InterContinental Hotels Group Plc 2026 Q2 Earnings Call
Review the key takeaways and the transcript of this earnings call.
- IHG Hotels and Resorts reported a 4.1% global revenue growth in the first half of 2026, with growth across all three regions.
- Gross system growth was 6.5% and net system growth was 5%, driven by record development activity with openings and signings both up 8% year on year.
- On an organic basis, IHG expanded its fee margin by 120 basis points and grew EBIT by 10%.
- Adjusted earnings per share grew 13%, supported by share buybacks.
- China showed strong performance with 3.1% revenue growth for the half, driven by tier one and tier four cities, record development activity, and profitable operations with profit up 25% year on year.
- IHG's loyalty program has 160 million members with 67% room nights penetration globally and 73% in the US.
- IHG's residences business is small but growing, with 35 branded residences open and selling in 19 countries and expected to become a material fee revenue source in 2027 and beyond.
- The company is advancing negotiations on a US Air Force lodging contract, a long-term and asset-light agreement.
- IHG's key money and maintenance capital are expected to remain in the 200 to 250 million USD range.
- IHG's fee triangulation gap is narrowing, with a 40 basis point improvement year over year at the group level and 110 basis points in the US.
- IHG's commercial services program, piloted in 500 hotels in the Americas, is lowering costs for owners and expected to expand region-wide soon.
- IHG's portfolio in China is fully controlled with no partners or JVs, maintaining high quality and sustainable growth.
- IHG does not provide its owner services such as IT, software, or procurement to non-owner independent hotels.
- IHG's fee margin growth in the Americas and other regions is expected to continue medium to long term, with potential for further 100 to 150 basis points expansion.
- IHG's first half 2026 RevPAR growth was balanced across regions, brands, and segments with both rate and occupancy growth contributing.
- IHG's cash conversion remains strong, over 100% trailing 12 months, and expected to be around 100% for the full year.
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Transcript
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Hello. Thank you, and welcome to this Q&A session. I am Elie Maalouf, Chief Executive Officer of IHG Hotels & Resorts. Hopefully, you have all had a chance to watch the results presentation, which we made available at 7:00 A.M. U.K. time this morning. It featured myself and Michael Glover, our Chief Financial Officer. We also released the latest episode of "IHG Checks In On," featuring Heather Balsley, our Chief Commercial and Marketing Officer, and Jolie Fleming, our Chief Product and Technology Officer. The episode provides a closer look at how we are leveraging artificial intelligence to get closer to the guests, transform the search and discovery process, and further enhance the overall guest experience. Before we open the lines to take the first question, I will briefly summarize our strong performance in the first half of 2026.
Our global RevPAR grew by 4.1% with growth across all three regions and underpinned by the breadth of our geographic footprint, the depth of our brands, and the resilience of our operating model. We delivered gross system growth of 6.5% and net system growth of 5%, driven by record development activity with openings and signings both up 8% year-on-year on an organic basis. We expanded our fee margin by 120 basis points and grew EBIT by 10%. Adjusted earnings per share grew 13%, supported by our share buyback. In summary, we made excellent progress in the first half on our strategic priorities, and we are confident in the strength of our enterprise platform and the attractive long-term growth outlook. With that, let me turn it over to the operator to take the first question.
Your first question comes from the line of Jamie Rollo from Morgan Stanley. Your line is open. Thanks.
Good morning, everyone. Three questions, please. You have obviously delivered very strong net system growth in China again, but also we have seen some weak market data continuing through Q2 into Q3 on RevPAR. Could you talk a bit about why you think RevPAR has slipped back in China, and is there any risks that impact owner economics and your net system growth going forwards? Secondly, just a question on the fee algorithm at the group level. Your helpful slide 47 shows constant currency fee growth for the three regions combined at 5.2%, well below the sum of 4% constant currency RevPAR and 5% available rooms. There are quite a few items on the slide you are giving behind that. Could you please talk through those items and when you think that regional fee algo picks back up again? Then finally, just a general industry question.
Some of your U.S. peers have been reducing charge outs to help owner economics. Some are under pressure to share credit card income. I know you're an early mover a couple of years ago on your reward night reimbursements, but are you considering any future changes to charge outs, and would that be system fund P&L or would that be IHG P&L?
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