• RevPAR Growth: Increased by 3% with improved momentum in Q4.
• Gross System Growth: Achieved 6.2% growth.
• Net System Growth: Recorded 4.3% growth.
• Room Signings: Signed 106,000 rooms across 714 hotels, a 34% increase over 2023.
• Fee Margin Expansion: Expanded by 190 basis points.
• EBIT Growth: Increased by 10%.
• Adjusted EPS Growth: Grew by 15%.
• Share Buyback Program: Completed $800 million program; announced new $900 million program.
• Shareholder Returns: Over $1 billion returned in 2024; expected over $1.1 billion in 2025.
• Acquisition: Acquired the Ruby brand for $116 million.

• Warning! GuruFocus has detected 2 Warning Signs with OSTO:EMBELL.

Release Date: February 18, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• InterContinental Hotels Group PLC (NYSE:IHG) reported a 3% growth in RevPAR, with momentum improving across all regions in Q4.
• The company achieved gross system growth of 6.2% and net system growth of 4.3%, marking the third consecutive year of accelerating system growth.
• IHG signed 106,000 rooms across 714 hotels, a 34% increase in signings over 2023.
• The company expanded its fee margin by 190 basis points, driven by operating leverage and new ancillary fee agreements.
• IHG completed an $800 million share buyback program and announced a new $900 million buyback program, returning over $1.1 billion to shareholders in 2025.

Negative Points

• In the Americas, fee growth was only up 1% in the second half, despite a 3% increase in RevPAR, due to certain one-time costs.
• In China, while there was a strong year of signings, openings and signings were down in Q4, raising concerns about the development picture.
• The company faces increased competition and costs in the industry, particularly regarding key money, which is expected to remain elevated.
• There is uncertainty regarding the impact of potential US policy changes on employment costs and hotel operations.
• Disruptions from climate change, such as natural disasters, pose ongoing risks to IHG's operations and future signings.

Q & A Highlights

Q: Can you explain the increase in key money and its impact on revenue? A: Michael Glover, CFO: The increase in key money is driven by our shift into premium, luxury, and lifestyle segments, which require more key money. This year, we expect key money to be between $200 million and $250 million. The revenue impact is minimal, with only a $5 million to $6 million effect on fees next year due to the amortization over long contract terms.

Q: What is the outlook for RevPAR in China and the US for 2025? A: Elie Maalouf, CEO: We expect RevPAR in China to improve in 2025, driven by strong domestic and outbound travel. In the US, we anticipate RevPAR growth to be as good or better than 2024, supported by strong economic fundamentals and low supply growth.

Q: How does the Ruby acquisition fit into IHG's strategy, and will it be earnings accretive in 2025? A: Elie Maalouf, CEO: Ruby is a strategic acquisition in the urban micro space, allowing us to scale quickly. It won't be earnings accretive in 2025 due to integration costs, but we expect fee accretion starting in 2026. The acquisition was made at an attractive multiple, with significant growth potential.

Q: Can you discuss the potential for net system growth to increase beyond 4%? A: Elie Maalouf, CEO: We are confident in achieving 4% or more net system growth in 2025, driven by strong brand performance and strategic acquisitions like Ruby. We aim to grow thoughtfully and profitably, focusing on keys with fees.

Q: How is IHG addressing climate change and its impact on operations? A: Elie Maalouf, CEO: We take climate change seriously and monitor its impact closely. While natural disasters occur frequently, our diversified global presence helps mitigate disruptions. Our hotels often serve as refuges during such events, and we continue to focus on sustainable practices.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.