because of the lending environment, then the lending arm comes back up, new builds happened and they take off. So we would expect the same to happen.

And the next question goes to Jaina Mistry of Jefferies.

I've got three. My first question is on the pricing environment for 2023. If I'm thinking about the key moving parts, let's take Americas, it feels like there's more scope to push rates in business and potentially in groups. And if the leisure pricing is flat, it could mean pricing up mid-single digits, perhaps? And then in other regions where there has been a slower recovery, we could see stronger pricing there, such as Asia and China. I mean how are you thinking about pricing for 2023? That's my first question. My second question is around OpEx inflation. How are you thinking about the moving parts to OpEx inflation? And is 4% to 5% still a good anchor for 2023? And then my last question is on net unit growth. I think in a previous investor presentation, perhaps the 1 at Q3, the slide has spoken to net unit growth, even reaching around 5.5%. What's holding you back from reaching 5.5% this year? And has anything changed in January and February so far? If you could fund through each region, that would be really helpful.

Yes. Well, thank you. I mean in terms of pricing, so if you look at the U.S. state for like Q4, you had leisure up in room nights and 14% ahead in average rate. Business just slightly behind room nights for the first 2019 and 7% ahead in rate and groups are about 10%, 12% off, 30% off in demand but 7% head in rate. So you're right, there's been significantly pushing rate in leisure, probably not going to be replicated moving forward but it can be maintained. We are definitely seeing that there is pricing power in both groups, meetings and events and in business travel. And so in our corporate negotiated rates which is what we do centrally, we're seeing kind of mid- to high single-digit pricing movement in 2023 and it's a good portion of our overall business, too. So you would expect to see further pricing power in group's meetings and events and in business probably coming off in leisure to some degree, not going backwards but not seeing the same level of growth. So overall, strong pricing.

And then in terms of OpEx and how we invest into the business because you've got a combination of what's inflation and then what choices we make to continue to build out the competencies of the business; [indiscernible] and when you think back to the prior year. So we added back in the $25 million that we said we would of what have been saved because effectively, we have saved more than we targeted. So that came in. And then you saw about a 4% increase in costs in the business which was primarily wage inflation. And in 2023, the vast majority of our costs in the business are people. So we will see increases due to wage inflation. And then beyond that, where we choose to invest for greater competencies, we will look at the trading environment and make decisions as to whether that makes sense, if there's anywhere that would give us a good return. And I think we've got a good track record of driving margin. And what we are trying to do is balance profit and investment for future growth. In terms of the net unit growth, what we've talked about for a long time is our intention to be industry-leading. If you go back to 2019 on a gross growth basis, we led the industry. So we were the highest rate of openings in the industry. There's a reason why we can't be doing that again, you just got to be back in the same sort of industry environment. It's not going to be that same environment in 2023 because there are fewer new builds coming through. So can you get back up to 5.5% at some point? Yes, absolutely. And with only 1.5% removals, it's actually easier than it would have been before. But we're certainly not saying that that's a 2023 aspiration.

And just to build on my previous comments, too. I mean, again, China, we have a significant business in China, a fantastic business in China that was growing 10%, 12% and it's growing around 6% today. So as China ramps back up, so will the group's net system size growth, too. And so again, we have a strong business in the Americas, great growing business in EMEAA and China is on its path to recovery. And so when we were talking about 5%. That was a very different macro environment in China, where there were no lockdowns and they were -- the rest of the world was sort of in recovery mode and they were in normal that flipped around for 2022.

If I could just follow up on pricing. I think you mentioned potentially a soft landing for this year or that's what we expect are expecting. Is it fair to say that given the tailwinds this year, low to mid-single-digit pricing for the group as a whole might be a floor?

I think that it really depends on the demand environment. And -- so we have very strong revenue management tools. And as demand comes in, then we revenue manage that to the best outcome of rate and occupancy for us. So -- certainly, so far, it's been a very strong rate environment and looking at forward bookings and looking at level of leisure demand. So it certainly all goes well for the future.

And the next question goes to Leo Carrington of Citi Leo.

Just two for me, please. Firstly, on the comments in the presentation on IMF being still lower than 2019 in EMEAA. Can you give an indication of how they recovered in H2 or even Q4 in order to give an indication of the 2023 path, please? And then secondly, a brief follow-up on net unit growth, that 4% to 5% corridor for 2023. Does that include the Iberostar rooms being brought in this year?

Yes. Look, on the second, that's an easier one. Iberostar is as part of our organic business getting added in. It's not something we've acquired or anything. This is just part of what we do. So yes, exactly how many of the Iberostar rooms remaining coming in '23. We have to wait and see, you'll probably be paced across '23 and 2024. And then in terms of the IMF, yes, they are obviously down on where they were back in 2019. And that's principally in EMEAA and in China. So don't get a lot of IMFs in the Americas these days anyway but it's actually ahead of the 2019 levels. So I'm not going to give you the exact numbers but there's certainly still room for recovery there in future profitability.

Okay. Maybe just a follow-up on that. The -- would 2023 be a 2019 like level for EMEAA hotel profitability, maybe put it that way without going plus -- I mean, without being more quantitative?

Yes, I think you can get there or thereabouts. It partly depends on the cost environment. And so obviously, I think revenues will be there. owners are seeing higher wage costs and higher operating costs which obviously does have an impact on IMF. But as long as the rate environment remains strong, then I think they're going to have a very good year in 2023.

And the next question goes to Tim Barret of Numis.

My last question left is around demand. What you said on Slide 10, what you showed there is really helpful in terms of the leisure and business recovery. And verbally, you said that group is 13% below. Just wondering how you see that trending this year? Do you under-indexing group versus the industry? But are you still as confident on group as you are, say, on what your very bullish comments on business transient?

Yes. Thank you. I mean we do index lower than our peer set in terms of percentage of group that's about 15% of our mix is groups. And just to give you a sense, though, for the exit rate, again, group revenue was down, in Q2 was down 16%, then down 11% in Q3, then down 7% in Q4. December's exit rate was down 4%. So you're seeing that progressive set of recovery in the group segment which gives you confidence and talking to the teams, we're seeing as restrictions have been lifted in China, groups meetings and events inquiries are coming in, seeing strong requests in the U.S. too, can't find confidence in meeting space in many of the major markets right now. And strange enough hybrid working is actually a tailwind for groups because people are getting people together, too. So I think we're confident that you're going to see this continued progression in the recovery of group business.

And our final question goes to [indiscernible].

Just a couple of things. On the Iberostar deal, could I understand if the costs that you're talking about for last year this year are eventually recovered. Are they group costs or system fund cost? I'm not sure I understood that. And the revenue you're talking about, is that dependent on achieving a performance in excess of a budget? Are those fees performance related so that they could be if you don't hit target? And then the second question is we're a little way away from it but if the buyback continues. Have you -- would you continue to buy back shares even if it took the company out of large cap indices is retaining index membership an important part of value or would you stop?

Well, certainly, on the second [indiscernible]. I think we're a long way to go before we would ever get close to falling out of the FTSE 100. I think we're about number 40 in the FTSE 100. So you'd have to you'd have to buy back an awful lot of stock. Certainly, not something that is in current expectations or thinking. We want to return cash in the most sensible way to our shareholders. So I guess that's something we look at but it's going to be -- it would have to be some years down the line. In terms of the Iberostar deal, the cost -- our group costs, that's our cost of integration. There are some costs in the system fund as well but that's separate to what we've talked about. And in terms of the deal economics, it's a mixture of components. And look, I'm not going to give you exactly all the different ingredients in the recipe because that's commercially sensitive. But there's elements of it that will naturally flow and then elements that are more linked to delivery to our systems.

We have no further questions. I'll hand back to Keith for any closing remarks.

I'm just going to say a couple of things and I'll close off the call. Again, great questions, everyone. Really appreciate the level of engagement on the call. And we've talked about -- I mean, clearly, the industry is still seeing RevPAR recovery and we've talked about kind of ranges of what that could look like. But again, positive tailwinds there, particularly what's happening in Greater China continued to be a growth business, too. So we're talking about where we can grow our system this year and continue to accelerate that. We're going to continue to be disciplined in how we do our costs and grow our margin as a business and be judicious how we utilize our capital to continue to grow revenues, grow profits and really deliver on being able to return surplus cash to shareholders, too. So I think -- with the headwinds we faced in '20 and '21, we clearly have a lot of tailwinds and a lot of exciting growth and very proud of what the team has done here to, again, make us a stronger, more resilient company going forward and to deliver on our model. So it's been great to connect with you. Again, we're pleased with the year we've had and looking forward to the success we have going forward. Before I dial off, I would be remiss if I didn't say thank you to Paul who will be leaving IHG next month after 19 years with the company. I have truly enjoyed working with him over the years. He's done a fantastic job as our CFO since 2014. He's a good friend, a great friend, a great partner. We've been through a lot together but you've left the company better than you found it which is what you hope to do. So wishing you all the best for your future. Our next market communication with our first quarter trading update on Friday, the fifth of May. Thanks for your time and interest and look forward to catching up with you all soon. So that ends the call.

Thank you. This now concludes today's call. Thank you so much for joining. You may now disconnect your lines.