Earnings Call: H2 2014

Feb 17, 2015

Hey, good morning, everyone. Thanks. How are we doing? Yeah. Thanks for joining us today. Welcome to our 2014 full year results presentation. Before I hand over to Paul, I would just like to start with some of the highlights and perspectives on the market. 2014 was an excellent year for IHG, and we delivered a strong financial performance, which Paul will talk about in more detail shortly. We made excellent strategic progress. We acquired Kimpton Hotels & Restaurants, opened the first EVEN Hotels in the U.S., and just last week, opened the first HUALUXE Hotel in China. Alongside this, we developed our more established brands, achieving many growth milestones, which I will talk more about later on. Our disciplined approach to capital allocation saw us return over $1 billion to shareholders in the year. So where is the hospitality industry today, and how is the outlook? As we have seen for many years now, tailwinds for the sector remain very favorable. Demand continues to be driven by global GDP growth, increasing disposable income, demographics, the globalization of travel, and the growing number of outbound travelers from emerging markets. The industry is also becoming increasingly branded, driven by both consumers and the capital markets. This is a backdrop where our strategy and strengths position us well to win in the future, explaining why we have a 13% share of the active pipeline globally, with only a 5% share of existing supply. In our largest market, the U.S., we continue to experience favorable industry dynamics. GDP growth remains strong, driving demand to record levels, and supply growth is still considerably below the long-term average, driving strong RevPAR performance. However, today's macroeconomic environment outside of the U.S. seems to be more uncertain and variable than it has been for some time, with an unfortunate mix of falling oil prices, a strengthening U.S. dollar, heightened potential for a Eurozone crisis, continued terrorist activity across the Middle East, and the specter of a hung parliament in the U.K. Having said that, as we look into 2015, we are confident that we will continue to deliver against our strategy, and the strong momentum in our business positions us well for continuing outperformance. I will now hand over to Paul, who will talk in more detail about our financial performance in 2014, and I will return later to discuss our strategy with a particular focus on our brands and how we are using technology to enhance the customer experience across the guest journey. Paul. Thank you, Richard, and good morning, everyone. We are pleased to report another year of strong financial performance. With growth in fee revenues across each of our four regions as global demand for hotels operating under IHG's brands increased once again. As in previous years, the year-on-year comparability of our total revenue and operating profit are distorted by the impact of owned hotel sales, significant liquidated damages, the performance of managed leases, and foreign exchange movements. I will therefore focus my attention this morning on our underlying performance using constant 2013 exchange rates, as this gives the best explanation of our financial outturn. We have converted our strong fee revenue increases into significant underlying profit growth through careful cost management and our continued focus on concentrating resources into those priority markets where we see high returns and long-term growth opportunity. Nearly 90% of our 2014 room openings were in these locations. I talked last year about our desire to maintain an efficient balance sheet and net debt close the year within our target leverage range, following the special dividend paid in July, with our interest charge increasing accordingly. I will talk more about our capital allocation strategy and debt position later on. Our effective tax rate increased by 2 percentage points to 31%. As I have previously guided, we expect it to remain in the low to mid-30s for the next few years. Average shares outstanding declined following the share consolidation midway through the year and the completion of the share buyback. In aggregate, this enabled us to increase our underlying earnings per share by 12%. Demand growth in almost all of our key locations around the world led to further increases in occupancy rates, which across the year averaged 69.1%, the highest we have ever experienced. Given this level of occupancy, we have increased average rates by 2.7%, largely through optimizing our guest mix, which has driven comparable RevPAR up 6.1%. Growth in developing markets and the impact of hotel ramp up means that our total estate RevPAR is a little lower at 5.5%, particularly due to bringing in lower RevPAR hotels in Asia, Middle East, and Africa, and Greater China. Across the year, net room count increased by 3.4%, with much of this growth driven in the fourth quarter. We opened 41,000 rooms and removed 18,000, representing 2.6% of our opening balance as we continue to focus on optimizing the long-term attractiveness of our brands. In aggregate, our RevPAR and net rooms growth allowed us to increase our fee revenue by nearly $100 million to $1.3 billion. Each of our four regions increased their fee revenues with a particularly strong performance from Greater China, despite the more challenging RevPAR environment we are seeing there. This demonstrates again the merits of being able to deliver growth through both same-store performance and new unit additions. I will now talk through the performance in each of our regions in more detail. Firstly, the Americas, where demand in the U.S. has been at record levels for 46 months in a row. We have capitalized on this to drive occupancy to levels just short of our prior peak in 2006, and to increase rate by a further 3.5%. With this record level of demand in mind, driving the highest possible average rate for our owners through optimizing our revenue management systems at property level is a key focus. In addition to a nearly 8% increase in fee revenues, we saw a strong performance from our small number of remaining owned assets, particularly at Holiday Inn Aruba, following refurbishment, leading to an overall increase in underlying revenue of 10%. Underlying profit was up 8%, with the devaluation of the Venezuelan bolivar, a $3 million headwind, and reported overheads increasing by $12 million, partly due to $4 million of additional development cost driven by our strong signings performance and an unusually high level of large claims in our healthcare scheme. The refurbishment of InterContinental New York Barclay is progressing well, and the hotel is expected to reopen in 2016. We incurred costs of $5 million in relation to our 20% joint venture share of the hotel's operating expenditure, and we expect to incur a similar cost in 2015. Our net rooms growth of 1.9% was our best in the region for five years. With the further strengthening of the U.S. lending market and a high level of investor interest in the hotel sector, we have continued to see strong demand for our brands, both new build and conversion projects. Against this backdrop, we increased our signings by over 10% on last year, and with over 90% of our high-quality pipeline expected to open in the next three years, our growth prospects for the Americas continue to look attractive. I will now talk a little bit more about the strong performance of the Holiday Inn brand family and why it continues to lead the market. You may remember last year I showed you some analysis on the resilience and outperformance of the brand through the cycle, and this has continued into 2014. Holiday Inn Express had the highest share of new build openings of any brand in the industry at 11%. The overall brand family had a 28% share of openings in the upper mid-scale segment, 7% more than its closest competitor. Our focus on quality for Holiday Inn and Holiday Inn Express means that these new openings are consistently averaging up the RevPAR of both brands. For hotels that we have opened since 2009, RevPAR growth has been considerably faster than for the other comparable hotels in both estates. These new hotels represent approximately 20% of our U.S. Holiday Inn brand family and contribute to its significant RevPAR premium to the upper mid-scale segment, currently $5 or over 7%. Strong rate outperformance demonstrates that guests are willing to pay more to stay with a brand that they trust, which in turn delivers superior returns for our owners. Moving on now to Europe, where we have benefited from our long-term disciplined focus on priority markets and key cities, which together contribute 85% of our fee revenue. The improving economy in the U.K. drove high occupancy across the board, with double-digit RevPAR growth in the provinces driven by rate, which still remains well below the prior peak in real terms. Germany benefited from continued growth in domestic economic output and a rise in employment, which allowed us to achieve steady growth in both occupancy and rate. We were encouraged by our signings of 2,300 rooms there, the highest we have ever achieved in this priority market. We have invested in local development resources and deployed recyclable CapEx in what has historically been a difficult market to achieve asset-light growth in, and we are starting to see results from our approach. Russia and the CIS is currently a more challenging market due to the geopolitical and economic situation, including the devaluation of the ruble, but we continue to outperform the industry for what is still a small part of our business. Total underlying profit in Europe increased by 3%, suppressed by the refurbishment of InterContinental Paris Le Grand in the first half and the difficult trading conditions in Russia and the CIS, which are expected to continue this year. We have recently streamlined our mainstream European managed business, which will result in the transfer of most of our U.K. managed hotels to franchise contracts. Around 20 transferred last year, and a further 40 or so will change over in the first half of 2015. The new structure will both bring greater efficiency to our U.K. business and allow us to expand our brands more easily. This will accelerate our growth and drive greater long-term profitability in one of our key priority markets. Moving now to Asia, Middle East, and Africa, our most geographically diverse region, where Japan, Australia, and the Middle East contribute around 65% of our profit, but we see excellent long-term growth opportunities in developing markets such as Indonesia. Our focused development strategy continues to deliver strong growth, with 4,200 room openings in the year, of which over 1,000 rooms opened in both India and Indonesia. In Indonesia, where levels of demand continue to be very encouraging and RevPAR increased by over 9%, we now have a pipeline of nearly 7,000 rooms. Our growth in this market demonstrates the flexibility we have, allowing us to be nimble and switch focus between our priority markets as economies start to mature. Our new openings in EMEA are largely in locations where RevPAR is below the regional average, so they dilute the average RevPAR, and as a result, our total growth was 1.6% below the comparable number. This will continue as we execute against our strategy to grow in these markets for the long term, in support of which we are investing in additional local market development resources. Moving to Greater China, where we continue to lead the industry and are rapidly delivering on our strategy of building a domestic hotel business. Against the backdrop of more muted industry growth, with the Chinese government's austerity measures continuing to impact the industry, we still grew comparable RevPAR, as our brand strength and operational excellence led to industry outperformance of 2.5 percentage points. Total RevPAR decreased by 3.4% due to new openings in lower than average RevPAR markets. Our underlying profit growth is somewhat flattered by a number of individually small, one-off upsides totaling $5 million, which will not repeat in 2015. This was largely counteracted by trading at InterContinental Hong Kong, where the redevelopment around the hotel and local protests affected demand. So whilst effective revenue management maintained occupancy, profit fell by $5 million. The construction work will continue in the medium term, so trading is expected to remain at a reduced level. We signed 16,000 rooms in the year, of which over two-thirds were Holiday Inn brand family hotels, evidence of continued delivery against our strategy to grow our mainstream brands into tier 2 and tier 3 cities. We've established a leading scale position in China, and in 2014, we opened 11,000 new rooms. Our most ever, and more than double that of our nearest international competitor. This helped to drive net rooms growth of 14.1%. While some of our competitors have needed to adopt partnership models in China, we have retained full control over our brands and continue to deliver market-leading rooms growth. We always relate back to the fact that our business is driven by RevPAR and rooms. In China, it's been rooms growth that has driven fee revenue increases over the last five years. Since 2009, nearly 80% of our growth has been driven by new openings. Stronger RevPAR growth will come in the future, when new development slows down and demand continues to expand. But for now, we are continuing to build on our first-mover advantage through adding high-quality units in strong locations across China. While some of these new rooms reduce reported RevPAR growth, they are profit enhancing. To allow us to continue delivering this level of growth, and to recruit and train the required level of staff, we will be investing an additional $5 million into the China managed business from this year. Our scale position in China means that in tier 1 cities, we already have nearly 7,000 more rooms than our nearest international competitor. And we are leading the way in tier 2 and tier 3 cities, where we have the strongest pipeline and the long-term opportunity is greatest. Nearly two-thirds of our Holiday Inn brand family room count is now in these markets. Demand growth in these cities is high, and by 2022, around 80% of the fast-growing Chinese middle class are expected to be in these locations. Whilst we are the biggest international hotel company in the country, we only have a presence in a quarter of these markets. It is worth remembering just how big these cities are. For example, the tier 3 city of Xianyang, with a population of over 5 million, would be one of the 10 largest cities in the U.S. Yet our Crowne Plaza is the first and currently only internationally branded hotel in that city, highlighting the long-term opportunity for new branded rooms in these markets. I will now move on to talk about the progress we have made with increasing our fee margins. Our disciplined approach to expansion, focusing on priority markets, low capital intensity business model, and investing for the future in proportion to growth, continue to allow us to increase our profit margins. The increase in margin was slightly higher than usual in 2014, with growth of 1.5 percentage points, helped by the stronger than expected U.S. RevPAR environment and performance in Greater China, which benefited from the previously mentioned one-off upsides. Through leveraging our scale and focusing on productivity improvements, we intend to continue growing margin over the medium term. However, we will balance this with investing behind critical business capabilities to maximize top-line growth as well. These include development resources to sign more hotel contracts and people to manage the greater scale of our business in higher unit growth markets such as China. Given the recent strengthening of the U.S. dollar and our distribution of revenue and costs, we also expect foreign exchange to be a translation headwind on reported margin. There are more details in the appendices, but I just wanted to flag that the impact of FX translation on our 2014 operating profit was around $9 million, and using current rates, the impact would be a further $7 million. Considering this and our focus on reinvestment, in the next few years, we expect to keep our margin growth more closely aligned with our long-term trend of around one percentage point per annum. You will be familiar with the messages on this slide, I am sure. But I wanted to take the chance to reemphasize our disciplined approach to capital allocation. We remain committed to maintaining an efficient balance sheet with an investment-grade credit rating. We believe this equates to a net debt to EBITDA of roughly 2 to 2.5 times. Having started the year at around 1.5 times, we are now post the Kimpton acquisition at 2.6 times, a level we are comfortable at in current economic conditions. We will continue to reduce the asset intensity of the business. In the fourth quarter, we formally accepted the offer of €330 million for InterContinental Paris Le Grand. The transaction is currently going through EU antitrust approval, and we expect to receive proceeds in the first half of 2015. In line with our usual practice, only when funds have been received will we comment on their use. Our strategic review of other major owned assets is still ongoing. I talked in detail at Interims about how I view our capital expenditure in three distinctive categories: maintenance, capital, and key money, recyclable investments, and system-funded investments. Looking at each category in a little more detail. The largest proportion of capital expenditure will be spent on maintenance and key money, which is expected to total approximately $150 million each year, and in 2014 amounted to $154 million. The need to invest in hotel maintenance will reduce as we sell further owned assets, but we will continue to deploy funds in developing corporate infrastructure and key money to access strategic hotel development opportunities. Our other two CapEx categories both incur gross outflows, but over time, they break even on a net basis. Recyclable investments are used to support new brands and growth into priority markets in instances where we can establish long-term fee revenue. Gross funding is expected to be $50 million to $150 million a year, and in 2014, amounted to $60 million, including $12 million related to The Barclay. Net recyclable CapEx was $12 million after disposals of investments made in previous years. While we expect these investments to even out over time, this type of expenditure is lumpy, making the outflows and inflows difficult to forecast. Gross system fund investments are expected to be approximately $35 million a year, and in 2014, amounted to $57 million gross and $37 million net as we continue to increase our investment in our sales and marketing infrastructure, in particular technology, which Richard will talk more about later. This spend is funded through CapEx, and the system fund then reimburses IHG over time through surplus working capital. In total, in 2014, we made gross investments of $271 million, which was just over $200 million on a net basis. Whilst our medium-term gross CapEx guidance of $350 million remains unchanged, I expect that over time, our net investment will be much closer to our permanent maintenance capital and key money of around $150 million. Our strong underlying results mean that we are proposing growth in the final 2014 ordinary dividend of 11%, which will result in full-year ordinary dividend growth of 10%. This is in line with our consistent sustained growth over the last 10 years and reflects the confidence we have in our business model while remaining very alert to the short-term challenges that exist in some of our markets. To conclude then, I have summarized our 2014 cash flow to reiterate our focus on executing our capital allocation strategy and maximizing returns to shareholders. We generate significant cash from operations, which we then use to invest in the growth of the business. Our gross CapEx was covered over 2 times by our underlying operating cash flow, with our permanently invested maintenance capital and key money covered almost 4 times. Disposal proceeds and a regearing of the balance sheet generated further cash inflows that enabled us to distribute over $1 billion to shareholders last year. And we will continue to maintain this disciplined approach going forward with the aim of striking the right balance between investing for growth and returning funds to shareholders. I will now pass over to Richard, who will talk more about our strategic progress in the year. Thanks, Paul. Okay. Our winning model, combined with a targeted brand portfolio underpinned by disciplined execution, is driving superior returns for IHG shareholders. In the context of the changing macroeconomic environment I talked about earlier, our proven strategy puts us in a position of strength. In 2014, we continued to focus on enhancing our portfolio of preferred brands, as well as investing in technology and the digital elements of the guest journey, which gives us a direct and personal relationship with consumers. This runs across all of our brands, and we've pioneered in this space. I'll return to it later, but first of all, I'll talk about the progress we're making with our brands. I've spoken many times before about the in-depth research we undertook to look at the universe of guest needs and occasions, a vital underpinning that continues to advantage us in the marketplace. Understanding these needs informs how we evolve each brand experience, as well as how we build our portfolio in order to build trusted and long-term relationships with our guests. The acquisition of Kimpton has helped us fill some of the white space in our brand offering, and it caters for a broad and varied range of guest needs with its differentiated boutique offer. It's an excellent fit in our portfolio and perfectly complements our organically developed boutique and lifestyle brands, Hotel Indigo and EVEN Hotels. Last week, we opened our first HUALUXE Hotel, a brand which I'll talk more about shortly. But first, I'd like to cover the momentum behind our more established brands. The Holiday Inn brand family continues to be IHG's engine for growth. Holiday Inn offers the perfect mix of business and pleasure for our comfort-seeking guests, and Holiday Inn Express is the ideal choice for the smart traveler, offering them a great night's rest while helping them to be productive on the go. It's the largest hotel brand family in the world, with the largest pipeline. Considering it's been around for more than 60 years, this demonstrates the enormous power of the brand and highlights the way that we've kept it relevant through the major brand relaunch a few years ago and subsequent innovations. Holiday Inn continues to win coveted awards, including the J.D. Power Award for guest satisfaction for the fourth consecutive year. The brand's universal appeal is demonstrated by the fact that it's the only mainstream brand with a meaningful presence on a global scale. And we're taking both brands into new markets. In the past 3 years, Holiday Inn Express has entered 9 new countries, and last year alone, the brand opened its first hotels in Russia, Nicaragua, and Puerto Rico. We have had similar success with Holiday Inn, with recent openings in Ecuador and Oman, amongst others. The brand family now has nearly 750 open properties outside the U.S. and over 250 in the pipeline. At the same time, we continue to strengthen our position in established markets. In Greater China, for example, we celebrated the opening of the 50th Holiday Inn Express property with a further 50 in the pipeline. The outlook remains strong, with the brand having its best year of signings since 2008. Here are photos of some of our key openings in 2014 in these new markets. Innovation in the guest experience has been a key factor in Holiday Inn's longevity and growth. We successfully rolled out our open lobby concept across 5 countries in Europe and continue to transform our food and beverage experience. This is delivering strong financial performance for our owners with year 1 returns of around 20%. In the U.S., in addition to the open lobby, we are piloting a new restaurant concept, Burger Theory. This is part of a fast-growing specialty burger segment with a bar-centric rustic design. At our initial pilot location in Atlanta, the hotel saw top quartile guest satisfaction scores and a greater than 30% increase in its food and beverage revenue. Following successful trials, this concept is now on offer at 15 hotels and is being rolled out further. We also launched a new branded design solution for Holiday Inn Express in the U.S. and Canada. The first hotel with this new room opened in Salt Lake City just a few weeks ago, and whilst the design is not yet mandatory, 80% of hotels that started renovation projects since the 1st of November have signed up for it. Moving now to InterContinental, our international luxury hotel brand. This is another brand, like Holiday Inn, that has been in existence for over 60 years and remains very relevant to today's guests. At double the size of its nearest competitor, InterContinental has unrivaled scale and delivered another strong year of openings and signings. In 2014, it was voted the world's leading hotel brand in the World Travel Awards for the sixth consecutive year. We opened flagship InterContinental properties in Double Bay, Sydney, and Lisbon, which you can see on this slide, along with artist's impressions of 2 recent landmark signings in the U.S. in high barrier to entry, strong RevPAR markets. We have signed a new luxury property in downtown L.A. with 900 rooms, and when it opens in 2017, it will be the largest InterContinental hotel in the Americas region. Last month, we signed an exciting new project in Washington, D.C., with the same owner as our Willard InterContinental. The Crowne Plaza brand supports ambitious career-focused travelers, and we continue to strengthen the proposition through our brand refresh, which centers around making business travel work for our guests. The brand refresh and repositioning is not a quick process, given third-party ownership of the hotels and the need to schedule and fund capital expenditure. Having said that, Crowne Plaza opened its 400th property in 2014 and continues to have great potential for future growth, with nearly 100 hotels in the pipeline in 25 countries. We added 27 properties to the pipeline last year alone, the majority in priority markets, including 10 in the U.S. The brand refresh helped to drive 10% revenue growth in the Americas, the largest year-on-year increase in the region for the brand since 2006. The refresh is focused on improving the guest experience, specifically when it comes to rooms, food and beverage, and fitness. These initiatives have been rolled out to around 80% of our hotels in the U.S., Canada, and Europe. At our owners conference last November, we unveiled our next generation guest room, an innovative design to meet the changing needs of today's business traveler. The new room introduces a uniquely angled bed design to maximize usable space and insulated wall panels to reduce noise levels and support a great night's sleep, one of the brand's core hallmarks. We're currently trialing the room with guests in Atlanta, where 84% of guests said they think more highly of Crowne Plaza than they did before, and they felt more rested and more productive. An encouraging start. Last week, as I mentioned earlier, we opened our first HUALUXE Hotel out of our pipeline of 24 hotels. The brand was designed by our China team in China to meet the needs of Chinese guests and was based on our extensive market insight, experience, and leadership. It epitomizes the finest elements of China's world-renowned hospitality. The first hotel is located in Yangjiang, a fast-developing business and leisure destination with a population of around 3 million. The property will be the city's first hotel to be run by a global company. The fact that we've not opened the first hotel in a Tier 1 city highlights that the brand has been designed for domestic, not international travelers. The image on this slide is of the second HUALUXE Hotel scheduled to open in the first half in Nanchang, a gateway city in Southeast China with a population of 5 million. The HUALUXE brand has been well-received in the market by owners and potential guests. With a strong pipeline of more than 20 hotels, we're on track with our vision of taking it to 100 cities in Greater China over the next 15 to 20 years. The Chinese outbound market continues to represent a significant and growing opportunity and is expected to reach 150 million travelers by 2020. To capture a greater share of this, we plan to introduce the HUALUXE brand into key international destinations such as London, Paris, and New York over time. Moving now to Hotel Indigo, which was launched 10 years ago and was the first branded boutique among the major hotel companies. It's a pioneering brand that continues to go from strength to strength, with excellent momentum in the U.S., where its RevPAR premium to the industry peer group has grown by 20 percentage points since 2010. Our global expansion has also accelerated with the portfolio of open hotels outside of the U.S. more than tripling in size over the past three years as the brand continues to attract high-quality opportunities in new gateway cities. Some of our key openings and signings from last year are shown here. We opened hotels in distinctive and authentic neighborhoods in Paris and St. Petersburg. In January, we opened our first Hotel Indigo in the Asia Middle East Africa region on Wireless Road in Bangkok. We had our greatest number of signings in seven years, including a new flagship property in Manhattan. With a pipeline of more than 60 hotels, we expect to double the size of the portfolio in the next few years. Moving on now to our acquisition of Kimpton, which closed a few weeks ago. I'm sure you're all familiar with the rationale behind the deal. Just to recap quickly, Kimpton is the largest independent boutique hotel brand in the fastest-growing segment of the industry. Its hotels are in the most attractive cities in the U.S., and combined with Hotel Indigo, we have the world's leading boutique and lifestyle business. In the time since the transaction completed, we've appointed Mike DeFrino, previously the Chief Operating Officer, as Chief Executive Officer, reporting directly to me. We've also retained key members of the senior management team. While still at an early stage, our integration plans are progressing well. Kimpton is an exciting business where the employees and owners have enormous passion for the brand and what it offers to its guests. Kimpton's expertise in operations, design, and restaurants will add a lot to our existing business. Conversely, we can accelerate the growth of Kimpton in the U.S. and elsewhere through our owner relationships and revenue generation systems. Making sure that we protect what is unique about Kimpton and ensuring that owners and customers understand that is crucial to its future growth. Here are some images of some of the great properties already in the Kimpton portfolio. As I said earlier, our winning strategy is underpinned by investment in technology platforms. I'll now talk a little bit more about how and why we're focused on digitizing the guest offer to be flexible and maintaining our industry-leading position in what is a rapidly changing landscape. Our approach to technology starts, as ever, with understanding our guests and their needs across the entire guest journey. We know the market, and we have a deep understanding of the current trends that will enhance the guest experience. For example, we look at differing demographics and their needs. Our research, some of which we described in our most recent trends report published last month, tells us that baby boomers and millennials broadly have similar needs when they travel. They stay in many of the same brands but interact differently with their surroundings. Baby boomers are highly interactive. They want to talk to people. Millennials, on the other hand, tend to be much more self-sufficient, using technology to handle the entirety of their stay with minimal human interaction, what we call the invisible traveler. Our priority is to own the stay experience through the strategic use of both on-property and mobile technology. We then look across other areas of the guest journey where we can add real value and have a differentiated consumer-focused proposition. Guest reviews, for example, which impact the dream and share element of the guest journey and are based on feedback from real guests at IHG hotels. IHG has a strong record of innovation and leadership in technology. To continue winning, we have to invest smartly to support our plans across the guest journey. We'll maintain control over intellectual property and customer data but partner or outsource where appropriate. We see four key trends in the always-on world. The convergence of technology at all price points has fueled the global growth in smartphones, which now drive roughly a third of all website traffic. China is already the world's biggest e-commerce market, and here, consumers have pretty much skipped desktop PCs altogether, going straight to mobile. There are now nearly twice as many smartphone users in China than all Internet users in the U.S. There's an active debate about the level of personalization versus privacy. Smartphones are location-enabled. Whilst this feature can be disabled, many consumers are very willing to give access to personal data for unique tailored benefits. This enables us to personalize many different aspects of the journey depending on who the traveler is and what their needs are. Through access to social media, guests are making travel decisions based on more than just price and value. They're looking to reviews, recommendations, and feedback from other guests as a key driver of the decision process on where to stay and which brands to favor. The Internet of Things is another trend that offers enormous potential. With some 75 billion devices forecast to be Internet-enabled by 2020, there's the ability to transform the in-hotel guest experience. We have a long track record of innovation in this area. This started with our development of the first-ever centralized reservation system, Holidex, and IHG being the first company to offer online bookings. We were also the first in the industry to have an app on all mobile platforms, and we continue to evolve. Our scale supports delivery today and enables the innovation for tomorrow. In 2014, our website alone generated $4 billion of revenue, putting us amongst the top Internet retailers in the U.S. We also have a social media presence in over 200 countries. We're leveraging our scale to invest further in these areas and the systems that underpin delivery. Technology is fundamental to driving superior experiences across the entire guest journey, and we have a clear roadmap to ensure we continue leading the way. To deliver compelling and engaging digital content to our guests, scalable technology foundations need to be in place, which have the flexibility to handle the rapidly evolving trends I've been talking about. This has to be supported by deep data insight and standardized property-level capabilities. This framework gives us the foundation to transform the guest experience and make it more interactive through digital content, which we continue to evolve across all our direct channels to engage with customers and drive revenue contribution. To enable more engagement with our brands at the dream stage of the journey, we have new digital marketing capabilities that allow us to target potential and current guests more effectively. For example, we're utilizing programmatic media buying, which allows us to specify the profile of consumers we want to target and at which stage of their guest journey. Alongside this, we're delivering innovative multi-brand campaigns to our Rewards Club members. Campaigns such as The Big Win included over 1 million automatically tailored offers and utilized specific insight on each guest profile and stay history to drive revenue over $360 million in 2014. We continue to make enhancements in the plan and book stage, and this is delivering results. In the fourth quarter, digital revenue grew by over 13%, materially increasing our direct channel contribution to hotel revenue. Our websites are being updated as we move to responsive brand-led designs that better target specific guest needs. I've already spoken about the consumer movement towards mobile, and with our number 1-rated app, we're perfectly positioned to meet our guests' needs. However, we're not complacent, and we continue to evolve our offering to make it more interactive, particularly during the guest stay, a part of the journey we truly own. In 2014, we standardized on-property hardware across all our U.S. estate, which enabled the launch of mobile check-in and check-out. The service is already live in over 500 hotels and will be rolled out across the rest of the U.S. this year, and then extended globally. It's exclusive to IHG Rewards Club members, strengthening its consumer proposition. We expect this type of offering to constantly evolve, and we're already piloting mobile room key technology that allows guests to completely bypass the front desk when checking into their room. The guest stay goes beyond just the in-hotel experience, so we're delivering mobile solutions that support their broader travel needs. Recently, we launched the IHG Translator, a language tool which allows guests to travel like a local, and as with mobile check-in and out, is a free benefit for our most loyal members. Our continued focus has helped drive our mobile bookings up 50% to just short of $1 billion in 2014, accounting for 18% of our digital delivery. This is boosted by the increasing usage of our app with year-on-year download growth of 80%. There are huge benefits from our ability to drive traffic through our mobile app. Evidence shows that guests that book through this platform become more loyal, and it is the lowest cost channel with no intermediation. To drive even more interaction with these guests, we're piloting beacons in 20 of our hotels in China and expect to launch more broadly in the first half of 2015. Beacons are set up in the lobby and restaurants and allow us to send location-tailored notifications and information to our mobile app users. We're also rolling out new CRM capabilities which utilize our Rewards Club members' profiles so we can deliver a more personalized experience at the hotel by understanding our individual guest preferences better. Personalized interaction with the guest is a key part of the future, and these initiatives are just two examples of how we're delivering against this need. Delivering along the entire guest journey is pivotal. To illustrate why our mobile app is so highly rated, I wanted to take a moment to demonstrate how it does just that. We now have a single IHG app which consolidates all of our brands into one place and provides a true one-stop shop. We continue to lead the way across the industry due to both the app's range of offerings and reliability. With consumers' desire for ease and efficiency, you can see why it's been so popular. The InterContinental Concierge service provides guests with the ability to explore different destinations with insider tips on the best spots to visit in the city. The innovative search functionality enables quick booking of hotels frequently visited or located nearby, whilst the simple booking engine allows you to mix points and cash and to confirm with one click. Prior to arrival, a guest can check in remotely, indicating when they expect to arrive. When a stay is complete, guests can view their bill digitally before checking out again with a single click. Finally, the feedback portal provides the ability to share reviews with social networks instantly. To recap, IHG is incredibly well-positioned to continue to outperform in an industry that has compelling long-term demand drivers. Over 90% of our operating profit is generated from franchise and management contracts, with around 85% of these fees linked directly to hotel revenues. Rooms growth and RevPAR are both important to us, and we saw our strongest fee revenue growth last year in Greater China, closely followed by the Americas. There's strong momentum in the business, and 2014 was another excellent year of delivering against our clearly defined strategy. Our brands, some of the largest and most preferred in the industry, lie at the heart of this. We acquired Kimpton, continue to innovate with the recent opening of the first HUALUXE and EVEN Hotels, and further developed our established brands. We'll build on our history of firsts and innovation in technology to support our market-leading digital content to meet changing consumer behaviors and sustain our industry-leading position. We've once again demonstrated our commitment to returning funds to shareholders, and we're focused on continuing to do so into the future. Looking into 2015, we face continuing macroeconomic and geopolitical uncertainties but are confident that our strategy for high-quality growth, coupled with the momentum in the business, positions us well for continued strong performance. Thank you. With that, Paul and I'll be happy to take your questions. For those of you listening on the webcast, you also have the opportunity to send your questions in online. All right, now for the fun part, questions. Jamie. Hello, good morning. Jamie Rollo from Morgan Stanley. Thanks. Three questions, please. First, on the net system growth of 3.4%, that's a little above the sort of informal guidance you've been talking about, and you had a very strong fourth quarter for signings. Are you confident enough to suggest that figure might be even higher this year? Secondly, on the net CapEx guidance now, that's quite a big change from $350 million to $150 million. What's given you the confidence you can recycle a couple of hundred million dollars a year? I appreciate it's quite lumpy, but that's quite a big change. Then finally, on the restructuring in the U.K., $45 million exceptional, was that cash? What sort of return are you getting from that? Thank you. Paul? Thanks, Jamie. So in terms of the net system growth, we are much more encouraged by the 3.4% that we achieved this year. That was a combination of 6% openings, so growth, and then a lower level of removals. That level of removals was sort of bang in the center of our guidance of 2%-3% removals a year. So it is a bit lumpy year by year. We saw that in 2013. But if we can keep the removals between 2% and 3%, and if we can achieve the level of signings that we've seen in the last few years, then I think we'll see continued strong progress there. In terms of the net CapEx, we talked at the interims around the buckets and where we spend, and that we have the maintenance and key money. It's really the permanent CapEx in the business, which in aggregate is around $150 million. Then we've got recyclable CapEx, which varies, and last year, because we spent some and then we got some back, it was only $12 million, which is the base we're spending. So that $150 million is the permanent. It may go up in some years to $350 million, but the balance of it we should get back in future years, either through recycling or through the way the system fund depreciation works. It comes back to us as cash. So that's just a timing difference. In terms of the U.K., that is restructuring a contract that we signed when we sold the portfolio in the U.K. back in 2005 for a billion pounds sterling. It is a cash charge. It was a contingent liability at the half year, and I talked about it then. It'll allow us to grow our business in the U.K. more rapidly and to avoid some cost growth that we would otherwise have seen. So we think we'll get a good return on it over time. Can I just follow up on the first one? Did you say in your presentation that 90% of the U.S. pipeline is expected to open in the next three years? Was that of the pipeline or of the construction element? That's of the pipeline. Okay, fine. Thank you. Yeah, Vicky. Morning. Just on Germany, you talked about success on signings. Just curious to know, is that market changing now? Are banks sort of starting to get it in terms of managing franchise contracts, and is that true across anywhere else in Europe? Then just secondly, on the sort of breakdown of OTA share, I think you often give a figure as to how much distribution is going via OTAs. If you could update us there. Thanks. Yeah, just in Germany, obviously, operating in 100 countries, you have got ups and downs and things going on. I think in Germany, the reality is our success there has been about a real focus on how we grow there. You remember a couple of years ago, or three years ago now, we reorganized to create Europe as a standalone region. Part of the objective was that we saw an opportunity which maybe we had not been tackling. So having a team that is very focused on Europe, which does have some different ownership dynamics than some other markets, certainly on the continent where leasing is more prevalent and there is a different group of owners. I think in Germany, we have kickstarted a few hotel developments, and we have worked really hard on working with a different group of owners. So we are really gaining share there on the revenue side, but also on the supply side, by, I think, just tailoring our operations much more effectively. That is really what is behind that. In terms of OTAs, our OTA share is around 13% now, which obviously is significantly less than our own direct bookings and our mobile bookings. But with OTAs, I think our position has always been, if the business is incremental and profitable, that is good business. The hospitality industry has always had intermediaries, whether they are online or offline or wholesalers. So our push in the last couple of years with OTAs has been to get rid of the low-rate business, the opaque business, that is much less profitable, and focus on better quality, higher rate business, which is really what you have seen, which is what has driven up that percentage. It is more about rate than anything else. Okay. Tim. Good morning. Tim Barrett from Nomura. Just on supply, can you talk about what percentage of the pipeline is under construction? That is normally data you give. Industry-wise, do you see any changes in the supply environment this year or next? Then I had a follow-up on the fourth quarter, there was a small slowdown in growth. Did abnormal weather or any one-off issues have any impact for you? Thank you. Okay. Well, I will talk about supply generally, Paul, maybe you can pick up there. I think if we are seeing anything particularly different, no, I do not think so. I think we have continued to see big supply growth in China and other parts of Asia. But as we have talked about many times before, we do very well when there is a growth in supply because we are actually, as a brand owner, we are driving our presence in the markets. So with 5% of the world's rooms, 13% of supply, that is a very good dynamic for us. In China, RevPAR growth was 1.6%. I think we grew fees 9.5%. So that is exactly talking to why the model works. The bigger issue always for us is demand, not supply. I think in the U.S., there's been obviously a lot of focus on supply growth in the U.S. because it's been so low. I think even now we're forecasting below or we're not forecasting, the industry is forecasting below 2% in 2015. It may tick up a little bit, but again, we've got a greater share of supply than we have of pipeline than we have of existing supply. Again, that's probably a good thing for us. It comes back to us being able to drive our revenue line. Nothing major I don't think we're seeing anywhere. No real change in the proportion that we're seeing under construction as well, and that's been fairly consistent. 45%. Yeah, about 45%, yeah. With around 60% that's financed. That's coming through well. In terms of the quarters and how the hotels were opening, if that was the question, Tim, apologies if I misunderstood. The first quarter of 2014 was a little slower. It was weather impacted in the U.S. in particular. The fourth quarter, we had a really strong quarter of openings. I think we opened more hotels in December in the U.S. than we have for many years. Which again, does come down to are the ground conditions right? Can you get everything done? We're very pleased with the adds in 2014. Okay. I was asking about RevPAR in Q4. I am sorry. Okay. Any- RevPAR in Q4 in the U.S., 7.5% RevPAR growth, which we were pleased with. In China, it was a little weaker, which we traditionally saw through the year, and we have talked about. The tier 1 cities continue to do very well in driving RevPAR. Tier 2 and tier 3, where demand is still very high, I mean, it is double-digit demand, but you have still got a lot of supply coming in. You are going to see more volatility. We have been driving our occupancy up, and we have been outperforming the market, which is a really important thing. Rates still tougher then. We saw very strong growth in our business there because of the number of new units that we have added. Thank you. James. Thanks. James Ainley from Citi. Two questions, please. Can you talk about recent dollar strength and whether you are seeing any appreciable impact on visitation to the U.S. or your U.S. hotels? Moving on to the weaker oil price, again, are you seeing a sort of pickup in domestic travel? Are there any sort of historic correlations you can share with us on the impact of a lower oil price on your business? Sorry, what was the first question, James? On dollar strength and whether there's impact on visitation. Yeah, look, I think Paul talked about some of the dynamics around currency, but I think it's certainly too early for us to see any impact on dollar strength. I think what it'll be, if it affects anything, it'll affect leisure travel later on in the year. We're not seeing that. I think on the oil price, again, it's relatively early days. A lot of travel, business or leisure, is booked in advance, so it does take time for these things to work through. But I think lower oil price on balance will be good for the industry, certainly be good for us. And we know that gas prices impact very quickly the amount people drive in the U.S., and Holiday Inn is primarily a drive-to brand, so lower gas prices will benefit us. We've seen very clearly that as the low-cost airlines have evolved, that certainly for leisure travelers, they sort of tend to have a budget they're going to spend. If they're spending less on air travel, finally, those fuel surcharges come down. They're likely to stay longer or stay in better hotels. I think all of that's going to be beneficial for the industry. Okay. Geoff? Yeah. Hi, Geoff Collyer from Deutsche. Couple of questions. On The Big Win $500 million benefit you claimed, is that substitutional or is that incremental, and how can you prove it? Secondly, a lot of the things that you are doing seem to be benefiting new members. How do non-members find out about the benefits, and therefore, how do you drive up the loyalty program? Two subsidiary questions. Hotel Indigo, 20 percentage point increase in rate. Is that just a young brand feeling more confident and growing to the rate that it should be trading at rather than some spectacular outperformance? Finally, could you just add a bit more color around the health claim comment and what sort of cost that was to you? Okay, thanks. I will take the first two. Paul, maybe you take- Sure The second. Yeah, The Big Win, it was 360 million, I think. We can round it up to 500. That is okay. A lot of that is incremental. I think always with these things, you do your best to evaluate how much is incremental, how much is substitutional. There is always going to be an element of substitutional. Because the way these promotions are run digitally, the data, the ability to look at control groups is better than you would get in a typical ad campaign. So a large part of it is incremental. It is also very beneficial because it drives cross-brand behavior, which is one of the reasons why we relaunched Rewards Club last year. So it has got a double benefit for us on that front. On loyalty, I think as we look at the planks of a commercial strategy around how we drive revenue, which ultimately is what owners are looking for us to do, drive revenue cheaply. Loyalty is a very big plank on that alongside digital, because clearly loyalty just in and of itself is helpful if you are getting a greater share of wallet because you have got guests who are loyal to you. You also get a lot of data, enables you to talk directly to those customers, enables you to drive cross-brand and get a bigger share of occasions. So it is a very big plank of our strategy to drive revenues. Obviously, we encourage the hotels to sign up new guests, so one of the big rewards for front desk staff all around the world in every brand is to sign up new guests into Rewards Club. As you drive things like free Wi-Fi to members, you've got those notices up or you're advertising it drives sign-up. It's been very successful. It works extremely well, and you're seeing it. There's no question it's one of the differentiators for the big brands. With 84 million members, we are the biggest scheme, and it's a massive barrier to entry to those who don't have loyalty schemes because it's very hard to create and replicate them. You see that even with some of the quite big brands out there who just haven't had a scheme very long. It's a real struggle to grow to the scale of ours. Just in terms of your questions on the healthcare scheme and Hotel Indigo. The healthcare scheme operates in the U.S. on a self-insured basis. We collect premiums effectively across the business, across our hotels, and there's actuarially calculated as to what will be enough to meet any costs of claims. This year, we just had a particularly bad run of large claims, which meant that we had a higher than average cost. We do get some small variance year to year. Normally, it's not enough that we'll pull it out, but we have this year because it's a little bit more than normal. In terms of Hotel Indigo, Hotel Indigo's now up at 60 hotels. We are taking it into some of the higher RevPAR markets, so you are seeing some differentiating coming through from that. It's had a strong RevPAR performance, but although it's 10 years old, it's still a relatively new brand growing out. Bernard's point was about premium to the market, not rate. Obviously, rate's a big piece of it. A few years ago, it was below in terms of it's now running at quite a big premium, which is what you see as you scale up a brand, as it starts to benefit from our revenue-generating systems, which I think is what gives us confidence as we launch these new brands or as we take a Kimpton into the portfolio. Simon. Good morning. Simon Larkin from Bank of America Merrill Lynch. A couple of questions from me. First of all, could you update us on the progress in your relationship with Amadeus and how the work you are doing with them links in with your technology presentation this morning? Secondly, could you also just quickly remind me how far through you actually are with the brand refresh of Crowne Plaza and any performance stats you can give us to show us that it is working and the performance gap versus peer group is improving? Thank you. Yeah. Thanks. Yeah, look, on Amadeus, there is nothing new to say on that. What we signed was a sort of cooperation agreement where we sat down together and said, "What might we be able to do? Let us work through that." And that is what we are doing. And these things take time as we look at what their interests are or what we need. And I think we have got a very clear digital strategy. And one of the points I made is that in order to deliver some of these cooler things to guests in the hotel, you have to have a powerful and standardized foundation. And so those are the things that one is looking at. And again, I think I said it, and it is important that we are not a technology company, we are not a software house. Our industry has had a habit, and we have been the same, of doing a lot of development ourselves. So the important thing is you own the intellectual property where it is a competitive advantage. You own the business rules that you use to operate the business. And anything else that is effectively commodity, you partner or outsource. And that is a philosophy that we have around technology. So, we will continue working, and we will see if we can get somewhere. And when we do, we will let you know. But progressing as we would have expected. In terms of Crowne Plaza, I gave a few stats in there. Certainly in terms of revenue, we have 10% revenue growth in that brand in the U.S., was significant in 2014. We are continuing to grow. We are ahead of the market with that brand. We are continuing to sign hotels. So with 400 open and another 100 or so in the pipeline, and significant, I think 27 signings I said in the year. It is continuing to attract both customers and owners. Okay. Ian. Thank you. Ian Rennardson at Jefferies. Just on the internet, I noticed that Hyatt is now giving free internet to absolutely everybody. Is that something you would see as inevitable? If so, how much do you think that might cost you in lost revenue and profit over time? Coupled with that, what do you see as the next sort of big industry area for this sort of amenity creep? Thank you. We already give free internet in a lot of our hotels, in a lot of markets, particularly Holiday Inn and Express, but in some others, too. The reason that we gave free internet to Rewards Club members is, one, to reward them for being a member, and two, as a way to attract more people into the scheme. I do not know Hyatt's particular numbers, but whether you have a much, much smaller scheme, there is not much point in just giving it to scheme members because you do not cover enough of the guests. In terms of what it costs us, it does not cost us anything, obviously, us, because it is paid for by the owner. But actually, more importantly, one of the reasons why the owners were happy and confident to go with us is that it is part of the overall brand offering, and ultimately, that gets reflected in what customers are prepared to pay, how often they come back. Also the way we are moving more and more now, and again, you have got to get the infrastructure right. If you get free basic internet that you can charge for high speed, and you have all seen that, I am sure, in a lot of hotels, that can actually be a revenue generator. People expect it. If you can spend $0.99 on a McDonald's or $3 on a cup of coffee and get free internet, it would be absurd for hotels to think it was going to in any way be different. In terms of the amenity creep, it is not a phrase I like, really. I think much more about enhancing brand values and that sort of thing. But that is how you have to think. Because if it is just something that is purely a cost to owners and does not benefit the guest, then there is no point in doing it. But to the extent that it again enhances the experience and that you can package it within what the brand stands for and charge for it, then it is beneficial. I mean, you could even think about flat screen TVs, right? The last few years, every hotel has gone flat screen TV. You could not isolate an ROI on that, but it is an expectation of customers. That guest insight that I go on about is all about actually understanding what matters and making those choices about where you invest, which is why we are talking so much about digital today and some of the other innovations, the sleep experience, "Me on Sleep." Not an innovation, but actually that is what people are paying for. Thank you. Win. Wyn Ellis from Numis. Just a quick one on, I was looking at the breakdown of net debt by currency, and there has been quite a significant change there. There is a lot more sterling debt. I just wondered any particular reasons for that or what is the thinking behind it? We have got two sterling bonds, which we have had for some years, one 2016 and one a 2022 maturity. It is the balance of that against the drawings that we have got and how they have been swapped that will impact on our net debt. But there is nothing to read into that or anything material. Thanks. It's Tim Ramskill from Credit Suisse. Couple of cost-related questions. In the period just finished, in 2014, outside of the U.S., it looks like most of the overhead lines were flat or maybe slightly down. That's a little different to perhaps what we might have expected. Is there anything specific that explains that? Related to overheads, if we think back to 2009, you had the ability to take quite a lot of cost out of the business. Where we're at now, clearly things are great, but if we were to face a more challenging environment, how much flexibility is there in the cost base at this stage? Just because we've got you and it's topical and it's always interesting to hear what you think, obviously Airbnb remains a potential elephant in the room. I just wonder how you guys think about it, what your potential responses are to that business growing. Okay. Thanks, Tim. Why don't I take the Airbnb one for me and you can pick up on the cost one. Yeah, I think it's clearly topical. It's been a fast-growing business. There's many aspects to it. I think we probably talked about it before, but even in the U.S., one of the most hoteled markets in the world, about 50% of citizens never stay in a hotel. If you talk to the Airbnb guys, what they'll talk about is growing the market and a big chunk of their business, I don't know the number, but a big chunk of it is people who wouldn't normally stay in a hotel. Airbnb is an alternative to staying with your mother-in-law. You don't want to necessarily stay in a hotel, but you'll rent an apartment next door. So there's definitely a growth in the market there. Clearly, they operate with a different sort of customer at quite a low level of the market today. I think if that grows and our customers who are loyal to our brand start seeing that as an opportunity, it's something we would potentially look at. We're extremely good at branding. We're extremely good at distribution. We're extremely good at technology. So if it's a market that's genuine, we'd seriously look at it. I think the discussion in the industry is much more about level playing field, which I think is really appropriate for any industry, whether it's digital versus traditional, or anything else. Of course, the regulation that we're subject to around fire life safety, around building code, around security, all of those things need to be fairly spread across all companies operating, particularly when they put themselves out there as a major player. They talk about. In fact, I got asked on the. I was interviewed this morning on the media, "Airbnb's got 1 million rooms. That's more than your 710,000 rooms." And they put themselves out there as a big company. I think customers expect something, and it's very important that the regulators follow that, particularly something which is becoming more of an issue around zoning and planning, where we're highly restricted from where we can build a hotel, quite rightly. I think the Airbnb hotels, people taking multiple units in the middle of residential areas, which the U.K. government's talking about permitting, which I think is going to cause a big community backlash. We're already seeing that. I think fairness of regulation is important, even though it's still a very small business at the moment, it doesn't really affect us. I think that's an appropriate way forward. Do you want to pick up on cost, Paul? Yes. In terms of the cost base, as you know, Tim, we've been very focused on growing the margin over time, which we've done over the last 11 years by, I guess, now about 13 points. So we're always focused on efficiency. There's a couple of things that we've talked about in recent years that have helped us. Some of the programs around our global technology business, streamlining some of that, which has helped us avoid some costs coming through in that. And behind some of the programs we've done in our global human resources infrastructure, which has given us better management information, which has also helped, as well as just a culture of cost efficiency. So that has helped us, apart from in the U.S., where we had some larger one-off items, have a good result in that area. And we are in 2015, say we're going to put some investment back into the business so we can continue to grow the top line. And look, in terms of comparison to 2009 and what could we do, I guess maybe like investment banks, a lot of our costs are people. We've got the people that we need to grow the business in this current economic climate. But there is an element of variable cost in there because it's people. Yeah. Could I- Time for one more question, I think. Could I just come back on the sort of cost comments for the year just gone? I know there was an exceptional cost related to restructuring the, I think it was HR and technology piece. Has that brought a saving in the year, or is there a saving coming from that going forwards? Well, in the year and going forwards, it's an ongoing program, which has helped us avoid cost increases that we would have otherwise seen, yes. Okay. We have time for one more. Morning, it's Nick Edelman from Goldman Sachs. Just two questions, please, both on China. Firstly, just in terms of RevPAR outlook for 2015, is there anything clear in terms of supply outlook that would suggest that the fourth quarter run rate will continue into 2015? Secondly, in terms of the ongoing RevPAR performance there on a comparable basis, for your own hotel owners, how does that compare with either their expectations or their cost inflation in terms of, is their hotel profitability lower than their plan? Does that, in the near term, affect your signings at all? I think in China, there's no precedent for China in any way. It's hard to, I think, give specific forecasts. I think the important thing for us, though, is you can see, and Paul shared some of the data on our relative outperformance in China, on our level of signings, our level of openings, our RevPAR performance. We've consistently been outperforming the market. I think China may be one of those markets where you get maybe a more polarized view of winners and losers. Because we've been there a long time, we have a great portfolio of owners. We have brands that have been tailored. We have a unique brand we've just launched. We're in an extremely good place to win, and I think you're seeing the results of that. Forecasting quarterly RevPAR in China is. I guess we do it, but it's not something that I think would be our most accurate forecast around the group. I think you have to take a long-term view of China, and you look at infrastructure, GDP growth, creation of the middle class, demographics. On any measure, as we've talked about on many occasions over the years, China is going to be a great hotel market. It's already our second-largest market. In the shorter term, everything we're doing is enabling us to win share, supply and revenue share in that market. I think that's how you need to judge us, and that's what's really been driving our success. Very confident about it, and I do think the 9.5% revenue growth on a 1.6% RevPAR growth really talks to the strength of our business down there. The last point I would make is that the owners there take very long-term views of their investment. They are very sophisticated owners in China these days. Certainly way more than 10 years ago. They look at the business exactly like any other owner. A lot of the hotel developments are necessary parts of mixed use. Unlike Europe and America, where they are very standalone there, they are very rarely standalone. The owners look at them as a different dynamic. Fundamentally, they want to make money, and that is why they come to IHG rather than to anybody else. Anything add on China? Go on China. No. That is great. Just in terms of the question on expectations of owners and around cost increases. I think that the RevPAR in the U.S. certainly was higher than I think most owners expected going into 2014, particularly in the leisure segment. So I think there was positive news for them on the revenue side. In terms of costs, the energy costs have come off from where they were. We are not seeing too much people cost increases. So I think most of our owners have had a good year in 2014. That's all. Thank you, everybody. Look forward to next time.