InterContinental Hotels Group PLC (IHG) on Q1 2024 Results - Earnings Call Transcript
Operator: Ladies and gentlemen, welcome to the IHG Hotels and Resorts 2024 First Quarter Trading Update Conference Call. I am Darwin, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast.
At this time, it is my pleasure to hand it over to Stuart Ford, Senior VP, Head of Investor Relations. Please go ahead.
Stuart Ford: Thank you. Good morning, everyone, and welcome to the IHG Hotels and Resorts Conference Call, covering the 2024 First Quarter Trading Update. I'm Stuart Ford, Head of Investor Relations at IHG, and I'm joined this morning by Elie Maalouf, our Chief Executive Officer; and Michael Glover, our Chief Financial Officer.
Just to remind listeners on the call that in 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.
For those analysts or institutional investors who are listening via our website, can I remind you that in order to ask questions, you will need to dial-in using the details on Page 3 of this morning's Q1 RNS release. The release, together with the usual supplementary data pack for the first quarter, can be downloaded from the Results and Presentations section under the Investors tab on ihgplc.com.
This morning, we also released a separate announcement regarding changes to System Fund arrangements, which is summarized in the Q1 trading update release. You'll also find that separate full release under the Investors tab on ihgplc.com or by following the link within the trading update release.
Now over to Elie.
Elie Maalouf: Thank you, Stuart, and good morning, everyone. I'd like to start today by congratulating our teams on what has been a very busy and productive start to the year across our business, and which has been another period that has really demonstrated the attractiveness and strength of our globally diverse distribution.
RevPAR continued to grow and on a global basis was up 2.6% on last year. This was driven by both ADR, which was up 2.3%, and occupancy, which was up 0.2 percentage points. In terms of performance by stay occasion, leisure demand remained robust, with global rooms revenue on a comparable hotels basis up 7% on 2023. Group's performance also improved, with revenue up 5%. Business revenue was flat, but that reflects the timing of Easter being in March this year compared to April last year, as the week leading up to Easter always experiences a lull in business travel.
In terms of system growth, we opened more than 6,200 rooms across 46 hotels in the quarter, leading to 5% gross growth year-on-year and 3.4% net growth. The number of rooms opened in the quarter was 11% higher than in 2023, adjusting for the Iberostar rooms, which were being added this time last year. It is worth reminding that we typically experience seasonality in our system growth with the relatively fewer openings and more removals in the first quarter of each calendar year. Year-to-date, net system growth was therefore neutral, and we expect net growth to ramp up through the rest of 2024.
Turning to signings. We added nearly 18,000 rooms into our pipeline in the quarter, which was an increase of 7% on the same period last year. This contributed to the milestone of over 300,000 rooms in the pipeline for the first time, an increase of 6.6% year-on-year. Over 35% of openings and signings were quicker to market conversions, reflecting the breadth and attractiveness of our brands and the benefits to owners of joining IHG's enterprise.
This was further reflected with the major conversion deal we signed a couple of weeks ago. We were delighted to announce an agreement with NOVUM Hospitality, which will double IHG's presence across Germany and add up to 119 hotels or 17,700 rooms over the coming years. This deal boosts confidence in the outlook for our system growth and underlines the attractiveness to owners of our brands and enterprise platform. We expect the agreement to bring significant benefits for IHG and NOVUM Hospitality, including higher brand awareness, increased direct bookings and excellent loyalty engagement.
Germany is one of Europe's largest hotel markets, and so there's strong domestic consumption that IHG will capture. The country also generated the highest number of international [ outbound ] trips globally in 2022, around 100 million, which is a further attraction to this priority market for us. Of course, we also expect the agreement to drive the development of more of our brands across more locations.
And in a separate announcement today, you will also see that we have made changes in our System Fund arrangements, which will further improve economics for our owners and grow ancillary fee streams. This change is consistent with the strategic priorities we shared with you a couple of months back, which drive value for owners through our leading commercial engine and grow ancillary fee revenue and drive margin improvements for IHG as part of our growth algorithm.
In 2024, we expect the change to incrementally add $25 million to IHG's revenue and operating profit from reportable segments. Then in 2025, it should be double that amount, and we'll also grow further as more points are sold and as deferred revenue recognition ramps up. Michael will talk to you through more of the detail on these new System Fund arrangements in a moment after he has reviewed each region for you.
And with that, let me hand it over to Michael.
Michael Glover: Thanks, Elie. Starting with the Americas. RevPAR was down 0.3% year-on-year. The U.S. was down 1.9%. Whereas in aggregate, Canada, Latin America and the Caribbean was up 11.3%. Occupancy in the region was down 1.1 percentage points, though pricing demand remained robust with rate growing by 1.5%. In terms of demand types, group's demand was the strongest with comparable rooms revenue up year-on-year by 5%. Leisure revenue was also ahead by 1%, while business revenue was slightly lower than the first quarter of 2023, down 2%.
For the industry as a whole, this was a quarter with some adverse calendar timing and other seasonal impacts. When we look at the last 8 weeks rolling performance, which obviously smooths out the shift of Easter that impacts not just leisure travel, but also the timing of business travel, our U.S. RevPAR in aggregate over the last 8 weeks was ahead of last year. The quarter also had some other small adverse impact to deal with. For example, the location of the Super Bowl this February compared to last year was less helpful in terms of the geographic distribution of our rooms inventory, and there was also less hotel demand for a combination related to weather events than this time last year.
And if you take our overall performance for the first quarter compared to the U.S. industry, we are very satisfied when we look at it on a weighted change scale basis. Looking ahead, booking trends would indicate a move back into positive RevPAR for the second quarter. In terms of system size, over 3,000 rooms were opened in Q1 in the Americas, an increase of more than 60% versus the same period last year, albeit as we've noted, Q1 is a seasonally small quarter for openings. This included 13 hotels across the Holiday Inn Brand Family as well as openings for avid, Atwell and Garner as we continue to build momentum behind these newer brands.
There were also 2 Kimpton additions, one of which, the Kimpton Todos Santos in Mexico, was an example of a hotel signed and opened in the same quarter, demonstrating the speed in which IHG can deliver to market high-quality conversions to our brands. We signed over 5,000 rooms across the Americas, broadly in line with the first quarter of 2023. It was a great start to the year for our newer mid-scale brands, with 8 avid properties and 9 Garner hotels added to the pipeline. Similarly, the 25 signings across our extended stay brands shows their continued strong appeal to owners.
Moving on now to our Europe, Middle East, Asia and Africa region, where RevPAR was up an impressive 8.9% versus 2023. Pleasingly, this was driven by both pricing and demand, with rate up 4.5% and occupancy up 2.7 percentage points. The dispersion of RevPAR performance across EMEAA continued to narrow. RevPAR was up 17% in Japan, 10% in Australia, 7% in the Middle East and 6% in Continental Europe. RevPAR growth of 2.4% in the U.K. was simply a reflection of the normalized growth in a market, which fully recovered earlier than much of the rest of the EMEAA region. This time last year, RevPAR in the U.K. was already 12%, ahead of 2019 levels. And so now, we are further 2.4% ahead of that.
Just over 1,000 rooms were opened in the quarter, representing growth -- gross year-to-date growth of 0.4% and gross year-on-year growth of 7.2%. Net system growth was a slight decrease of 0.2% in the quarter. We expect to return to net growth as we progress through 2024. 5,400 rooms were signed to the pipeline in the quarter, 4% more than a year earlier. These signings were well dispersed across all our segments, demonstrating IHG's ability to compete and [ win deals ] all through the chain scales. It was great to see the first 3 Garner deals signed as the brand becomes available across the EMEAA region, having only launched in the Americas back in September. And of course, the NOVUM deal will add more than 50 further Garner hotels.
Finally, moving on to Greater China, where RevPAR was up 2.5% year-on-year, driven by occupancy improvement of 0.7 percentage points and rate growth of 1.3%. An increase in international travelers in the quarter contributed to a 7.3% rise in Tier 1 city RevPAR. In Tier 2 to 4 cities, RevPAR was down 2.1% given tougher comparables from the resurgent demand this time last year and outbound leisure travel, particularly to Southeast Asia, has also picked up, which is a benefit we've seen in our EMEAA region. Looking ahead, we expect to continue to see a tailwind through 2024 from the return of more airlift capacity into Greater China.
In terms of system size, over 2,100 rooms were opened in the quarter, driving gross year-to-date growth of 1.2% and gross year-on-year growth of 10.4%. Net system size growth was 0.2% year-to-date, while net year-on-year growth was 7.9%. Development momentum continues to build, and the 7,200 rooms signed in the region is an increase of 22% on the same period last year.
Now to update you on the share buyback, we are currently 30% of the way through the $800 million program announced in February. To date, this has reduced our share count this year by a further 1.4%.
Elie has already noted the new agreement recently announced with NOVUM Hospitality that will double IHG's presence in Germany. Just to add some further color for you, we currently have just under 100 hotels in Germany, and this portfolio of 119 hotels would add a further 111 in Germany, and the remaining 8 are in Australia, the Netherlands and the U.K. The increase in our global system size would be up to 1.9% over the coming years, with the majority of the conversions expected to take place over the next 24 months. IHG is contributing key money capital that will reflect the phased conversion and timing of openings of this major portfolio of hotels, which, of course, includes the European debuts of our Garner and Candlewood Suites brands, which we are very excited about.
And then in terms of fees, IHG will receive franchise fees after the phased conversion of the existing properties and upon the opening of the hotels under development. The [ brief ] fee revenue net of key money amortization once all the hotels [ entered ] our system would be in excess of $10 million a year. Additionally, standard assessments were received into IHG's System Fund, including those to cover the operation of IHG One Rewards and marketing and reservation services.
Finally, to cover off for you the separate announcement regarding the changes to our System Fund arrangements, under the new terms that govern the sharing arrangements with the System Fund, a portion of the revenue from the sale of certain loyalty points and some other ancillary revenues will now be recognized by IHG within our results from reportable segments. Initially, 50% of this will be recognized in 2024, which is expected to deliver an estimated incremental $25 million of both revenue and profit for the year before increasing to 100% from 2025 onwards, which doubles the run rate of this incremental fee stream.
The run rate is expected to further increase in subsequent years as the number of points sold continues to grow and also due to the ramp-up effect of deferred revenue recognition. As analysts and investors revisit their expectations for our fee revenue and operating profit from reportable segments, or EBIT, you'll want to bear this in mind in -- this -- for future uplift. As Elie mentioned, it is important to recognize that the changes we are making are also improving the economics for our owners. We're able to do this because of the successful growth and development of the IHG One Rewards loyalty program and the efficiencies and scale of the System Fund.
For example, the assessments into the [ fund ] meant that the System Fund revenues in 2023 totaled nearly $1.6 billion, which is $330 million or 27% greater than 5 years earlier. IHG's hotel owners benefit from the substantial scale and efficiency of the System Fund, will continue to do so as it further grows and as the overall enterprise achieves new levels of strength. To the immediate benefit of owners and reflecting the efficiencies that are already being achieved, IHG is lowering its standard loyalty assessment that owners pay into the fund and is also increasing the Reward Night reimbursements that owners receive back out of the Fund. Across all the changes being made to the System Fund arrangement, IHG and the IHG Owners Association have worked together to ensure that overall capacity and effectiveness of the fund to invest and spend on behalf of all IHG System, hotels remain strong and that the operation of the fund continues to be on a net nil surplus or deficit basis over the long term.
With that, I'll hand back to Elie for some closing comments.
Elie Maalouf: Thank you, Michael. So to summarize the first quarter, global RevPAR has increased by 2.6% year-on-year, with both occupancy and rate showing further improvement. Gross system growth was 0.7% year-to-date, and net system growth was 3.4% year-on-year. Our newer brands continue to build momentum, including a dozen signings globally for Garner as it accelerates in Americas and secured [indiscernible] in EMEAA. And the progress we have made in securing large conversion deals and delivering ancillary fee streams gives us confidence in our ability to deliver our growth ambitions and drive shareholder value.
As we progress through 2024, we expect to continue advancing the strategic priorities that we have laid out for IHG in order to drive the core components of value creation. As a reminder, these are growing our fee revenues through the combination of RevPAR system size expansion and ancillary fee streams, which in turn will drive further margin accretion. And with our typical strong cash conversion, this allows IHG to both reinvest in the business and to return surplus capital to shareholders.
With that, I will now pass back to the operator to open up the call for your questions.
Operator: [Operator Instructions] The first question comes from the line of Vicki Stern with Barclays.
Vicki Lee: Just wanted to start off on the System Fund changes. So it looks like it's sort of described as a win-win for all, IHG gets more and the owners seem to pay less. So if you could just help us understand sort of who loses here? Is that ultimately lower marketing spend? Where does the difference come from? And with that, how do your owners sort of feel about the initiatives?
Secondly, on that point, you talked about the faster growth from beyond next year. So just any sense of what that $50 million by next year could ramp up at? What pace of growth beyond that? And then the final question was just back on the NOVUM deal. I don't think you've called out exactly how much key money will be involved there. And so just any sort of quantification there? And then, I guess, particularly whether that could lift you above that sort of $200 million CapEx level you talked about for this year?
Elie Maalouf: Okay. I'll -- thank you, Vicki. Let me just start on your first question and second question, also. I'll take part of the third question and turn it over on key money and expectations for that to Michael. First of all, the System Fund, when we made this arrangement to start selling points on the back of IHG One Rewards and the strength of our brands back in the mid-2000s, I think 2008 and 2009, well before my time, the System Fund was a fraction of what it is today. IHG One Rewards haven't grown like it had today. And we always assumed back then, I understand that at some point when the System Fund reaches a certain scale, there will be a change made when the System Fund reached that scale and had all the capabilities that it has today.
Today's System Fund is nearly $1.6 billion. It has grown nearly 40% since 2018. And there's ample capacity to do everything we're talking about and continue the marketing of our brands and continue the effectiveness of our operations as it is. Remember, System Fund grows every year with RevPAR, grows with system size, grows with more ancillaries. And so it's a growing fund. It's not static. It's not a zero-sum game in the way that you might be thinking about it. Second, it is also not an accounting change. It is actual fee stream that is today being recognized in System Fund that is now going to be the P&L. It's not an accounting change of that sort. It is high quality, high margin and growing beyond that.
Our owners are benefiting, as we said, by having higher reimbursement for loyalty nights, lower loyalty assessment, but that's something that we envision doing all the time across all the fees that we charge in the System Fund at some point. When a fee gets -- when System Fund gets a certain scale, the unit cost per hotel is lower, and we are always trying to invest in our owners' value proposition and because of System Funds run at a net nil surplus or deficit, we want to make sure that they're getting the best value for the operation. So there's not a reduction in capability, what the System Fund marketing will do, nor there is somebody winning and therefore, somebody has to be losing because as the System Fund has grown, it's able to do all these things at once. That's the first question.
On the ramp-up, it ramps up for 2 reasons: one, because there is an element of deferred revenue that can only be recognized in future years when the points are consumed. Number two, because the point sales program is very popular for consumers. And people buy more -- have been buying more points over recent years. And as IHG One Rewards gets stronger and as our master brand gets stronger and as our system gets bigger, we anticipate people to continue to buying more points. So that's the growth.
On NOVUM, look, it's a terrific transaction, let's step back. The opportunity to find a portfolio of 100 hotels in a straight franchise deal. It's not a partnership. It's not a distribution agreement. It is an actual franchise, a conversion deal, but to find a portfolio that can convert of this scale is very attractive. It's very competitive, of course, in a high-value market, like Germany, which is a very high -- very large hotel market, but actually not very branded. So we and obviously, other hotel groups are trying to grow our distribution in this high-value market. And we were successful in this given the scale and size and quality of this portfolio and length of these franchise agreements, it was competitive, as I said. So therefore, there was some key money associated. We don't disclose that for commercial and competitive reasons, as I'm sure you understand.
I'll let Michael address how that plays into projections.
Michael Glover: Yes. So as Elie mentioned, obviously, we won't give out the absolute key money number agreed with this. And the key money will be paid out over the time of the period in which the hotel is open. So it will be spread out over the next few years. In terms of our guidance, we did raise the guidance to -- of key money of $150 million to $200 million at the full year results announcement. That was primarily due to the increase in Luxury & Lifestyle properties that we're opening. It's obviously very early in the year now. And so the mix of what opens will change throughout the year. And so we're not changing that guidance as of now, but we will keep it -- keep an eye on it. And obviously, we'll be looking at it as we get to the half year.
Operator: The next question comes from the line of Jamie Rollo with Morgan Stanley.
Jamie Rollo: Three questions, please. First, actually, just sticking with the loyalty changes. Could you just quantify the reduction in the loyalty assessment fee? And also, where does that put you versus the competition in terms of that sort of percentage or even dollar value that you're spending on marketing and so on? Secondly, in terms of just U.S. RevPAR, I appreciate your points about seasonality and some sort of one-off external factors. Just probably fair to say it's been a bit weaker than expected this year, particularly for the mid-scale and economy segments. Why do you think that is? And are there any sort of forward-looking indicators you can give? I think you said you expect Q2 to be positive. So notwithstanding the March, April figures you gave, what else can we hear on the rest of the quarter or year?
And then finally, just again back on NOVUM, I think $10 million was a sort of mature run rate. So it's about just over 0.5% to group fees versus about 2% to group rooms. I guess some of that is the refurb CapEx, but just help us understand that -- to understand that bridge, please a bit more.
Elie Maalouf: Thank you, Jamie. In terms of the reduction, actual reduction, Michael, was...
Michael Glover: 4.75 to 4.55, 20 basis points.
Elie Maalouf: So 20 basis points. If you ask how? I think it's -- we're in a competitive range. I mean, our competition -- our competitors charge varying rates. Some have different rates by brands. Some have different rates by categories. So we think it's still a competitive rate. It does not affect our ability to market our brands whatsoever, if that's your question. This is a different thing. We charge a certain amount and then reimburse hotels when a guest stays at the hotel. So it does not really affect the capacity of the System Fund to do the marketing.
But I mean, looking at -- to go back to your point generally about marketing. We do a certain amount of marketing that's been actually growing over the last few years as the System Fund has grown. You reach a certain point where as the system grows and System Fund grows and we find more efficiencies in the System Fund and our overhead and System Fund does not grow at the same rate, of course, of the -- of room nights and of RevPAR and of rooms and RevPAR that you just have more capacity in there.
In times before, we've actually lowered other fees to owners for other programs that we have, whether the technology programs with other support programs, our revenue management for hire program, we found ways over time that we've not discussed in public, such as this, to lower those fees because the unit cost can come down while the total cost hasn't changed, and there's more capacity in System Fund. So actually lowering fees over time as -- as the system grows and as our system -- as our costs don't grow at the same rate of our revenues is a natural thing to do to our owners. This one is part of this disclosure because of the impact that it has to the P&L. So it is actually a healthy thing to be doing to lowering unit costs as the system grows over time, but does not affect our capacity because we're still spending the same amount in total, and we're still growing the System Fund.
On U.S. RevPAR, look, it's very hard to estimate the impact of Easter. We know it happens every year. It does move every year. It's very hard to estimate exactly how much it's going to be. It probably turned out to be more than some people in the industry expected, some -- what some of the forecasters expected. Now as Michael and Stuart said, April has shown a pickup. So we're pleased with that. I don't know if that's a read across for the rest of the year or not. I think it's a smaller part of the year here in the first quarter. We're pleased with the start that we've had, the projections from the industry for U.S. RevPAR are still for positive growth.
Actually, the U.S. economy is in pretty good shape. GDP is growing, unemployment is low, wage growth and job growth is high in a way that's kind of why the Federal Reserve isn't lowering interest rates as much as people thought. And our group's bookings are pretty strong. I mean we're, at the end of the first quarter, 11% year-over-year in group's booking, which is showing momentum and people wanting to travel for business and for large groups and meetings. We'll see how that plays out for the rest of the year, but projections are still for RevPAR growth for the rest of the year.
On NOVUM and that calculation, the 2% to the 1%, let me turn it over to Michael.
Michael Glover: Yes. So I mean, the -- we do talk about it being in excess of $10 million. This is a typical standard franchise deal that we've got here, typical arrangements, typical to what we would see in -- in Germany in terms of kind of the fees that we get in both on a franchise fee and a System Fund side. It also is important to recognize, remember, these -- 50 of these will be Garner, so in the lower RevPAR ranges and mid-scale ranges. So that affects the total fee take as well from that. So I think that's probably the main drivers of how we get to the key, in excess of $10 million.
Operator: We now have a question from Richard Clarke from Bernstein.
Richard Clarke: I have 3, if I may. Just starting again on the System Fund changes. Just want to understand what was the origin of this. Did the owners want a reduction in their fees, and that's what led to this and you managed to make the -- make weight? Or is it you -- was it IHG wanting the extra revenue for yourselves and had to negotiate this fee cut? Who went first?
Maybe the second question just on churn in Q1. I'm struggling to find a year where Q1 was actually flat for system size. I think you have to go back to maybe 2017. So it looks like higher churn than normal in Q1, few Kimptons left in the U.S., I think 1,200 Holiday Inn Express rooms as well. So anything you'd call out that's just driving higher-than-expected churn and what that might look like at the full year?
And then lastly, quite a big gap between U.S. RevPAR performance and Americas RevPAR performance. Just wondering how much of that is caused by Iberostar? You don't break out a Iberostar RevPAR. Is that going very well for you?
Elie Maalouf: Thank you, Richard. Your last question, U.S. RevPAR versus Americas RevPAR. Let me actually start in inverse here, take the first question. Look, the rest of the Americas did very well. Latin America, Mexico, Caribbean, Canada, they were, on the one hand, later to recover. Those markets are doing very well. Our distribution is well located in either resort or urban areas that are progressing well. You've seen Mexico do very well with the reshoring of manufacturing into the market with a stronger peso. They benefit also from higher oil prices. And so everything is kind of going in Mexico's way in the last 18 months or so, and resorts have been very strong in Mexico. I don't think it's -- Iberostar, by the way, is going very well, but I don't think this is a reflection of just that whatsoever in any different way in Canada did very well for us.
So I think it's actually a testament to having a global diversification, regional diversification, not just across brands, but across regions where we know that there are highs and lows across regions, but we're diversified enough that our distribution attenuates that. But it's not necessarily an Iberostar thing, although Iberostar is going very well.
Let me jump to the first question on your -- the System Fund discussions, and then I'll leave the second question to Michael. We're always in conversations with our Owners Association, our owners. It's a constant thing. We have a formal association. We have a standing board. We have a very engaged dialogue that goes on all the time. Of course, as you would know, Richard, owners are looking -- always looking for lower cost, it's not today or yesterday or tomorrow, it makes sense. They want the highest revenue delivery system, which we believe we deliver at the lowest possible cost always.
And so as I mentioned earlier, I think either Vicki or Jamie, we're always looking for ways to add value to them. And as -- as we gain scale and -- what is the purpose of scale? The purpose of scale is to deliver value to your customers through many times more services, higher-value services. Sometimes it means lower unit cost because if you reach a level of scale, you can actually lower unit cost. And over the years, we've lowered other unit costs that we have not publicized it for. For example, our revenue management for hire program is a self-contained, no surplus or deficit program, one of those nil surplus programs that we offer owners. But we've lowered unit cost in that program over the years as we've gotten more membership into it and more revenue into it, then we use it to fund the services for revenue management for hire that we deliver to owners. But we lower the unit cost as the program grows.
Same thing here. That discussion is always going on with owners on how we can deliver value to them. At the same time, as I said earlier, I think to Vicki, I think it was always envisioned at some point when we created this point sales program, which is separate from credit card, which is separate from other ancillary revenues, but lives off the back of the strength of our brands, of our direct relationship with our customers and IHG One Rewards. As IHG One Rewards has grown, as the System Fund has grown, we always envisioned at some point that this would belong in the P&L when the System Fund would reach a certain capacity. It was our deliberate decision to place these revenues and System Fund way back when, what is much smaller.
But scale means that when you are bigger and stronger, you have different choices. And today, we're exercising that choice in agreement with the owners. But it wasn't really sort of this and that kind of discussion. We're always looking to add value to the owners, and we're always looking to use our scale to benefit the growth of our ancillary streams.
Michael Glover: In terms of the kind of system size and the first quarter results, if you look at the kind of average over the last 8 years, we've grown at about 0.2% in those 8 years. And so the first quarter is always the highest for removals and lowest for openings. And so we -- we would still fully expect our removal percentage to be in the 1.5% range as we talked about for the full year. So I wouldn't see anything change there in what we've said. And I think we've also been -- certainly, with the NOVUM deal coming in and some of those coming in this year, we feel confident in being around where our consensus is on system growth. And certainly definitely not below where it is. So you still want to reaffirm that and feel comfortable about where that goes.
Elie Maalouf: I mean, Richard, one other way I'd look at it is, we had a very strong year in signings and openings last year. We came back this first quarter with another 11% increase in openings, 7% increase in signings, pipeline up 6.6%. I think that's pretty good momentum. And by the way, those figures didn't even include the NOVUM deal, which was signed in April, but gives us greater confidence in continuing our growth momentum. I think that's actually a pretty good growth momentum.
Richard Clarke: Makes sense.
Operator: The next question comes from the line of Muneeba Kayani from Bank of America.
Muneeba Kayani: So just a few more on the System Fund changes, please. Can you explain what is the cash impact of this? Is that $50 million fully flowing through to cash? Then secondly, this -- you said it's a portion of the revenue from loyalty points. So can you help us understand what's the portion percentage of the overall? And then as we think about the growth going forward, what drives it? What drives the loyalty points? Is that -- should we be thinking about it as kind of driven by system size or RevPAR, just a framework would be helpful. And then the other question on China performance. The STR data turned negative in April. Can you give a bit more color on what you're seeing in China and your outlook for the rest of the year?
Elie Maalouf: Thank you.
Michael Glover: I'll take -- Elie, if you want, I'll take the first one on the cash impact. We are obviously always getting the cash into the system. But as you know, we try to run the System Fund as a surplus -- nil surplus/deficit, so you were spending that cash. So this is positive cash into our operating cash and because we won't be spending the funds for that, it will be pure EBIT uplift at almost 100% margin. So cash accretive and then EBITDA margin accretive as well.
Elie Maalouf: On the -- yes, the percentage of loyalty points continue on that.
Michael Glover: And then on the percentage of loyalty points, we -- there's multiple programs in which we sell loyalty points. This is one of those. The credit card is another one. We're not giving any guidance on what percentage of the overall sale of what we do for loyalty points today. But this is related to points we sell and promotions we do. For example, if you go on our website, you may see a point in cash opportunity to do a room with where you buy some points and you spend some cash. We do sales on things, like points.com and users go out and buy the points there.
And it's really driven by the increase in our loyalty program and the more loyalty members we have, the more people want to go out and buy those points, and that's why we've seen growth as we've seen growth coincide with the growth in our loyalty program. And certainly, the relaunch of the loyalty program has driven increased number of members, increased engagement with members, that drives also points sales. And so that's kind of how we look at that.
Elie Maalouf: I mean, to your question on why does it grow. It grows because IHG grows its system. We have more hotels. IHG grows its members and IHG One Rewards and it grows its brand portfolio and the strength of the brand portfolio, grows the recognition of its master brand. And therefore, those customers want to be more engaged in the IHG System. They want to stay more with IHG, they want to earn more points with IHG. Sometimes, they want more points before they've earned them to complete a stay or to reach a certain status or because they see a certain sale value on buying those points. It's a bit of a gamification of the points program, and it keeps them engaged in the program.
And so now that they're earning more -- they're earning points through a stay, they're earning points maybe because they're a credit card holder, they're earning points because they're using a credit card to do their shopping, not just staying. And now they may want to buy some points to top it off. And that's where that final piece, that's where those points are coming from. And it's been growing because people are engaging more with IHG and IHG One Rewards. And based on the trend that we've seen over several years, we expect it to continue to keep growing.
On Greater China. Multiple dynamics going on in China. We've seen Tier 1 cities, RevPAR growth over 7%. Tier 2, 3 and 4 not grow in the first quarter, but we've seen growth of outbound travel to Southeast Asia, which we actually benefited from high rates of growth in Vietnam, Thailand, Cambodia, Japan, all the -- Hong Kong, all the adjacent travel markets from China. Whether that continues for the rest of the year, we don't know. I think that Chinese economy had a 5%, 5.2% GDP growth in the first quarter. Clearly, some segments are slower, right?
We know that sectors like residential, real estate, financial sectors are slower. Hospitality sector seems to continue to go forward and grow. Our openings grew 10%. Our signings grew 22%, which to me shows confidence in owners and investors and continued growth in the hospitality market. We also recognize that it makes highs and lows, that it ebbs and flows as other markets seem to do, too. But we're in it for the long term. And we do benefit from Chinese travelers that may not stay in China and go somewhere else. We don't have any prediction for the rest of the year, but we feel good for continued growth in China for this year.
Muneeba Kayani: If I may follow up on the cash question. Just to clarify, so it's adding to your operating cash. So we should be thinking about this as kind of benefiting your net debt position at year-end?
Michael Glover: Yes, absolutely.
Elie Maalouf: Thank you, Muneeba.
Operator: The next question comes from the line of Jaina Mistry from Jefferies.
Jaina Mistry: I have got 3. The first question is around your balance sheet. At the Capital Markets Day or at your full year results, you mentioned you had a potential $500 million of excess cash. We've seen M&A activity pick up, particularly in the Luxury/Lifestyle segment. Are you seeing any compelling opportunities this year? Or do you see potential to return the excess cash to shareholders this year?
Second question is on the U.S. environment. I wondered if you could give us an update on what you're hearing from developers and banks in terms of bank financing conditions, specifically in the U.S. And then my third question, you mentioned earlier about the headwind from the location of the Super Bowl. And I wondered, do you have any plans to accelerate growth in Vegas, specifically, over the next few years?
Elie Maalouf: Thank you, Jaina. I think what we said in February was that we had another $500 million of headroom, which isn't necessarily to have a $500 million of cash laying around, but $500 million of headroom within our debt-to-EBITDA guidance. We don't comment on M&A. You know that we don't. You know that we have said that we're always looking for opportunities that might be strategically accretive, but also financially accretive. We've done some of those before. We -- but don't comment about what could happen in the future. And...
Michael Glover: I would also say on that, Elie, I mean, we did talk about -- that was $500 million if we took net debt-to-EBITDA all the way to 3x. And of course, we've been very clear on our capital allocation policy. Obviously, we invest in the business first. We're going to grow the ordinary dividend, and we're going to return cash back to shareholders. And assuming we don't find any other uses of that through an M&A activity, we will return that cash back to shareholders. As we said last year, we feel like that time -- the best time to do that is at our full year results. I would expect that's when we would really look at that again. So that would be kind of our general guideline on how we would look at that.
Elie Maalouf: Then U.S. environment, U.S. financing development environment. I think it continues to get better, continues to get better. We said in February that it would not be sort of V-shape, and it's not a V-shape. We've seen interest rates sort of stabilize, maybe not go down any further. But I think stability and predictability matters as much as lower rates. The fact that rates are kind of stable in the mid-4s on a 10-year and inflation, it maybe not be going down as much as people thought it might, but it's not going up, but just people visibility and stability also to project their construction cost and to get the financing. We think that's reflected in our pace of signings. It's reflected in the fact that in the first quarter, our construction starts were more than 2x higher than last year.
So it's picking up. It's -- and we think it will continue to pick up. We're optimistic about that. But it's going to be sort of a build. It's not going to be a V-shaped inflection. Meanwhile, conversions continue to go pretty well. We've had a very good start with Garner and not just in the U.S., but we're very pleased to see Garner catch on quickly. We announced deals in Japan and in Germany. We've made it available in Mexico and in Canada, and I think you'll see the pace of the brand continue. I think it will be both. New development will continue to improve, and conversions will continue to improve.
Regarding Las Vegas, look, we're always looking to grow our distribution in key markets. We don't have anything to announce right now, but our developers, our teams are always looking to add. And I mean, as we speak, I'm sure we have hotels that are entering the pipeline and are being planned in Las Vegas. I don't have anything specifically to announce on that.
Operator: We now have a question from the line of Jarrod Castle from UBS.
Jarrod Castle: Just in terms of kind of how you approach marketing and related to the system brand. Can you give a very broad picture of where the spend is going to in terms of loyalty points, digital, TV, print, et cetera, just to get an idea of, broadly speaking, where it would be going to? I know it's probably different by market as well, but any comments you can say on that.
Secondly, just in terms of construction cost inflation, what are you seeing at the moment and the ability to undertake construction on time, are there any supply chain issues? And then just something notable about the U.S., I mean, we've seen occupancy falling for many months now, but pricing still seems to be pretty buoyant in general. So I mean how long do you think this can continue? Or is it just better revenue management systems in the industry and it's not -- it potentially doesn't lead to pricing under material pressure.
Elie Maalouf: Sure. the scope of our marketing activities is vast. It's vast. It's powerful. It's highly sophisticated. Sure. It's the traditional media that you mentioned, TV, airport, airplane, radio all those things, but it's way beyond that. Our digital marketing, our social marketing, our earned and paid media marketing on social and digital is very powerful. Our partnerships and alliances, whether that's sports partnerships and whether it's sponsorships have been growing.
I think you see IHG hotels and resorts everywhere you travel, every sport you watch, whether it's U.S. Soccer, whether it's lead sponsor of Major League Soccer, whether it's rugby here in Europe, whether it's U.S. Tennis Open, and you see it in every major airport around the world on many airlines today and China were the sponsor line on airlines. I mean it's really -- our marketing has actually expanded significantly over the last 2 or 3 years, much more than it used to be.
And that was a deliberate strategy, and we've talked about that strategy, which was, first, we were going to grow and fill out our Luxury/Lifestyle portfolio. Second, we were going to relaunch IHG One Rewards, the app. And then we're going to market the heck out of those through a much larger marketing and we're doing that. And that has powered the growth of IHG One Rewards as part of the growth of our system, as part of the growth of our System Fund. So we're going to continue to do that. And there's nothing in today's arrangement change that deters that or defers that whatsoever.
In terms of construction costs, I think they've stabilized in all of our major markets. They're not coming down. I don't get the sensor coming down, but they stabilized. Supply chain issues have not been really an issue for at least a couple of years now. I think those got resolved. In fact, there's quite a bit of excess of supply in many materials today. I think the -- what we have built out is a very robust procurement program that supports our owners to purchase all the way up to HVAC and mechanical supply equipment and at the lowest possible cost and the highest quality. Our construction starts, as I said earlier, are more than 2x higher in the first quarter than a year ago, which is an optimistic sign. That's a U.S. statistic.
And China construction starts continue to move at pace. We signed 22% more hotels in the first quarter, opened 10% more hotels and making good progress in Europe. And I mean, let's not forget that the NOVUM deal that we've announced in Germany comes with a healthy pipeline and a growing pipeline and a commitment with NOVUM that all the future hotels that will open will be part of IHG brand. So there's confidence in that market, too, that we'll continue to open and develop hotels either as conversions or new builds. So it has stabilized and improving...
Michael Glover: So add to that, that this is not a onetime type fit. We are -- always our brand teams, design and engineering, procurement teams are looking at our brand designs continuously. They're looking at ways that we can create value, we value engineer our products, we should -- cost modeling we go through and more cost, and we're looking at where do the guests value the experience in the hotel and we where can we -- where do we dial up costs in those areas and maybe dial down costs in other areas. So we're constantly looking at that cost to build as we move forward and as we continue to evolve the brand.
Elie Maalouf: On your question about ADR in the U.S., can it keep moving up? Well, I mean you have the fundamentals of good demand, strong economy, strong employment, good wage growth and low supply growth. And then add it to something we discussed also in February, which was it isn't necessarily raising individual rates for certain customers, but it's remixing the rates, mixing out lower-rated business because occupancy is still solid and demand is strong and supply is low and mixing in higher business.
I mean I'm sitting today in a hotel here in London, the Kimpton Fitzroy, speaking to [indiscernible], that's exactly what he was talking to me about this morning, which was given the strength that they're seeing from corporate business here in London, he's been mixing out some lower paying customers and mixing in some higher paying customers. Neither is paying more than they were a year ago, we're just taking more of the higher rated business, and that's showing up in higher net ADR. But the solid demand and low supply is still a pretty good tailwind for rate.
Operator: The next question comes from the line of Leo Carrington from Citi.
Leo Carrington: I've got 3 type of questions, please. Firstly, in terms of the System Fund changes, that 20 basis points of assessment fees that owners no longer need to pay. What was that spent previously on? And I suppose is it fair to assume that those fees were not previously currently driving the owner benefits that you were hoping for? And then secondly, on openings, EMEAA openings were quite low even for Q1 is -- is that a timing issue? Or is the European or EMEAA development [ and construction ] outlook not improving as you would have hoped? And how does this tie into expectations for around 4% net unit growth for this year, taking into account NOVUM as well? And then lastly, just thinking forward, I mean, are there any other changes to the System Fund that in future you could implement to either move costs out of the reportable segments, like you did in December 2020 or -- or other changes like those announced today?
Elie Maalouf: Okay. I'll take part of the first question and then turn it over to Michael to follow up on it. I guess I've said earlier, we had an assessment of 4.75%. But that's when our system was much smaller. The loyalty [ program ] was much smaller. And actually, our marketing spend was much smaller. And today, all of those things are much bigger and therefore, there's an opportunity to just lower the unit cost. But there are still more customers, and there are still growing room nights. So the total revenue System Fund doesn't necessarily have to decline. It's just that it is growing more so the unit cost can decline. And remember, it's 4.75% of portfolio. So as rate grows, that grows too. But rate has grown significantly.
And so we find the opportunity to return some value to owners and say, we are covering the cost of the loyalty plan, of the loyalty marketing we have to do and can still give you a little bit of benefit back because the system has grown so much if the unit cost can come down. It is just one of those very classic economic models that as you grow scale, you can lower unit cost while still having a greater aggregate take, that is nobody necessarily loses because we've grown scale to the point where unit costs can come down, but the total volume is the large and the marketing can still continue and everybody wins.
Scale is actually one of those things where it is not a win-lose. Everybody can win when we grow scale properly. And that's what we've done with IHG One Rewards. It was -- it is always the intent to grow scale to a point where everybody can benefit. If conversely, by some unfortunate measure, it was -- it dropped down in half, like it did during the pandemic, then everybody -- then there isn't enough to do for everybody, right? But we've grown so much that there is the opportunity to lower the assessment just a little bit, but also to maintain the marketing of the loyalty plan.
Do you want to add to that, Michael?
Michael Glover: Just a reminder that the 20 basis points is not off the marketing and reservation assessment. That stays the same. This is only on the assessment of Reward Night stay. So when a customer stays with us that is a Rewards member, as Elie mentioned, it is on -- we charge 4.55% now on the full folio of what they stay. And so it's not taking out of the marketing and reservations assessment, it's coming from the loyalty program. And we don't expect to change what we've been able to do there in terms of marketing and targeting loyalty customers going after new enrollments, and we'll continue to see that happen. As Elie said, it's mainly a scale and efficiencies play. And so we feel really good about this. This is actually a great thing for our owners and hopefully, will help us sign more deals in the future.
Elie Maalouf: On your question about EMEAA openings, that is mostly a timing thing. I've traveled throughout the EMEAA a lot since the beginning of the year. I've been in Japan. I've been in Southeast Asia. I just came back from India, been in the Middle East and Saudi Arabia. We see great momentum. I've been in Germany, where we signed the NOVUM deal, which really isn't in these figures, but will clearly boost EMEAA signings and openings for the year and beyond. I'm very comfortable with the EMEAA's outlook for growth, for signings, for openings, for starts, for the whole thing.
I think that addressed your questions, or...
Michael Glover: The System Fund was the only other question. And really with the System Fund and are there other things, we have a really healthy relationship with the IHG Owners Association. We're constantly looking at how can we drive more revenue and benefit for our owners, how can we drive benefit for IHG. It's an evolving thing that we will always look at, just like you would do in any business. We try to grow it, and we try to grow ancillary revenue streams. We've been talking about the credit card, which is out there, and we're going through that process. So this is an evolving area, and we'll continue to look at it and do the right thing for our owners and for IHG.
Leo Carrington: Maybe just the only point not covered, the 4% net unit growth for this year, taking into account Q1 plus NOVUM, is that something you're still happy with?
Elie Maalouf: Absolutely. It certainly doesn't come down after NOVUM deal and the momentum we feel in our markets.
Operator: The next question comes from the line of Alex Brignall with Redburn Atlantic.
Alex Brignall: First one on RevPAR, it sounds like you don't give guidance, and you've explained why, it's very sensible. But it sounds like you're suggesting that consensus could come down by about 1% for the full year. Looking at the second half, your -- the comps for where we were versus 2019 last year, they get significantly harder, probably 600 basis points harder in Q3 than Q1. How does that come into your thinking of what your year-on-year will look like? Because obviously, international markets last year were recovering very rapidly. And so the base is very different in the second half of the year to the first half of the year.
And then the second one is, I guess, it's NOVUM related. It sounds like the free cash flow from NOVUM over the years where hotels are converting is likely to be sort of flat or negative. And other hospitality businesses have done conversion deals recently that were certainly on worse terms than we were used to and quite a lot of them. STR data kind of shows that a decade ago, only 55% of branded hotels were held by the sort of big ones. And now we're over 80%, which obviously is positive, but it means that there's just not very many left to convert. So I wonder what you might say about sort of how much there is left to go for in terms of smaller branded hotels that are converting to your bigger brands and whether that's a risk?
Elie Maalouf: Okay. Thank you, Alex. Let me start with your last question on how much is left to convert. And I'll turn it over to Michael for a question about comps and whatever guidance we don't give, anyway. So I think on conversions, you have to keep in mind that not everything we're converting is necessarily unbranded. So even in a market, like Germany, the NOVUM hotels would show up as branded. Actually, there are brands that they created, and we're very happy with, but they would want to be -- want to be part of a larger system and a stronger system and therefore, chose to rebrand to IHG.
So that doesn't actually show up in your figures as unbranded rooms going to -- going to branded, that's actually branded to branded. And in the U.S., which is high branded, higher branded, about 70% branded to 30% unbranded, a lot of what we convert is actually branded from other brand companies that want to join IHG. So the potential for branding isn't just in the unbranded. I don't know -- then I would say beyond that, in Europe, 70%is still unbranded. And therefore, that's on top of the brand that can move. Therefore, we don't think that the addressable opportunity in conversions is really diminishing.
I think it's -- I think actually, addressable opportunity and conversions stays alive as more branded and unbranded operators and independent operators realize the benefit of a strong global system, like ours. I would tell you when I was at the [ IHIF ] conference in April, where we signed and announced the NOVUM deal, but I was going there anyway, we had multiple meetings with hotel groups and owner groups interested in converting to IHG brands, irrespective of the NOVUM transaction, but probably motivated by it because they're looking at the same economics of having to scale up costs that are very difficult, such as having a loyalty plan, having an app, having a digital distribution, having a global sales force, things they just cannot access, and it tends to be European or pan-European operator.
So this is not a shrinking addressable market. I don't know what you may be referring to in terms of lower value partnerships or transactions. NOVUM is not that. NOVUM is neither a partnership, nor an alliance. It is a franchise deal at full fees, full fees to P&L, full fees to System Fund, every single hotel. Every single hotel is a separate franchise agreement with IHG under an IHG brand. It just happens to be a lot of them at once. That is -- that's what really differentiates it. But it's not different from having signed one franchise agreement, we're just signing a lot of them at once.
In terms of the comps, Michael?
Michael Glover: Yes. In terms of RevPAR, I think, we've said we've done -- consensus is at 3.6. We are at 2.6. We're not necessarily suggesting that consensus needs to come down. I think we just gave an indication of what -- if, for example, it did stay at that 2.6 range, what would be the impact on profit on the fees and in fee sensitivity, it's about $11 million for 1 point in RevPAR. So I think we were just kind of giving that indication. As we move forward, the RevPAR growth in the U.S. and really internationally started to actually slow as you went through the quarters. And you may remember actually the U.S. RevPAR in the fourth quarter was roughly flat. So we think the comparables actually are a little better. Q1 in the U.S. last year was really strong. So -- and then internationally, that will depend on the markets. But in the aggregate, overall, the RevPAR, again, was slow -- RevPAR growth was slowing. So we're not as concerned about the comparables being too tough.
Alex Brignall: I don't ask you to answer that question again, Elie. But I specifically asked about, are you referring to brands converting to brands. Most franchise operators talk about brand, whether their conversions are largely branded. I wasn't referring to independent hotels. I was saying that the mix of brands that is now large brands, like yourself, is now dramatically higher than it was 10 years ago. And so therefore, the amount of small brands that you referred to as weak and therefore, wanting to join a bigger group is now a much smaller pool to fish in than it was, and that being a challenge.
I understand the point about independence, but there aren't that many independents that convert into brands for logical reasons. And then just in terms of the -- I don't want to keep on asking, but on the RevPAR, obviously, the year-on-year numbers in 2023 were much lower than the second half because in 2022, what they were building on was much -- it just seems that not looking at 2019 might just be a little bit narrow, but maybe I'm seeing it wrong.
Elie Maalouf: No, we get your point about the -- just your earlier point about the conversions. I still say that in Europe, there's still a very large unbranded or independent category that is a ripe opportunity for conversions. So we see the opportunity continuing.
All right. Who else do we have? Andre, Deutsche?
Operator: The next question is from the line of Jaafar Mestari from BNP Paribas.
Jaafar Mestari: I've got a couple, if that's okay. On the System Fund economics point, I don't know if you have thought about this, but approximately how much profit do you think the fund would have generated in 2025 if you had just let it run with the current economics and not made these changes, please? And then I'll begin to hear any discussion of how this value will be reflected by geography and then the other side of it, if I'm a median Holiday Inn Express owner, how much better off am I in dollars post this change, please?
And just more broadly, it's just one quarter, but super, super rough rounded numbers. You signed 18,000 rooms in Q1. There's 3 big buckets there. And interestingly, the bucket with all the newer brands, Vignette, voco, HUALUXE, Garner, Atwell and avid, stuff that -- it didn't really exist 6 years ago, that's about 1/3 of your signings, just shy of 6,000 rooms. Is that the right -- is that the desirable moving parts there that all the new stuff is about 1/3, and then the big engine, Holiday Inn Express at about 1/3 and then everything else is about 1/3? Or is there a point where you will either do more in terms of new launches, continue to have additions to that brand roster? Or is there a point on the other hand where you go, well, the Crowne Plaza, et cetera, maybe we do another relaunch, another tweak because it should be a bit higher.
Michael Glover: Maybe I'll start with the first one and then Elie can pick up on maybe the last one there. In terms of what would it have been in 2025, should we have just left it in the System Fund? It's a really complicated calculation because it deals with actuaries and consumption curves. So really, I think the best way to look at this is that the $50 million that we've talked about, we get 50% of what's available this year, and we said that's approximately $25 million. We get 100% of that next year, so you can essentially double that.
But as we've said, that's going to grow as there is consumption of the points. This is the deferred loyalty accounting method. And so that will grow. And that will also depend on consumer behaviors and how they use those points and things of that nature. And then on top of that, it grows just from the growth in the points. So it's really complicated. And so I wouldn't want to try to go back to a non-deferred revenue accounting method. I think the best way to look at it is $50 million and growing.
Elie Maalouf: Then your question about what will that mean. I mean, the improvements we made for owner economics, what will that mean for them at a hotel level individually. It will really vary based on their mix of loyalty customers that they take, what level of occupancy they're reaching. And so there just isn't one specific answer. I think it's going to be very well appreciated and meaningfully incremental to their economics. But it's very hard to estimate it on what a specific [ availability ] because they have very different levels of loyalty contribution, very different rates, very different levels of occupancy to reach where their reimbursement varies based on occupancy. So it's a pretty complicated thing, and it's very bespoke to each hotel.
On your question about the signings across our brands, look, we're very pleased that our new brands launched and acquired represent a meaningful amount of our growth going forward and a growth in our pipeline. We're less interested in maintaining a certain proportion. We're interested in growing them all. We'd be happy if they all continue to grow, but the proportions would shift because we think they all have incredible potential in their markets, where they launched and the markets where they're going to expand to.
I mean we still have -- as we said in February, in China, we still only compete in the mainstream space with 2 brands, Holiday Inn and Holiday Inn Express. But we have 6 mainstream brands globally, including the new one, Garner. So you can anticipate that we're going to have more brands there. That will change the percentage of what gets signed in China. We're happy with that. We're not trying to limit how many we sign each brand.
On Six Senses, it will never be a very high percentage of the rooms that we sign by design. It is uber luxury, very high rates, super exclusive. We're going to keep it like that. We're going to grow the brand, but keep it very disciplined to very high-quality resorts in urban locations. It won't contribute to system size, necessarily contribute to fees substantially into the value of our loyalty plan to the value of our portfolio, but not about the system size. So yes, we're pleased to see our new brands ramp up, but we're not trying to reach a certain proportion of each category.
Jaafar Mestari: And just that point on the $50 million by region for you, if you've already made some estimates there that you're happy to share, please?
Michael Glover: The -- excuse me, say that again, that $50 million...
Jaafar Mestari: The System Fund change, how will it be reflected in each of your reported regions?
Michael Glover: Sorry. It will be in reportable segments into central.
Jaafar Mestari: Yes. And so that -- do you have a split of the $50 million, $25 million contribution in each of your reported regions?
Michael Glover: No, no, no. It's in central.
Jaafar Mestari: Okay. So it's all in the central. Okay. So it's not in the overheads in the region. Okay.
Elie Maalouf: Okay. Thank you for your time today. We really appreciate it. We have no more questions coming in, and the operator will now hand back.
Operator: Thank you. I would now like to turn the conference back over to Elie Maalouf for any closing remarks.
Elie Maalouf: All right. Many thanks to all of you on this call. We just want to remind you that our second quarter 2024 update and financial results for the first half of the year will be announced on Tuesday, the 6th of August. Thank you, and have a great rest of your day.
Operator: Thank you. Ladies and gentlemen, the conference is now over. Thank you for choosing Cho
