IHG Hotels & Resorts 2026 H1 Earnings Call - Record System Growth and Margin Expansion Drive 13% EPS Rise

Stuart Ford, Senior Vice President and Head of Investor Relations, IHG Hotels & Resorts: Hello, and welcome to IHG’s 2026 half-year results presentation. I’m Stuart Ford, Senior Vice President and Head of Investor Relations at IHG Hotels & Resorts. Shortly, you’ll be hearing from Elie Maalouf, our Chief Executive Officer, and Michael Glover, Chief Financial Officer. Before we proceed, I’m obliged to remind all viewers and listeners that the company may make certain forward-looking statements as defined under U.S. law. Please refer to the accompanying results 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. In addition, the presentation will refer to certain non-GAAP financial measures. Once again, please refer to the accompanying results announcement and SEC filings for reconciliations of these measures to the most directly comparable line items within the financial statements.

The results announcement, together with the usual supplementary data pack, as well as the presentation slides accompanying this webcast, can all be downloaded from the Results and Presentations section under the Investors tab on ihgplc.com. Now, over to our first half highlights reel, followed by Elie.

Elie Maalouf, Chief Executive Officer, IHG Hotels & Resorts: Hello, I’m Elie Maalouf, Chief Executive Officer of IHG Hotels & Resorts. Welcome to IHG’s 2026 half-year results presentation. I will begin with a short overview of our results in the first half, a period of strong financial performance, record development activity, and further progress on a clear strategy that’s unlocking IHG’s full potential. Michael Glover, our Chief Financial Officer, will then provide a financial review. After that, I will return to take you through the progress we are making on our strategic priorities. IHG delivered a strong financial performance in the first half of 2026. Global RevPAR grew 4.1%, net system growth reached 5%, fee revenue grew 7%, and fee margin expanded by 120 basis points, driving 10% growth in operating profit from reportable segments. Supported by strong cash conversion in our share buybacks, EPS grew even faster at 13%.

Today, we are pleased to declare an interim dividend of $0.645, an increase consistent with our 10% growth rate since 2022. Dividend payments, along with a $950 million share buyback program, are expected to return over $1.2 billion to shareholders in 2026. Together, the results reflect the strength and resilience of our business model, the diversification and scale of our estate, and the long-term value creation potential of our enterprise platform. They are a clear demonstration of how IHG’s continuing to deliver against the growth algorithm we set out in 2024. Let me now hand over to Michael to take you through the financial results in more detail.

Michael Glover, Chief Financial Officer, IHG Hotels & Resorts: Thanks, Elie. I’m Michael Glover, Chief Financial Officer for IHG Hotels & Resorts. Let me take you through some more detail on the strong financial performance delivered in the first half of 2026. I’ll start, as usual, with our reportable segments, which includes the fee business together with our owned and leased portfolio of 17 hotels. Revenue was $1,255 million, and EBIT was $655 million, growing 7% and 10% respectively. Within this, fee business revenue increased 7% to $971 million, and fee business operating profit increased 8% to $640 million. Fee margin increased by 120 basis points to 65.9%. I’ll come back to the drivers of that performance in more detail shortly. Adjusted interest increased to $106 million, putting us on track for our full-year guidance range that we’ve narrowed to $230 million-$240 million.

Our adjusted tax rate was 26%, consistent with the rate in the first half of last year. Adjusted earnings per share includes the accretion benefit from the $950 million share buyback program announced earlier this year, together with the annualized effect of last year’s $900 million program. The combination of revenue growth, further margin progression, and buyback accretion resulted in adjusted earnings per share increasing by 13% to 274.7 cents. The interim dividend is increasing by 10% to 64.5 cents, consistent with the growth rate in each of the past four years. Moving on to a summary of RevPAR performance. Global RevPAR increased 4.1% in the first half, with occupancy up one percentage point and ADR up 2.5%. Q2 RevPAR grew 3.5%, and positive RevPAR growth was delivered in each of our three operating regions, both in Q2 and for the first half overall.

In the Americas, RevPAR increased 4.8% in the first half. Performance accelerated through the period, increasing from 3.6% in Q1 to 5.4% in Q2. Supportive trading conditions from a strong U.S. economy led to growth in all three demand drivers, as shown on the next slide. The World Cup added approximately 100 basis points to Americas Q2 RevPAR growth. Excluding that uplift, there was clearly very good and broad-based growth right across the region. In EMEAA, RevPAR increased 3% in the first half. After growth of 5.6% in Q1, growth in Q2 was 0.6%, reflecting the well-documented impact of the conflict in the Middle East. This sub-region, which represents 5% of IHG globally, or just under 20% of the EMEAA region, declined by 19% in Q2.

The rest of EMEAA grew by 4% in Q2, including growth of 3% in the U.K., 2.3% in Continental Europe, and 6% in East Asia and Pacific. The breadth and diversification of the EMEAA portfolio therefore continues to be a significant strength. In Greater China, RevPAR increased 3.1% in the first half. Following stellar growth in Q1 of 5.7%, Q2 had an impact from public holiday timings, though RevPAR in this latest quarter still grew by 0.8%. This slide presents the Business, Leisure, and Groups demand drivers, showing a breakdown of booked revenue split by room nights and ADR. At a global level, all three demand drivers delivered growth. Groups was again the strongest, up 6%, with particularly strong growth, as expected, in the Americas. Business increased 2% globally, and Leisure increased 3% globally. As we’ve highlighted before, this diversification remains an important strength of IHG.

Growth is being supported by a range of customer segments, geographic markets, and travel purposes, rather than relying on a single demand driver. Turning now to system growth, where we delivered record levels of development activity. We opened 31,500 rooms across 197 hotels during the first half, delivering gross system growth of 6.5%. Excluding rooms from the Ruby acquisition, openings increased by 8% year-on-year, continuing the strong momentum we’ve seen across the business in recent periods. This further demonstrates the continued attractiveness of IHG’s brand and enterprise platform to owners globally. The mix of openings remained balanced, with 55% from new builds, 43% from conversions, and 2% from Ruby. Just under 9,000 rooms were removed from our system during the half, representing a removal rate of 1.5%. Taken together, this drove net system size growth of 5% year-on-year, continuing the momentum we had already seen in the first quarter.

This represents a strong outcome, with increasing openings, a normalized level of removals, and sustained net system growth across the portfolio. Moving now to signings. We signed 49,200 rooms across 352 hotels in the first half. Signings on an organic basis also increased by 8% year-on-year, and the composition of signings was again well-balanced, with 51% from new builds and 49% from conversions. By region, we signed 12,500 rooms in the Americas, 19,500 rooms in EMEAA, and 17,100 rooms in Greater China. Development activity remains strong with signings growth in all three regions, including in EMEAA, which continued to perform particularly well despite the disruption experienced in parts of the Middle East during the period. The strength of signings continues to support our confidence in IHG’s outlook for future system growth. Coming back to our fee margin progress.

This increased by a further 120 basis points to 65.9%, in line with our medium to long-term ambition of delivering annual margin accretion of between 100 and 150 basis points on average. Importantly, the improvement was broad-based across all geographic regions. The Americas delivered a 150 basis point increase in fee margin to 84.2%, driving operating profit growth of 7% to $442 million. EMEAA increased fee margin by 400 basis points to 69.8%, supporting 10% profit growth to $141 million. While Greater China achieved outstanding profit growth of 25% to $55 million, underpinned by fee margin expansion of 460 basis points to 62.5%. The central reporting segment had a revenue increase of 13%. The central margin came down slightly simply due to the planned timing of cost investment, which is a little more weighted to the first half, but fully consistent with our view for the year as a whole.

The operating profit of central therefore increased by 5% in the first half of the year. As I noted at our full-year results, IHG has maintained a disciplined approach to cost management for many years. With this mindset embedded in how the business operates. Through process redesign, greater leverage of centralized support, and enhanced use of technology, we continue to build a highly efficient, scalable cost base, with step changes delivered in our recent programs that are achieving sustainable savings over the long term. As you can see from this chart, we have consistently increased fee revenues over time whilst maintaining strong discipline over our overheads, therefore driving substantial margin expansion. That’s what we’ve achieved once again in the first half of 2026, with a 7% increase in fee business revenue delivered on a lower level of cost growth.

The 4% increase in fee business overheads in the first half included the timing of certain costs that were front-loaded in the year. There is no change to our view for the year as a whole. We remain confident of delivering an overhead increase within the range of 1%-3%, reinforcing our commitment to disciplined cost management and achieving further fee margin expansion. Moving on to cash flow. Adjusted free cash flow was $360 million, an increase of $58 million on the first half of 2025, driven by the increase in profit. Cash conversion on a trailing 12-month base has remained above 100%. The increase in net debt is a result of the ordinary dividend payments to shareholders, together with returning further surplus capital via share buybacks. As expected, financial leverage remains within our target range. Looking now at capital expenditure in more detail.

Key money and maintenance CapEx totaled $95 million in the first half, with $83 million of key money and $12 million of maintenance CapEx. Recyclable investments were a net outflow of $40 million, comprising gross outflows of $42 million and gross inflows of $2 million. These support attractive development opportunities within IHG, recouping the outflows over time. As previously described, these arrangements are often inherently lumpy. Along with system fund investments, overall gross CapEx was therefore $158 million, and net CapEx was $123 million. These align with our unchanged guidance for key money and maintenance CapEx of around $200 million-$250 million annually, and for gross CapEx of around $350 million a year on average. Our strategy for the uses of cash remains unchanged. After investing to drive long-term growth, which is the foremost priority, we look to sustainably grow the ordinary dividend.

After that, we then look to return surplus funds to shareholders. This year’s $950 million buyback program is on track and was 42% complete at the half-year balance sheet date, having repurchased a further 2.7 million shares or a further 1.8% reduction in the share count. For the full year, ordinary dividends of around $285 million, together with the $950 million buyback, are expected to return more than $1.2 billion to shareholders, which is equivalent to just under 6% of IHG’s market capitalization at the start of the year. Over the five years from 2022 to 2026, IHG will have returned more than $5 billion to shareholders.

On a prospective basis, given consensus expectations for growth in EBITDA and cash generation in 2026 Together with the share buyback, leverage at the end of 2026 is expected to remain within our target range of 2.5-3x net debt to EBITDA. Our other modeling guidance remains unchanged from what was communicated at our 2025 full year results back in February, except for a slight narrowing of the forecast range for interest cost. For reference, this slide also shows a summary of our growth ambitions over the medium to long term. With that, let me now hand back to Elie.

Elie Maalouf, Chief Executive Officer, IHG Hotels & Resorts: Thank you, Michael. We are pleased with our financial performance in the first half, which reflects the strength and resilience of our diversified business model. This model, which builds on years of strategic positioning, positions IHG to capture demand across geographies, price points, stay occasions, and fee streams. This breadth also allows us to benefit from the structural growth drivers fueling our industry, including consumers’ continued preference for experiences over goods. Even in a period when there were geopolitical challenges in a sub-region like the Middle East, which represents 5% of our global inventory, the other 95% performed very well against a favorable macro backdrop underpinning demand for travel.

In the U.S., our largest market, economic growth and our industry are being driven by high levels of employment, rising household wealth, resilient consumer spending, strong corporate profits, and huge amounts of investment going into technology, energy, manufacturing, and other areas of the economy. With this economic momentum expected to continue, we are confident in the underlying factors driving our U.S. RevPAR growth. In China, our second-largest market, the economy is also growing well. The number of middle-income households is rapidly expanding. There is significant investment going into infrastructure in China’s broad industry base, and the consumer has demonstrated a continued strong desire to travel.

Against that backdrop, we made further progress in the first half across our five areas of focus: growing our brands, expanding in key geographic markets, developing our leading technology and enterprise platform, driving ancillary fee streams, and, as Michael already covered, delivering increased dividends and returning surplus capital to shareholders. Together, these areas are unlocking the full potential of IHG for guests, hotel owners, colleagues, and shareholders. Let’s now take a closer look at the progress we are making in growing our brands. Over the past 11 years, we have expanded our portfolio from 10 brands at the start of 2015 to 21 today. We can now serve more guests across more price points and stay occasions in more destinations, from remote resorts to urban hotels in major gateway cities, while attracting more owners and property types to our system.

This broader portfolio is also creating a larger and more diversified revenue mix. Since 2014, the Total Gross Revenue, or TGR, generated by our hotels has grown from $23 billion to $37 billion. A key driver of that growth has been our strategic expansion in luxury and lifestyle. This higher fee per key segment has doubled from $5 billion of TGR in 2014 to $10 billion today. Strong growth in suites and the introduction of exclusive partners have further diversified the mix, alongside the continued strength and growth of our essentials in premium brands. This breadth of brands is translating into record organic development activity. In the first half, we opened 197 hotels and signed a further 352 into the pipeline, with the number of rooms open and signed both increasing 8% year-over-year on an organic basis.

Our established brands continue to drive the majority of development activity on a large base, accounting for around two-thirds of openings and signings. At the same time, our newer brands are scaling at pace, accounting for around one-third of development activity. Our newer brands still have substantial runway for growth ahead. Taking a closer look at three of these new brands that are bringing us closer to a wider set of guests, stay occasions, and owner types. Regent continues to build strong momentum and is resonating with guests and industry followers in upper luxury. When we acquired the first 51% stake in the brand in 2018, it had nine open and pipeline hotels. Today, it has 25, including flagship properties in each region in Hong Kong, Cannes, and Santa Monica.

In fact, Regent Hong Kong received its first Forbes five-star rating earlier this year. Regent Carlton Cannes received its second consecutive five-star rating. These prestigious accolades, among many others, reflect the quality of the Regent brand and the consistency with which our teams are bringing the guest experience to life around the world. We recently completed the next pre-agreed step to acquire the remaining stake in Regent. We see strong growth potential ahead as the brand continues to deliver for guests and owners. Ruby, our premium urban lifestyle brand acquired in 2025, has already grown from 30 open and pipeline hotels at acquisition last year to 42 today. Ruby’s distinctive urban micro format and franchise-friendly model give us significant opportunities to expand beyond its strong European base. We have already signed the first two U.S. hotels in New York and Chicago.

Owner interest is strong as Ruby becomes franchise-ready across East Asia and Pacific. Garner, our fastest ever scaling of a brand globally, opened a further 23 hotels in the first half of this year and signed another 54 into the pipeline. This included further development activity across the U.S. and Japan, and the first opening in China. The brand has already reached 17 countries across open and pipeline hotels less than three years since launch. A further example of the strength of our brands and enterprise platform is our selection together with our partner, Centinel, for the U.S. Department of the Air Force Lodging Program. This builds on the success of our work with Centinel since 2009 through the Privatization of Army Lodging Program. Finalizing the new 50-year agreement with the Department of the Air Force is in progress.

Operational transfer of the hotels into IHG system will begin later in 2027. This is expected to initially include hotels on 23 Air Force installations across the U.S. and its territories. The prospective agreement would further underpin our system growth momentum. We are deeply honored and looking forward to supporting the U.S. Air Force community and continuing to proudly serve those who serve. Let’s now turn to our key geographic markets, where we continue to grow across each of our three regions and further diversify our global footprint. IHG is a large domestic player in large domestic markets with the U.S., Europe, and China collectively accounting for 79% of our current system size. Over the last 12 months, nearly 90% of guests staying at our hotels around the world traveled either domestically or from nearby countries.

Therefore, shifting travel flows and pockets of geopolitical uncertainty, while impactful to certain markets and regions, usually have limited impact on IHG’s overall global performance. With more than 7,100 hotels in over 100 countries, we are well-positioned to capture guests wherever and whenever they choose to travel. Our pipeline of 2,400 hotels will expand our presence in the world’s fastest-growing economies. Almost 60% of this pipeline is located east of Europe, where economies are expected to grow by around 4% annually over the next decade, and the number of middle-income households is expected to expand by 6% per annum. Let’s now look at six priority markets where we are building strong growth momentum and taking share of future supply. In the U.S., our largest market, the strength and breadth of the macro backdrop not only supported very good trading, but also strong development momentum.

Applications and groundbreaks increased year-on-year, and we signed more than 10,000 rooms, up 30% across more than 100 hotels. The strength in signings was led by strong activity from our Essentials and Suites brands, including 22 Garner hotel signings and 43 across the Holiday Inn brand family. Given the record levels of investment going into the economy, greater clarity around tax policy, and continued wealth creation, we expect recent development momentum in the U.S. will continue. In Greater China, we celebrated our 900th hotel and delivered another record period of openings. Growth was led by the Holiday Inn brand family and our conversion-led brands. With more than 50% future rooms growth embedded in the pipeline, an under-penetration of hotel rooms per capita, continued economic growth, and a strong desire among consumers to travel, we remain confident in the long-term fundamentals of this vast market.

Across EMEAA, we continue to expand in both high-value and rapidly growing economies. In Germany, one of Europe’s largest hotel markets, our combined open and pipeline hotel count now stands at over 250, more than doubling from the start of 2024. Japan, another example of a high-value developed market, now has 62 open hotels and 34 in the pipeline. Signings included a 14-hotel conversion portfolio in Kyoto, 12 of which will become Garner properties. In India, a rapidly growing market with significant potential, we signed a record 24 hotels in the first half of 2026, taking the number of open and pipeline hotels to over 160. We expect momentum to continue accelerating over the next five years as we aim to reach more than 400 open and pipeline hotels. In Saudi Arabia, development activity continued in the first half despite geopolitical uncertainty in the region.

In fact, one of the first three Noted Collection deals was signed in Saudi Arabia in the second quarter, a testament to our and our hotel owners’ confidence in the country’s long-term growth potential. With 77% future rooms growth embedded in the pipeline, we will be significantly growing our footprint in the coming years on top of an already industry-leading position. Importantly, across the other five markets, as you can see in the top chart, our pipeline shows we will be taking greater share of future supply through both new builds and conversions. Overall, the strength of our brands and global geographic positioning drove our strongest net system growth performance in seven years, reaching 5%. With 33% further rooms growth embedded in our pipeline, around 50% of which is currently under construction, we remain confident in the continued momentum of our system growth going forward.

Now, turning to the important progress we are making in developing our industry-leading technology and enterprise platform to capture demand, deepen guest loyalty, and support hotel owner returns. Our connected technology ecosystem is the backbone of our enterprise platform and a key competitive advantage for the 7,100 hotels in our system. It reflects years of strategic investment in our digital foundations, including the unification of our data in the cloud, the early adoption of a best-in-class guest reservation system, and the rollout of our AI-enhanced revenue management system, which has unlocked revenue uplift and market share gains for our owners. Now, we are in the final stages of upgrading and modernizing our core hotel tech stack as we roll out new best-in-class cloud-based property management systems across our estate. This new PMS will help owners run their hotels more efficiently, transform their day-to-day operations, and unlock further new tech capabilities.

One such capability is a new digital solution that will create a more connected experience for our guests, from pre-arrival messaging through to in-stay services like enhanced digital F&B ordering. We expect the new PMS to be in 4,000 hotels by the end of 2026, doubling over the year. We are continuously leveraging the strength and scale of our enterprise platform to deliver even greater value for owners. In recent years, we have lowered our standard loyalty assessment fee, increased reward night reimbursements, and reduced the cost of the IHG Ignite marketing program. On top of providing a leading tech stack, we have also enhanced many other areas of support, such as the growing depth and breadth of our hotel procurement services. In a further important development, where owners pay for additional specialized commercial services, we are piloting a new commercial delivery model in 500 hotels.

75% of owners are already seeing a price reduction while at the same time benefiting from an expansion of services. Owner feedback has been very positive, and further rollout across the Americas region will continue into 2027. Now, turning to the ways we are weaving AI throughout our enterprise platform and supporting how we deliver on our growth algorithm. Our approach to artificial intelligence is grouped into three distinct areas: guest acquisition and loyalty, hotel performance, and corporate efficiency and innovation. Together, these capabilities are strengthening our direct channels, creating better experiences for guests, enhancing hotel profitability for owners, and supporting an even more efficient and scalable cost base for IHG. In the first half, we made important progress across a number of priorities within the area of guest acquisition and loyalty.

We launched new AI-enabled natural language search capabilities within our award-winning mobile app and our website, making it easier for guests to find the right hotel for their needs through a conversational search experience. We launched an IHG plugin within ChatGPT, giving users access to real-time hotel information while creating a seamless path back to IHG’s app and website to complete their reservation. We also began piloting our new hotel content platform, which will amplify how our hotels show up across digital channels and AI-powered search. We are piloting our new cloud-based guest CRM, allowing us to get closer to our guests and deliver more personalized experiences consistently across our global estate. Together, these capabilities will make it easier for guests to discover the right hotel, experience more memorable stays, and deepen loyalty.

For hotel owners, these capabilities create even greater value, widen the competitive moat, and unlock the full potential of IHG One Rewards from an already strong base. For a more detailed look at our advances in AI and the area of guest acquisition and loyalty, you can watch the latest episode in our "IHG Checks In On" series, which has been launched today alongside these half-year results. This episode, featuring Heather Balsley, our Chief Commercial and Marketing Officer, and Jolie Fleming, our Chief Product and Technology Officer, is available on the investors section of ihgplc.com. Turning now to IHG One Rewards, which continues to be one of our most important competitive advantages and a key to strengthening hotel owner returns. At the start of 2026, our IHG One Rewards membership base stood at more than 160 million members globally.

In the first half, loyalty penetration increased further to around 67% of room nights booked globally, and this figure was even higher in the U.S. at 73%. Member engagement has been strong, with milestone rewards selected up 7% year-on-year. Our loyalty members are also continuing to take advantage of our award-winning digital channels with 65% of elite members using the app in the last 12 months. App visits in total have increased 9% year-over-year. Overall, the strength of IHG One Rewards, together with our industry-leading technology ecosystem and all the channels and sources we manage for our owners, is driving increased total enterprise contribution that provides our hotels with 83% of all the rooms revenue booked. This is generating more high-quality revenue for owners, further lowering their costs and improving their returns.

Now, an update on our ancillary fee streams driven by the strength of IHG One Rewards, our powerful brand portfolio, and our enterprise platform. We have said before that our loyalty members are our most valuable guests, spending more and booking direct. Our co-brand credit card holders stay even more frequently and spend even more in our hotels. In the first half of 2026, the number of U.S. co-brand card members grew at a mid-single-digit rate, and the total card spend continued to grow. We are on track with the previously described increase in this fee stream, which will also expand system fund capacity and our ability to invest on behalf of owners. We are also expanding our co-brand offer internationally.

Our new U.K. debit cards with Revolut and Visa launched in June, and we recently agreed a partnership with Sumitomo Mitsui Card Company and Visa to launch co-brand credit cards in Japan in 2027. Further co-brand opportunities in priority growth markets are targeted for future years as these partnerships deepen guest loyalty, bring more business to our hotels, and create valuable fee streams for IHG and the system fund. Finally, we continue to see significant growth potential from branded residences. We now have 35 projects open or selling across 19 countries, with additional opportunities in the pipeline. In the first half of 2026, we earned further fees from sales of branded residences at Six Senses Residences Dubai Marina, building on the success of the previously fully sold development at Six Senses The Palm, Dubai, and from the sale of further units at locations such as InterContinental Halong Bay in Vietnam.

Fee growth is expected to be more substantial in 2027 and beyond as additional residential units under development are sold as we continue to leverage the global reach and potential of IHG’s luxury and lifestyle brands. To finish with a reminder of our growth algorithm. We are very pleased with the strength of our financial performance, the growth of our brands, and the progress made in the first half of 2026 against a clear strategy that is unlocking the full potential of our business for all stakeholders.

This strong performance culminated in adjusted EPS growth of 13% within our medium- to long-term growth algorithm target range. We remain confident in our ability to continue delivering on this algorithm over the medium to long term, which is expected to produce a CAGR of high single-digit fee revenue growth, 100 to 150 basis points of fee margin expansion, the ongoing return of surplus capital to shareholders, and growth in adjusted EPS of 12%-15%. With that, we thank you for listening to our first-half 2026 results presentation.