InterContinental Hotels Group PLC (IHG) on Q4 2021 Results - Earnings Call Transcript
Stuart Ford: Good morning, everyone, and welcome to IHG's conference call for the 2021 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 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 do 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. The release, together with the presentation and 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 Keith.
Keith Barr: 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 for the year. Thanks to the collective efforts of our teams and working closely with our owners and listening to our guests, we delivered a strong performance in 2021 that gives us great confidence in the shape of this recovery and things to come. Our room signings and openings were significantly ahead of the prior year, and we're seeing excellent momentum across the business. The impact of travel restrictions around the world were, of course, still felt, but with global RevPAR down 30% relative to 2019 for the year as a whole. But trading improved significantly on 2020 with RevPAR some 46% higher and occupancy at times at record highs in some local markets. By the fourth quarter, global RevPAR was down just 17% versus 2019, with nearly half of our hotels back to prepandemic levels. In December, the Americas was actually up on 2019. This significant trading improvement, coupled with the actions we've taken to deliver sustainable cost reductions, translated into EBIT more than doubling. Our high-quality fee streams and disciplined use of capital drove significant free cash flow of $571 million, which is back above 2019 levels. On the strength of this performance and our outlook for future growth and profitability, we have taken the decision to resume the dividend with the proposed final payment equivalent to that which was withdrawn in March 2020. Throughout the pandemic, we have made sure that as we dealt with its challenges, we have not lost sight of delivering on our plans to position IHG for long-term growth. We made important progress in 2021 on multiple fronts that will ensure we emerge in this period a stronger company. We've continued to invest in the quality and consistency of our estate, including completing our Holiday Inn and Crowne Plaza review. We've reduced our cost base to create a more efficient model with $75 million of recurring savings. We've launched Vignette Collection to further strengthen the attractiveness of our portfolio. And we have kept investing in the enterprise that underpins it, developing our technology offer for guests and owners and delivering a new loyalty program that this year will truly transform the experience for our guests and owners. We've also made sure that we're set up to grow in the right way through our ambitious 2030 Journey to Tomorrow responsible business plan, with key steps in 2021 including upgrading to a 1.5-degree science-based carbon reduction target. We'll talk in more detail about each of these shortly. But for now, let me hand over to Paul to take you through the financial results.
Paul Edgecliffe-Johnson: Thank you, Keith, and good morning, everyone. Starting as usual with our headline results from reportable segments. Revenue of $1.4 billion and operating profit of $534 million increased 40% and 144%, respectively, against 2020. Underlying revenue from the fee business increased 38% and operating profit 104%. Adjusted interest, including charges relating to System Fund, increased to $142 million, as expected. Our effective tax rate of 31% was in line with our previous guidance. We expect the effective tax rate for 2022 and most likely for the next few years to continue to be around 30%. In aggregate, this performance resulted in an adjusted earnings per share of $1.47, up very strongly from the $0.31 in 2020. Turning now to our drivers of performance, where, to show the status of the recovery to our previous peak trading, I will also compare against 2019's performance. Group RevPAR continued to recover rapidly and across the year was just under 30% behind 2019's level, including the adverse effect from hotels that were temporarily closed. This reflects rate of just 8% and occupancy 16.5 percentage points behind. During the year, we added 44,000 rooms to our system. Our continued focus on the long-term health and quality of our established brands resulted in the removal of 50,000 rooms. Nearly 70% of these removals related to Holiday Inn and Crowne Plaza, which I'll talk about more in a moment. These additions and removals brought net system size growth on a year-on-year basis to negative 0.6% and on a 2-year basis to negative 0.4%. Our usual summary of total RevPAR growth and total rooms available on an underlying basis can be found in the appendix. Looking at our RevPAR performance over the year. You can clearly see differing trends in monthly RevPAR by region. Both Americas and EMEAA saw sequential monthly progress with both regions having a strong summer boosted by leisure demand, driving a significant recovery in rate. Momentum continued in both regions during the second half of the year. Our Greater China region saw more volatility in performance, largely driven by localized lockdowns and government-mandated travel restrictions. I will now take you through our regional performance in more detail. Starting with the Americas, where RevPAR recovered to only 20% lower than 2019 with the U.S. down 17%. In the fourth quarter, U.S. RevPAR improved to down just 5% but with 2% growth in rate. This included RevPAR being ahead of 2019 levels across Holiday Inn Express and our extended-stay brands. Across all our franchise hotels, which are largely in the upper mid-scale segment and in nonurban locations, RevPAR was almost at par with 2019, though in our managed estate, which is weighted towards luxury and upscale hotels in urban locations, RevPAR remained 23% below. During the year, we opened 16,000 rooms across the Americas, of which more than half were for the Holiday Inn brand family. This was more than offset by 31,000 rooms exiting, including 20,000 across Holiday Inn and Crowne Plaza. Underlying fee business revenue increased 51% to 81% to 2019's performance, and underlying fee operating profit increased 75% to 86% to 2019, driven in part by delivery of sustainable cost savings and an $11 million payroll tax credit. Our owned, leased and managed lease portfolio improved profitability by $18 million though were still $46 million down on 2019 due to weaker demand in urban markets where these hotels are located. Towards the end of the year, we sold our 3 owned EVEN hotels, maintaining franchise contracts. These hotels contributed a loss of $3 million in 2021. Looking at our future growth, we signed 18,000 rooms, ahead of the 14,000 signed in 2020, taking our Americas pipeline to 97,000 rooms. Looking at our U.S. business and leisure mix in more detail. Leisure demand stayed strong in the fourth quarter with room nights consumed up 2% on 2019 and rates up over 7%. As you'll recall, we are largely exposed to domestic business demand, and this steadily picked up through the year with business room nights down only 8% in the fourth quarter and with rate down less than 5%. The strong rate environment across each segment is encouraging as we continue to see demand build back. Moving now to Europe, Middle East, Asia and Africa, where RevPAR has also been recovering rapidly and was up over 100% year-on-year in the fourth quarter. Compared to 2019's performance, RevPAR was 52% lower for the year and 33% lower in the fourth quarter. In the U.K., fourth quarter RevPAR continued to recover to just 16% below 2019 with the provinces almost at par. The high level of restrictions in Continental Europe held recovery back in those markets with RevPAR 40% under 2019. Where restrictions were less severe, such as in the Middle East, the recovery was stronger with RevPAR only 10% behind 2019 and ahead in the UAE, helped by the Dubai Expo 2020 event. Underlying fee revenue increased 37% to $149 million, 54% below 2019. And underlying fee operating profit increased by $51 million to $32 million. Looking briefly at the development environment. We opened around 10,000 rooms during the year and removed 14,000, of which 11,000 were Holiday Inn and Crowne Plaza properties. After a particularly strong fourth quarter signings performance, we signed across the year 20,000 rooms with conversions accounting for around 30%. Turning now to Greater China, where RevPAR was up 21%. Demand fluctuated throughout the year, particularly in the second half, driven by the reintroduction of travel restrictions in certain provinces, which meant that despite seeing a near full recovery in RevPAR at the end of the first half, RevPAR was 29% under 2019's level for the year as a whole and 33% under in the fourth quarter. Tier 1 cities across the year saw RevPAR up 26% to 2/3 of 2019's level, although the fourth quarter was weaker, 40% below 2019. RevPAR in tiers 2 to 4 cities, which are more weighted to domestic and leisure travel, recovered to a RevPAR deficit of only 19% for the year with resort destinations, such as Sanya, seeing RevPAR ahead of 2019 levels, although these locations also saw a less strong fourth quarter. Underlying fee revenue was up 34% to $110 million, 19% below 2019. And underlying operating profit up 44% to $52 million, 32% below 2019. Net system size in the region increased by 8.9% year-on-year with 18,000 rooms opened during the year, nearly 60% more than in 2020. Signings were also up with 31,000 rooms or 153 hotels added to the pipeline, including 80 franchise agreements. Turning now to fee margin. Since the start of the pandemic, we have delivered $75 million of sustainable annual cost savings through our actions to rebalance resources and drive greater productivity across the business. As I mentioned at our third quarter results, we have also benefited from $25 million of temporary cost reductions in 2021 which are not expected to be retained as these were largely driven by vacancies in corporate roles and other areas of cost that will come back into the P&L in 2022 like travel. This, along with the recovery in demand, meant that fee margin showed significant improvement year-on-year and was down only 4.5 points relative to 2019 levels. The sustained high level of focus we have put on driving cost efficiency across the whole of our business has allowed us to reduce our overhead cost base per hotel by 27% versus a decade ago. Whilst balanced with our desire to continue to invest in the business behind growth, our high level of attention on the cost side of the business will allow us to maintain our strong track record of margin accretion. In each of our regions, we grew margins in 2021. Margins are highest in our Americas region, where 90% of our hotels are franchised. The pace of demand recovery, along with our focus on costs, has meant the margin in the Americas is already ahead of prepandemic levels. In Greater China, margins are structurally lower given our higher proportion of managed hotels. As the market further matures and transitions to a higher franchise mix, we see the potential for margins to move above prepandemic levels. Moving now to look at the completion of the review of the Holiday Inn and Crowne Plaza estate that we announced last year. We have worked closely with those hotels, which were identified as being below where we needed them to be in areas such as customer satisfaction and property condition. We have now concluded this review. And in total, 151 hotels or 34,000 rooms have exited these 2 brands. In addition, in the Americas and EMEAA regions, capital investment has been secured with 83 hotels whereby they will stay in the system. This has driven the significant increase to the consistency and quality of the estate we have been targeting. And with 2/3 of Holiday Inns and nearly 3/4 of Crowne Plazas in the Americas recently updated or committed to renovation, both brands are now well positioned to meet guest expectations and to continue expanding their distributions. The actions we've taken across the business mean we are strongly positioned to achieve our ambition of delivering industry-leading net system size growth. We expect an acceleration in gross openings over the next 2 years, supported by over 40% of our pipeline being under construction and the attractiveness of conversion to our brands. Keith will talk more about the progress we're seeing in this area shortly. Following completion of the review of Holiday Inn and Crowne Plaza, we also expect to see a lower average removal rate, which should be in line with our prior underlying rate, excluding those 2 brands, of around 1.5%. We can see the strength of our brands, as evidenced by their outperformance of peers on metrics such as guest satisfaction, which, in turn, drives owner preference. And we're further encouraged by the progress in lead indicators that will allow us to return to our previous levels of system growth in the near term. Americas franchise applications, which precede signed deals, increased significantly in 2021, while signings across the business were up 23% and were particularly strong in the fourth quarter. And room openings were up 12% for the year. Turning now to capital expenditure. We spent gross CapEx of $100 million and net CapEx was an inflow $50 million after proceeds from disposals, principally our 3 EVEN hotels in the U.S. and System Fund inflows. Maintenance CapEx was $10 million lower than last year given reduced needs for expenditure at hotels and corporate offices. Key money of $42 million reflects opening activity of hotels, particularly in the second half of the year. On the System Fund, given that we are at the latter stages of our GRS projects, CapEx spend is now lower and depreciation is higher, which, combined, resulted in a $49 million positive swing in net CapEx. Our medium-term guidance remains unchanged at up to $350 million gross per annum. We expect our recyclable investments and System Fund capital investments to net to 0 over the medium term, resulting in net CapEx of $150 million per annum. Moving now to cash flow. During the year, our adjusted free cash flow saw an inflow of $571 million, demonstrating once again the strongly cash-generative nature of our business model and our focus on this area. The result included a System Fund inflow after the outflow in 2020. Our net cash inflow, which included a favorable exchange rate movement, led to a $648 million reduction to our net debt. From a leverage perspective, we have always run the business on a conservative basis. Our bond maturity profile is staggered with our next significant maturity not due until 2024. The strong rebound in profitability and cash flow has meant that our leverage at 3x is now back beneath our original bank covenant level and our target leverage range. The Board is, therefore, recommending the reinstatement of the ordinary dividend, with a final dividend in respect of 2021 of $0.859 proposed. So to conclude. Trading rebounded strongly in 2021 with operating profit up nearly 150%, aided by our long-term focus on cost efficiency and driving our profit margins whilst investing behind growth. We drove very strong free cash flow generation and brought our financial leverage down within our target range. We have a strong track record of shareholder returns, and our strategy for uses of cash remains unchanged. Our first focus is to reinvest to drive growth. Secondly, we want to generate sufficient funds to pay a sustainably growing ordinary dividend. Lastly, where there is further cash available which is truly surplus, we will return this to shareholders, as we have previously demonstrated. We will do this while continuing to target a leverage ratio of 2.5 to 3x, which we are now back to, and with our objective of maintaining our investment-grade credit rating. With that, let me now hand you back to Keith.
Keith Barr: Thanks, Paul. Our industry continues to evolve, accelerated in part by the pandemic. I want to take a moment to discuss how IHG is responding and adapting as a business. As Paul talked about, we're seeing a strong recovery in demand, particularly in resorts and leisure and in more suburban areas, where we've seen some of our hotels get back above 2019 levels. The areas that are still relatively more challenged are urban, so the New Yorks, Chicago, Paris, Londons of the world. But as more offices return to work, more groups and meetings come back and the practicalities and ease of international travel is restored, we're confident of a full recovery for the industry and a resumption of its attractive long-term growth characteristics. If we think about our guests and what trends we see as a company need to respond to, they are placing an increasing value on seamless technology and a stronger expectation that businesses will bring sustainable practices to the fore. There's also the shift to hybrid working with more companies considering how and where to bring their teams together and employees looking at how to combine business and vacation days. For our owners, as more people head through the doors of their hotels, many are now turning their attention to growth and opening new hotels. In parallel, we also understand the current short-term challenges owners are facing, and we are providing support and solutions to ease pressure on supply chains, cost inflation and labor availability. In terms of growth fundamentals, IHG has 4% of open rooms globally and, notably, nearly 11% of the industry's global pipeline. That's an incredibly strong position for IHG to be in, and it means we will continue to take share and increase our relative scale against the rest of the industry. Given the power of our asset-light model and its ability to generate high-quality fee income streams, delivering industry-leading net rooms growth remains our clear ambition. We went into this pandemic on the back of excellent growth. If you look back across the last few years, we have made significant investments and enhancements to every aspect of our enterprise, ready for the next chapter of growth. Our four strategic priorities are in place to help us achieve that. Let me spend a few moments on each pillar. First is how we are building loved and trusted brands. Since 2017, we have added six brands to our portfolio and invested in our existing brands to create a much richer offer. Each brand sits in a high-value segment and caters to a different stay occasion, which ultimately drives growth. This means that we now have a fuller and more attractive brand portfolio that offers guests more opportunities to stay at an IHG property to earn and redeem loyalty points with us and also more chances for owners to work with us. You see this very clearly in Europe involved 3 hotels under our Vignette Collection and 1 as a voco hotel. The second deal in Vietnam involved 2 Holiday Inn Resorts, a Crowne Plaza and a voco. These are both deals that would have been difficult for us to access in recent past. But today, we have the breadth of brands that open up new opportunities for us and will help accelerate our growth. When it comes to our new brands, we've talked before about the strategic approach we take when assessing the opportunities out there. In short, we focus on two things: high-value markets, where we can tap into deep pools of unmet consumer demand to create scale positions; and developing a differentiated guest and owner offer. This highly targeted, insights-driven approach has guided our decision-making for the launches of Vignette Collection, avid, Atwell Suites and voco and the acquisitions of Regent and Six Senses. Each of their target markets is extremely large and with attractive long-term industry dynamics. And so each one of these brands represents a clear and compelling growth opportunity for us, which over time has the capability to add around $300 million in annual fee income to our P&L. We target each brand to deliver at least $50 million in fee income, and you can see here the progress we are making, what we already have opened in the system and signed in our pipeline and what we have left to do to meet our target. Clearly, our newer organic launches have further to go, but based on the guest reviews and owner conversations we're having, we are confident in them and the progress we are making. Just this month, we celebrated our 50th avid opening, and the brand is already proving a hit with guests, receiving great reviews and outperforming its peers in guest satisfaction. And you can see why. It delivers a great night sleep with a high-quality breakfast at a competitive price point. For owners, an avid hotel can be built and operated at an efficient cost with strong returns. As a result, avid is already our second largest contributor to system growth, and we expect continued momentum this year. With voco, our upscale conversion brand, after a very successful start in EMEAA, it has gone global over the last couple of years with signings and opened hotels in 25 countries. This includes properties in key gateway cities, such as New York, Singapore and Dubai, and we're seeing strong traction across both urban and leisure markets with the ability to apply the brand in resorts right through to all suite properties. Guests love the brand, too, ranking it top of its competitive set, and our owners are seeing increased guest satisfaction scores on conversion. First and foremost, our brands are about offering guests a great stay experience. But we do see that as hybrid working evolves and office space shrinks, there's going to be more demand for co-working spaces, especially as people don't want to go back to the office 5 days a week but also don't want to be sitting at the kitchen table every day. People are going to want to find those welcoming spaces where they can easily connect with others. This plays right into some of our brands, particularly our Crowne Plaza Workspaces and Holiday Inn open lobby concept. We now have open lobby installed or committed in almost our entire estate in Europe with hotels seeing a meaningful uplift in guest satisfaction and owners benefiting from increased food and beverage revenue. This is also the way we have thought about one of our newer longer-stay brands, Atwell Suites, which centers on creating a unique space for guests to work, socialize and rest. This has been one of the most resilient parts of the market and has seen strong growth, tapping into an $18 billion market in the U.S. Our first Atwell property is due to open in Miami any day now, with more due to open in the U.S. later this year. Turning now to our Holiday Inn Express brand, which is a key growth engine of our business and a real category killer in its segment. As we continue to grow the brand, we also keep pushing to ensure it can offer richer experiences for our guests and even stronger returns for our owners. For example, our next-generation public space and guest room designs in the Americas are creating better stay experiences. We're also able to deliver that in a new purchase-ready format that uses our procurement scale to achieve a cost per key savings of around 10% across furniture, fixtures and equipment. During 2021, we celebrated our 3,000th Holiday Inn Express opening globally. And the strength of the brand, the largest in the industry, combined with the weighting of our distribution to nonurban locations and domestic demand, have led to consistently outperformance segment in the U.S. over the last 2 years. We signed another 148 properties during the year. And with a pipeline that represents 26% of the current system size, we see a strong growth outlook in all regions for the brand. I'll now focus on our Luxury & Lifestyle brands and the opportunities we see across our expanded portfolio, which caters to uniquely different stay occasions. We have a strong heritage in this space with Intercontinental Hotels & Resorts, the world's first and largest luxury hotel brand. In recent years, we further developed our luxury concept with restaurants and bar expertise from Kimpton Hotels & Restaurants; spa, wellness and sustainability capabilities from Six Senses; and upper luxury know-how from Regent. Altogether, this is creating an impressive portfolio for both guests and owners. From 2 brands in 2014, we now have 6. And from 240 properties, we now have more than 440, rising to around 500 by the end of this year. In total, Luxury & Lifestyle is now 13% of our total system size. Even more importantly, our brands in this space represented 23% of our total signings in 2021, showing the strong growth outlook for this high-fee segment. Looking in more detail at Regent and Kimpton. Since we acquired Regent, 6 properties have been signed, taking the pipeline to 8 on top of the 7 that are currently open. You'll also recall that we're renovating the InterContinental Hong Kong as part of our rebrand back to Regent. That hotel will open this year as a global flagship for the brand. For Kimpton, its excellent international expansion continues with the flagship opened in Paris and strong signings in key resort locations, such as Mallorca, which will open by summer. We're also taking the brand to Mainland China with the first Kimpton hotel due to open in Suzhou later this year. Moving now to our second priority, which is about putting guests and owners at the heart of every decision we make. When it comes to our owners, we work closely with them to maximize their returns by reducing the cost to build and operate. For instance, like with Express, we developed new prototypes across Holiday Inn and our extended-stay brands that require less land and use more cost-efficient and environmentally sustainable materials to drive returns. So far, we have new prototypes committed in 150 Candlewood Suites and 140 Staybridge Suites. Similarly, we have fresh and modern prototypes for Holiday Inn hotels across the Americas. The concept brings our successful open lobby space and guest room designs together in a more efficient and flexible way with a 15% reduction in building size. To date, more than 250 hotels have adopted or committed to use these new designs. We also improved our processes, supporting reductions and the time it takes to open a property and, for a newly open property, reach full commercial performance. This support, for example, our target for 2022 to be a record openings year for Hotel Indigo. Clearly, one of the most important things is to build long-standing relationships with our guests and owners, the foundation of which is loyalty. Our IHG Rewards program is a key part of our owner value proposition where we have over 100 million enrolled members. We have seen member contribution grow by 7 percentage points over the 4 years prior to the pandemic, and these members traditionally account for more than around half of our guest days. As you might expect, loyalty members stay more and spend more. They are also 9x more likely to book direct, which is the most profitable channel for our owners. Loyalty members have proved to be the most resilient during the toughest periods of the pandemic, and we've made sure to look after them by protecting status and points expiry and introducing new program enhancements, such as dynamic pricing for reward nights, which is lowering the average number of points needed for a booking by around 15%, helping members get free nights faster. As you may have seen last month, we are now going much further with the biggest loyalty transformation in our history. This will drive even greater levels of member engagement and attract more guests into the program. As part of this work, we've already announced a simplified tier structure with more bonus points across the different tiers. And we are maintaining our industry-leading bonus points for the Diamond Elite tier, which rewards our most loyal guests. What's still to come is new customer preferred benefits that members will really recognize additional value from and more personalization so that guests can choose the benefits that are most important to them. We're keeping the next phase under wraps for now, but look out for further detail in the coming months. Our third priority is all about how we create digital advantage as a company. This is vital to enabling a seamless technology experience across the guest journey, from driving direct bookings and creating integrated digital experiences for our guests to delivering revenue-enhancing solutions for our owners. Our investment in our cloud-based hotel technology platform, IHG Concerto, is the backbone of this work. It allows us to develop and roll out performance-enhancing tools faster and easier than before. Attribute pricing is being rapidly rolled out with 95% of hotels having now completed detailed room inventory assessments in preparation. This enhancement will drive competitive advantage to allowing guests to choose specific room characteristics when booking and seamlessly add additional nonroom stay enhancements that customize their stay and provide incremental revenue to owners. Supporting this as well as our transformed loyalty offer is this year's rollout of our next-generation mobile app, which will offer a much richer and more personalized customer experience. Looking at our fourth strategic priority. I've talked before about ensuring our growth ambitions as a business match our aspirations to care for our people, communities and planet. And 2021 was the first year working toward our Journey to Tomorrow 2030 responsible business plan. Starting with our people. We are continually investing in our culture, so we support, develop and empower colleagues and attract new talent into the business. During the year, corporate colleagues completed more than 10,000 hours of Conscious Inclusion training, and we further progressed our DE&I agenda through new talent programs. Importantly, our employees are highly engaged by the direction we're taking as a business. And this is reflected in IHG again being recognized as a global Best Employer by Kincentric, who assess the survey data from our colleagues and benchmark IHG against other leading companies. In our communities, our clear commitment is to help improve the lives of 30 million people around the world by driving economic and social change through skills training and innovation, providing support in times of natural disasters and helping tackle food poverty. Progress during the year included extending the reach of our successful IHG Academy program to the launch of IHG Skills Academy, a free global virtual learning platform that will help drive skills development, hospitality training and career pathways. In terms of our planet, with such a global footprint and strong pipeline of hotels, it's vital that we work closely with our owners and partners to ensure we operate and grow in ways that protect the world around us. In 2021, with respect to carbon emissions, we further upgraded our science-based target to 1.5 degrees and became a signatory to the U.N.'s Race to Zero campaign. Supporting this work is a clear road map focused on our three key levers: existing estate energy efficiency, sourcing renewable energy contracts and developing plans to ensure our newbuild hotels operate at very low or 0 carbon. As part of our focus on minimizing waste, we are on track to eliminate single-use miniature bathroom amenities this year with solutions now secured for all brands in all markets. And in terms of reducing water footprint of our hotels and helping secure water access in our communities, we have made further progress against our final two stewardship projects in Shenzhen, China and Hayman Island, Australia. So as you can see, as we've been dealing with the pandemic, we remain focused on delivering great guest experiences, strong returns for our owners and an industry-leading level of net system size growth ahead -- in the years ahead. In the past 5 years, we have added 6 new brands to round out the portfolio, including increasing our exposure to the high-value Luxury & Lifestyle segment. At the same time, we remain laser focused on evolving our powerhouse Holiday Inn and Holiday Inn Express brands and growing the rest of the estate. We've made big investments in our technology platforms, which is really starting to come to fruition now with things like IHG Concerto and our mobile app. We're making transformational changes to our loyalty offer. And we strengthened our enterprise capability to drive better revenue opportunities, cost and return for owners. We've also taken costs out of the business and built a clear road map of investment across our enterprise to maintain momentum and accelerate growth. So to sum it up, we delivered a strong financial performance with profits more than doubling and net debt substantially reducing. We're executing against the strategic priorities we outlined at this time last year. We're well placed to gain further share with leading brands in the largest markets and segments, supported by our powerful technology and loyalty platforms and a clear commitment to do the right thing by our people, communities and planet. Our long-term confidence is as strong as it's ever been, and our owners share that view as reflected in nearly 300 hotels opening in the year and well over 400 signings, which was 23% more than the prior year. All the actions we have taken over the last 2 years position us to exceed our prepandemic levels of growth and profitability. I'd just like to finish by thanking all of our colleagues for their hard work and dedication and our owners for their partnership. Collectively, we saw another truly inspiring effort in 2021, and we look ahead with confidence from here. With that, Paul and I are happy to take your questions.
Operator: The first question comes from Bilal Aziz at UBS.
Bilal Aziz: Three from my side, please. Firstly, you clearly flagged good signing momentum across the fourth quarter. I'm guessing your U.S. number still leaves quite a room for recovery there. But you mentioned franchise applications now picking up. So keen to hear your thoughts on the construction environment over there and when you expect to see a step-up there, please. Secondly, the estate have all -- reads quite positively about getting above 4% net unit growth for this year. That still leaves just over 8,000 rooms to be opened incrementally through this year. So perhaps can you walk us through the building blocks and the phasing for those openings this year given that the signings now will probably impact '23? And then lastly, just your view on pricing. You've launched the attribute-based pricing system early this year, but there's clearly a lot of nervousness around the U.S. consumers. So any data points you can share that gives you confidence that you can drive real rates higher?
Keith Barr: Great. Well, thank you. I'll let Paul take on signings and on unit growth, and I'll pick up on pricing.
Paul Edgecliffe-Johnson: Thanks, Keith. Yes. And -- so yes, we are encouraged by the signings environment. I think that our step-up in franchise applications was pleasing and really demonstrates the power of our brands. Our owners clearly want to open up more hotels because they make very good returns. If you think about it, you're a real estate investor today, whereas previously you might have been considering investing behind retail, behind other forms of commercial real estate, office, for example, but those are sort of off the table right now. So more and more capital is being focused into hotels. And that advantage is us. We have a very high share of the signings in the industry. Clearly, there is still room for it to recover back to what we were seeing in 2018 or so. That's partly about the financing environment. So once financing eases up and supply chains ease, then I think that we will see more signings come through, which will take our level of openings over time even higher. And in terms of our 2022 expectations for growth, that obviously is the components of how many rooms we open and how many rooms we remove. On the removals, I think we've talked pretty consistently about the fact that we can come back down now to 1.5%, which is the underlying rate we've seen, excluding Holiday Inn and Crowne Plaza, over a number of years. And then in terms of openings, in 2021, we saw 5%. So 5% less than 1.5% would have been sort of normalized 3.5% for last year. And next year, we need to open a few more rooms to get up to where we'd like to see ourselves, which is back in line with what we were seeing in 2018 at 4% or so. So yes, we still have to find some rooms to open during the year, for sure. That's not unusual for us. We have some great conversion brands, and we're well placed to do that.
Keith Barr: Great. Thanks, Paul. In terms of pricing, I think there were two aspects to the question. There was a little bit there about attribute-based pricing and the health of the consumer and so forth, too. So I think if you look at the same data that we are seeing, generally the consumer is quite healthy, particularly in the U.S. And I guess our forward booking indicators, which have extended, give us confidence. We’re seeing in terms of leisure demand, which is that truly discretionary spend, being – continuing to accelerate across ‘21 and into ‘22, and we believe that we will see a record level of demand into Q2 and into Q3, kind of set – spring break into summer time frame. And in fact, I was telling a journalist only today, if you haven’t booked your holiday, you might want to book it now because truly, pricing and availability, pricing is high and availability is low. So I think that you’re going to see very, very strong pricing power there. Additionally, you’re now seeing business travel begin to return, groups, meetings and conferences and events that have shifted into the Q2, Q3 and Q4. So I think overall, you’re going to see generally a healthy consumer and a healthy uplift in demand for travel. In terms of attribute pricing, we are rolling that out right now. So we have set up the foundational aspects, which required us to touch every single hotel around the world and organize their data. Now we’re beginning to – a phased rollout of that, which will basically enhance the booking and searching experience for our guests and will be driving incremental revenue to our owners as it progresses, but it’s still early days.
Operator: The next question comes from Jamie Rollo at Morgan Stanley.
Jamie Rollo: Three questions also, please. The first is on the room openings again. Over 40% were in China last year, which is a record high for the company. I'm just wondering how confident you are there on the pace of openings given the pipeline fell in Q3 and Q4. And also, how should we think about the impact to group fees given China is a much lower revenue and margin market compared to the rest of the business? Secondly, specifically on avid, which you're calling out as a significant opportunity again. The pipeline there shrank quite a lot. I think you terminated more rooms than you signed in the year. I'm just wondering, where is it versus your expectations? That seems to be the brand of those six with the biggest absolute potential. And then finally, on the balance between M&A and returning cash, clearly lots of opportunity in Luxury & Lifestyle. And I note on Slide 33 there's a bit of a gap in that quadrant. So I'm just wondering about whether you are looking to do more acquisitions of brands. I think 4 of the 6 were actually acquisitions rather than homegrown. And how do you balance M&A versus a buyback, please?
Keith Barr: Great. I'll let Paul pick up on room openings, then we'll comment on avid and I'll pick up on M&A.
Paul Edgecliffe-Johnson: So in terms of the room openings, yes, a significant proportion in China, where, as you know, Jamie, we have an excellent business. And it's all our own business, so we don't have any master license agreements like some of our competitors. So effectively, we get fees from the rooms that we open in China, unlike some of our competitors. And despite the disturbance of some of the commercial property markets seen in China, we're not really seeing it in our business there. So we still watch for it, of course. We'll never be complacent. But no signings right now. And signings continue to be very strong. Openings continue to be very strong. And really good deals. And in terms of the overall blend, what's coming through, then I think if we think about the components of China, the components of luxury in EMEAA that we're seeing, it is all going to sort of blend out. So I don't think you're going to see any significant change in the overall profitability per room, which I know is one of your -- the things you watch for closely. And then in terms of avid, remember that we signed a lot of deals when we launched avid and -- which is owners wanting to build avid. And then as they've been able to get financing or not on some of those locations, we've freed up those locations for other owners to come in. But we're at 50 hotels open now, and the opportunity is very, very significant. The properties are performing really well, and I have no doubt that this will be a brand of great scale over time. It's going to take a while for it to reach Holiday Inn Express's 3,000-plus hotels but watch this space, I guess.
Keith Barr: Yes. And Jamie, just to build on that, too. I mean we're beginning to see some of the first avids begin to trade with some significant returns going to owners, too, which helps actually accelerate the growth in the pipeline as owners see that it's great, great cash-on-cash returns and then they're transacting on it as well, too. So we're very, very confident about the continued acceleration of the curve. Now in M&A, we'll give you our normal answer. We never comment about M&A, on anything specific. But we're going to clearly look at the brand portfolio, as we've done in recent years, where we've added six brands in to fill up those white spaces. And so we've done it inorganically in a couple of areas where we felt that the right thing to do was to acquire those brands and organically when we can develop those brands. So a great success is when you look at like voco, for example. Already -- 2018 and already 70 hotels opened in the pipeline across all 3 regions in gateway cities like Singapore, Dubai and New York. And so we'll continue to look at the brand portfolio and determine what's the right approach. But we're very, very disciplined in our use of capital, very, very focused on making sure that when we invest in something, it can deliver returns, get to that stabilized level of $50 million of fee income, so it's a scale opportunity and not a niche brand, too. So again, we'll continue to expand the brand portfolio, but we're in a pretty great position today when you think about what we've done in Luxury & Lifestyle, what we've done in mainstream. The fact that now 25% of our signings were conversions, that wouldn't have happened had we not had the brand portfolio that we have today.
Jamie Rollo: And can I just follow up on sort of one of the last questions? I don't think you answered in terms of sort of the cadence of net unit growth through the year. Is it fair to say that the sort of 4.5% target will be sort of back-end loaded given your removals were mostly -- or half of them were in Q4 last year? Now openings tend to be, in a normal year, Q4 loaded as well. Or could it hit 4.5-ish percent in Q1 or Q2, year-on-year, that is?
Keith Barr : Thanks, Jamie. So I think that’s just a component of the maths of the opening and the removals and the fact that it is over a trailing 12-month basis. So I think what we’ve said is that we want – we’d like to see 2022 looking more like 2018. And so I’m not sure I said exactly sort of 4.3%. I think starting with a 4, I think, will be a really good performance in the light of what our competitors are guiding to. So that’s certainly what we hope to see. But, I mean, clearly, given that it’s on a 12-month lag basis, you’re not going to see that on a reported basis until the back end of the year when you’ve cycled off those abnormally high level of Holiday Inn and Crowne Plaza removals. If you strip that out as the openings come through, it’ll look a bit different. But you’d have to make that adjustment.
Operator: The next question comes from Vicki Stern of Barclays.
Vicki Stern: Just firstly, separate to the Crowne Plaza/Holiday Inn program, I think the exits were quite a bit higher than expected in Q4. Just why was that? And how confident are you then in the exit rate going forward being around 1.5%? Or to put it another way, is there anything that could sort of derail that and bring it to exits at sort of higher level as we look into '22 or '23? Back on those franchise applications, thanks for giving the color on the U.S. Just wondering how that sort of indication for the future signings is looking in the other regions. And also, a little bit on the lending environment and the other sort of elements and the backdrop in those regions would be helpful. And then finally on cash returns. I think before COVID, you were generally happy to sit at the top end of that target leverage range. Just wondering how you're feeling about that today. You're starting the year at 3x net debt-to-EBITDA. I guess even with the dividend payment, assuming RevPAR continues to recover, you'll be substantially below that by the back half. Just how should we be thinking about the scope of surplus cash return announcement in the second half?
Paul Edgecliffe-Johnson: Thanks, Vicki. So yes, in terms of the exits and the fact that we’ve said that our underlying rate of exits is – if you look back over multiple years, is around the 1.5%, in 2021 it was a little ahead of that; in 2020, it was behind that. And there were some hotels in 2020 which, ordinary course of business, we would have exited. But given it’s in the middle of a pandemic, we couldn’t really. So they have then gone in 2021. So if you look across 2020 and 2021 combined, the underlying, ex Holiday Inn and Crowne Plaza, rate of removals is at a normalized 1.5%. In terms of franchise applications and, more broadly, what we’re seeing from owners, owners want to open hotels with us around the world. I mean if you look at our pace of signings in EMEAA in the fourth quarter, signings were exceptionally strong. In China, our signings were exceptionally strong. We’re making great returns for owners. So getting financing in place is important. Probably the area where it is most important that it comes back is in the Americas. If you look elsewhere, we’re seeing actually very strong signings. And in terms of the 2.5 to 3x net debt-to-EBITDA, look, in current economic conditions, low interest rates, high availability of funding, I’m happy to be at the top end of that range. Nothing further we’re saying today around further returns on capital. But we are – our track record over the last 20 years or so demonstrates our future intent. .
Operator: The next question comes from Richard Clarke at AB Bernstein.
Richard Clarke: Three questions, if I may. Just starting with your investments in loyalty. And maybe you could just explain why you're making changes to your loyalty program here. Is there anything you're sort of dissatisfied with or any aims you're trying to get out of that like higher loyalty contribution, more credit card revenues? What's the ambitions with doing the loyalty program over? Second question. Paul, you mentioned that the guidance remains that gross CapEx could be as high as $350 million. I don't think you've spent that level of gross CapEx since you were a much more asset-heavy business, and it was only $100 million this year. So what could you spend that money on? Is that going to be more recyclable investments? Is there more investment needed in the System Fund? Maybe just explain what could get us to $350 million. And then the third question, I noticed your single Six Senses in the Americas is just 20 routes. I think it's in Brazil. Is there an opportunity for IHG and maybe wider brands to move into smaller hotels? And what is the -- does that expand your addressable market meaningfully? And what could possibly lead to you being able to move into smaller hotels via conversions, et cetera?
Keith Barr: Great. Thanks, Richard. Good to talk with you. I'll pick -- I'll talk about loyalty and I'll talk about Six Senses and smaller, and then I'll let Paul talk about $350 million. As we got into the pandemic, we were committed to saying how do we exit this a stronger company. And that was one of the rallying cries across the organization into making the investments in technology, making the investments in growth, making the investments in the enterprise more broadly. And we recognized that we could invest more to strengthen the loyalty offer for our customers and for our owners and looking at as loyalty continues to evolve and becoming more competitive, how do we take share. So it's a significant transformation of the loyalty program. As we said, initially it's a new tier and different tier structures. But basically, it's going to be a richer offer for our customers. It's going to be with more personalization and increased benefits, which will close some of the competitive gaps or create some areas of competitive advantage for us. And from that increased loyalty contribution, more revenues to owners, better credit card fees, reducing costs, and better returns. So we think that it's one of the biggest thing we will have done to this loyalty program since we invented loyalty for this industry and really excited about that opportunity. I'll let Paul talk about capital and then I'll come back and talk about Six Senses.
Paul Edgecliffe-Johnson: Yes. Thanks, Richard. So in terms of the CapEx, as you say, this year, CapEx was a positive for us. And we've always talked about gross CapEx potentially being up to $350 million, but the components within that being the key money and maintenance capital, which is what is permanently deployed into the business. That could be around the $150 million mark, obviously much lower this year. And then recyclable investments and System Fund CapEx, both of which do come back over time, so they are a temporary use of cash in the business only. And we've seen that in the results this year, both of those being a net positive for us. So I think that's all been demonstrated. So what would you have to see? Well, you'd have to see a much higher level of openings. So more key money being deployed. You'd have to see opportunities for us to invest that recyclable money. So on -- a new brand or a really great opportunity to expand one of our new brands might mean that we might buy a hotel or invest in a joint venture or something somewhere. And then you'd have to see more money going out from the System Fund. So that will be the growth and how you could get up to $350 million.
Keith Barr: Excellent. Thanks, Paul. Six Senses. I think let me start by saying first we’re thrilled with the acquisition and the brand and to say I have been pleasantly surprised, bordering on amazed, at the demand for this brand throughout the pandemic. The level of owner engagement to want to be at the high end of luxury, to be in resorts actually felt like it accelerated 2021 versus slowdown. And so the number of inquiries that we have for incredible destinations, great hotels – and these are high fee earning resorts. As you pointed out, you can have an 80-room hotel paying you $1 million a year easily. And so we’re going to continue to look to expand that and accelerate that in the Americas. I mean the history, the legacy of the brand is Asia, and now it’s moved into Europe. And now we’re building that out into the Americas. We truly see this being a global brand and scaling up quite quickly. We think there are plans for potentially 8 or 9 openings this year alone, and that being at a pace to continue to accelerate going forward as we expand our development footprint. So it’s great we get in there with smaller hotels. Some of our other brands can convert smaller hotels as well, which is appropriate, but we want to make sure if we’re in smaller hotels, that they are high-fee-income hotels to – and make sure that we get the value from it.
Operator: The next question comes from Jaafar Mestari at BNP Paribas.
Jaafar Mestari: I've got two, if that's okay. Firstly, just on pricing. I'm curious, in your discussions with owners, do you have a sense of how much of the pricing they've been pushing is opportunistic? The strong demand in some windows, fixed supply, that's here to stay? And in contrast, how much is reactive pricing, passing on dollar cost inflation, and ultimately, if the inflation outlook changes, the second lever possibly goes away? And I think in H1, you said it was largely cost inflation that's evolved. And then on net room openings, I'm just trying to piece together the different time lines and targets. So you're now referencing prepandemic net room openings of 4.8% and 5.6%. But also separately, you're still bringing up the opportunity to do industry leading, which, if I'm correct, prepandemic was a touch higher than that. So from your comments today, are you saying that there's basically 1 more transition year in 2022 and then 2023 could be 4.5%, 5.5% like '18, '19, but then beyond that, from '24, you still want to eventually do 6%, which was the endgame pre-COVID? Would that sequence make sense?
Keith Barr: Great. Well, thank you very much, Jaafar. I think pricing, I think there's a combination of factors going on in pricing. We've done quite a bit in terms of our pricing simplification and our revenue management systems to enable owners to price more aggressively. And not to get too technical, but we've built out a lot of things in the back end to make sure that what happened during the pandemic doesn't negatively impact pricing. So we really make sure we're leveraging our new demand algorithms to make sure we really price aggressively. And so I say there's two aspects to it. In some markets, demand has increased so much. It's not defensive pricing, it's basically fundamental supply and demand. Basically, owners are pricing to maximize the performance in their hotels given what the demand is for those assets. Remember, 50% of our hotels are at or above 2019 levels already. And we've continued to see ADR hold very, very strongly, much more so than anyone ever believed once the pandemic started. There is also some defensive pricing going on where demand hasn't completely returned to some markets, but owners are pricing in order to make sure they're making up for the supply chain impacts and cost inflation, too. So I think there is proactive pricing, and I think there's defensive pricing going on, all of which is helping us maintain ADR and grow ADR, which is really, really a positive for IHG and for our owners.
Paul Edgecliffe-Johnson: And in terms of the question on what our aspirations are going forward around net system size growth, so I mean, we’ve said for some time that we want to be industry leading. And if you go back to 2019, for example, and you look at the openings and then you look at the removals, well, we actually led the industry in terms of openings. Nobody opened as many rooms as us on a percentage basis. We had more removals back then because we hadn’t been through the Holiday Inn and Crowne Plaza program, which going forward is going to take our removals down to 1.5% level. Had we been at that 1.5% level, we would have beaten everybody back in 2019. As we move forward, what we think is that 2022 will look more like 2018, and then going forward, more like 2019 and going forward from there. So it is a component of how many rooms we open and how many rooms we remove. So I think we’re very well placed.
Operator: The next question comes from Tim Barrett at Numis.
Tim Barrett: Just two things, please. Firstly, thinking about the dividend. If I'm right, it's just above $150 million in quantum. Just interested in what you're solving for on that decision and whether it's an EPS payout or more to do with leverage. And second question, forgive me, it's slightly devil's advocate, but on removals, 1.5%, there might be an argument to say there's always going to be a tail. And just really, why would you exclude the Holiday Inn and Crowne Plaza elements from that?
Paul Edgecliffe-Johnson: Thanks, Tim. Well, in terms of the dividend, what we said is that we are basically putting back the 2019 final dividend that we weren’t able to pay because of the pandemic. And we were one of the first companies to say we are going to withdraw this because we had to protect liquidity at the time. Now with the high level of cash flow that we’ve generated this year, $571 million of free cash flow, and coming back, very importantly, to leverage of only 3x net debt-to-EBITDA, we think it’s the right time to reinstate the dividend. And then going forward, we’ll continue to pay dividends and further returns of capital as we have over the last 20 years or so. In terms of the removals, we’re not – just to be clear, we’re not saying there aren’t going to be any Holiday Inn or Crowne Plaza removals going forward. It’s just that they’re going to be at a normal level. So across all our other brands over the last, say, 5 years, it’s been at 1.5%. And so we’re saying that Holiday Inn and Crowne Plaza, we would be removing 1.5% or so. There’ll be some blending across all the brands, but it gets to overall that sort of 1.5%, not that no Holiday Inns and Crowne Plazas are going to be removed going forward.
Operator: The next question comes from Ivor Jones at Peel Hunt.
Ivor Jones : Four quick things. On distribution channels, has anything interesting happened in this period of recovery particularly in relation to OTAs within the mix or just generally in relation to distribution? Secondly, I guess the tail end of the year is less business heavy than the rest of the year. So when do you think through the '22 you'll be able to say more confidently the level to which business is recovering given the change in business practices? When you get to a business-heavy month when you'd be able to make a comparison? Thirdly, just in relation to the contribution of Luxury & Lifestyle growth. Looking out a couple of years, is this going to be a significant driver of additional room nights through the loyalty program? Is 50% of room nights maybe the right number? Or with the luxury branding expanded, you get to 75% and will have a material effect on margin that we should be thinking about? Is that a second order payback on Luxury & Lifestyle? And lastly, Paul, you might have mentioned this already, but if there was a flow-in from System Funds in terms of cash flow in 2021, is there a flowing out in 2022? Or do we get to neutrality in 2022? I didn't quite understand the balance of those flows.
Keith Barr: Well, thank you. I'll talk a little bit about distribution. And candidly, it's still pretty noisy in terms of distribution and where contributions are coming from because the recovery is happening at different rates at different parts of the world. And so in areas where we have seen a full recovery and you're seeing more business travel, you're seeing much more of a normalization to our traditional distribution contributions. In markets where it's been much more leisure oriented, you are seeing an increase in some of the OTAs because, again, those are infrequent leisure customers and you're seeing decreases in things like GDS. But overall, we're beginning to see a normalization back to where we were prepandemic, and we'll have probably more clarity on where distribution lands through 2022 as more things begin to open up. Because again, you'll remember, some markets today are at 2019 levels. We have some markets that are still down 70% to 2019 levels and everywhere in between, too. So there's a lot of noise in distribution. But what was interesting is we saw a lot more coming to the hotels directly, which was an interesting trend. And we saw, again, continued strong loyalty contribution overall. And I think in terms of the business-heavy months, I mean, as spring progresses, business travel picks up. I mean January and February are lighter months. And industry-wide, Omicron has definitely been a bit of a headwind. You can see that in the data in terms of business travel was accelerating into December. Industry-wide, January probably was a bit softer. But we believe come spring, you're going to see business travel begin to normalize on top of that strong leisure travel as well, too. And then at the back end of the year when you get very business heavy, kind of up that September, October, November time frame is when you really see us being back to probably normal levels. In terms of Luxury & Lifestyle, I mean, it's a growing part of our business. It's an incredibly highly lucrative fee income from each asset. It also helps the loyalty program, but they're all interconnected, right? So the investments we're making in loyalty actually make it more appealing to a Luxury & Lifestyle customer as well as a mainstream customer. And so -- and by having more Luxury & Lifestyle hotels, your programs are more attractive as well, too. And so we would expect to see loyalty contribution continue to accelerate. Remember, in the previous years, prepandemic, we raised loyalty contribution 7 points. So we showed that we were strengthening the program throughout. The whole industry saw loyalty contribution fall in '21, and we would expect now a new program in '22, landing that into '23 forward, an acceleration of loyalty contribution in Luxury & Lifestyle and in our mainstream brands as well.
Paul Edgecliffe-Johnson: And in terms of the System Fund and how the cash flows there work, I think the key thing is that we run the System Fund effectively on a cash-neutral basis over time so that some years, there may be a small inflow, in some years there may be a small outflow. 2020, to make sure we were sort of supporting our owners as well as we could, although what was coming in was much reduced, we did continue to spend to invest behind marketing and everything that would put as much income as possible into our owners' hotels. That was the right thing to do. And then some of that flows back to us this year, so there has been an inflow. But broadly, it's net neutral over time.
Ivor Jones: But what do you expect for this year, sorry, Paul?
Paul Edgecliffe-Johnson: Well, it will depend on the pace through the year. So no guidance right now. I think we've sort of caught up on what we saw in the outflows in 2020 in the 2021 numbers. So -- and then going forward, we run it to broadly neutral over time. So if we were to see an inflow in this year, another inflow, then we might spend more in the following year. It's always a little difficult to predict exactly how much money is going to come in and then how much money you're spending on your marketing. But what we're try and, as I say, make sure we're doing is putting anything that's served us back into the System Fund to drive even more demand in the future years.
Operator: The next question comes from Alex Brignall at Redburn.
Alex Brignall: Just two, if I could. On the business travel assumptions, you sort of alluded to the RevPAR expectations for back to normal in 2023. I'm just wondering what the business expectations are within that. I ask because I saw a presentation from AMEX GBT, which is pretty much the biggest business travel agency. They expect business travel to get back to 70% of prepandemic levels. It seems a little different to what you might be forecasting. There's a big difference, obviously, on sort of total office attendance and total workplace attendance, and you're exposed a little bit differently to both. But just your thoughts there would be really helpful. And then on the distribution channel mix, you just made really interesting comments about the hotel direct going up during the pandemic. Could you just talk regardless as to whether it's OTA or your own website? But what's happening to the sort of online/off-line mix because that seems like a bit of a sort of anomaly for the pandemic period? Is it going back to sort of prepandemic trends in terms of moving from offline to online?
Keith Barr: Thanks, Alex. Yes, in terms of business travel assumptions, I think there's a couple of things we have to remem
