InterContinental Hotels Group PLC (IHG) Earnings Call Transcript & Summary

Good morning, everyone, and thank you for joining us for InterContinental Hotels Group's Annual General Meeting. Depending on where you are in the world, COVID-19 restriction on travel and gatherings mean we're easing to convene online today rather than in person. And while this is regrettable, I'm pleased that we are able to offer this webcast and still have a valuable opportunity to speak with our shareholders. While our AGM takes place this morning at IHG's global headquarters in Denham, I'm talking to you from the Intercontinental Marseille in France, and I'm joined virtually by the following members of IHG's Board: Chief Executive Officer, Keith Barr, who is at the AGM in Denham; Chief Financial Officer and Group Head of Corporate Strategy; Paul Edgecliffe-Johnson; Independent Nonexecutive Director and Chair of our Audit Committee, Ian Dyson; Independent Nonexecutive Director and Chair of our Remuneration Committee, Jo Harlow; and Independent Nonexecutive Director and Chair of our Responsible Business Committee, Jill McDonald, all of whom are joining us from their homes. We also have Nicolette Henfrey, IHG's Executive Vice President, General Counsel and Company Secretary joining the AGM in Denham, where we have the appropriate number of people in attendance to satisfy requirements for the meeting and government guidance on gatherings. Due to travel restrictions and time zones, other members of our Board have also joined this meeting remotely. In terms of today's agenda, in a few moments, both myself and our CEO, Keith Barr, will offer some short prerecorded perspective on the last year. And Keith will also share some of the details released in this morning's first quarter trading update. We will then move to a Q&A session where we look forward to answering any questions you may have. Using the messaging option on screen, you are able to submit questions from now until the end of Keith's update. After which point, we will begin answering those questions received today and in the lead up to today's meeting. [Operator Instructions] We may elect to group questions together by theme to ensure we use the time appropriately. Following the conclusion of the Q&A session, Keith will then Chair the formal business of the meeting. Ordinary resolutions 1 to 8 and special resolutions 9 to 12 are as set out in the notice of meeting. With respect to Resolution 7 to amend IHG's borrowing limit, the Board is seeking to replace the existing limit with a new limit of $5 billion. This reflects the group's progression over the last 15 years and is more appropriate in the context of today's asset-like model and the headroom required to support IHG's business model and growth aspiration for future years. It's important to add that IHG's external borrowings shall continue to be managed and controlled in line with our stated aim of a leverage ratio of 2.5 to 3x and our objective of maintaining an investment-grade credit rating. I'm going to pause now for a few minutes while we play the films for both myself and Keith. Ladies and gentlemen, as we reflect on 2020, I would like to offer some thoughts on the year quite like no other for us all, one which undoubtedly presented the biggest challenge our hospitality industry has ever faced. Social distancing measures and travel bans have led to the loss of millions of jobs in travel and tourism around the world. Our hotels have been faced with temporary closure or operating at the lowest occupancy levels we've ever seen, which has created enormous pressure on our owners and their businesses and in turn, on IHG. Our colleagues have had to deal with immense change, working to new cleanliness and operating procedures in our hotels and adjusting to remote working in our offices and reservation centers, still providing the continuity and support our stakeholders depend on. Our guests have turned to us for enhanced safety and flexibility, the communities, our thousands of hotels are a part of, have needed our compassion and support during an extremely challenging time. What's clear is that there can be no preprepared response to such a situation. Instead, organizations have to move with space, principles and purpose. And I'm proud of how IHG continues to deal with the challenges of COVID-19, doing the right thing by our stakeholders and using the strength of our business model and brands to consistently outperform the industry in key markets and segments. All parts of our business have been impacted by the pandemic. And the key role of our Board has been to actively support and constructively challenge decisions being made in respect of people, safety, risk, recovery and finances. Recognizing the need for quick decisions, the Board has worked closely with the Executive Committee to avoid short-term reactions and ensure that as an organization, we continue to act with a long-term perspective that protects the assets and talent needed to continue creating value for IHG and our shareholders. Maintaining that long-term perspective can be incredibly challenging when working against an economic, societal and competitive landscape undergoing so much rapid change. But our focus has been on making choices with transparency and sensitivity that are right for today through the recovery and for the future. Keith will talk you through how we have approached things with respect to different stakeholders. But I know that our colleagues and owners have appreciated the way we have acted. and I believe IHG is very well positioned to emerge from this period a stronger company. This experience has outlined the importance of acting with purpose and on ensuring values and standards do not take a backseat in any circumstance. As we have committed to doing the right thing for our guests, owners, colleagues, community and the world around us, it has given new meaning to our potential to effect positive change, and I highlighted the growing expectation that we must deliver that change in a challenging world. To this end, at the start of this year, we evolved our purpose from true hospitality for everyone to true hospitality for good. Still committed to looking after all those we interact with, but now more focused on the difference we can make to our people, guests, communities and planet. I would like to take this opportunity to thank our Board for their engagement and support during 2020 and also acknowledge the tremendous work of Keith Barr and his team for their resilience, empathy and decisive leadership, alongside the humbling, compassion and commitment of our colleagues around the world. I wanted to now take a moment to recognize a number of changes to our Board during 2020 and Q1 of this year, which are part of our disciplined approach to succession planning and ensuring the Board is best place to collectively support the evolving nature of both IHG's strategy and the world around us. Adding to a rich mix of relevant experience, backgrounds and perspectives around the table, we were delighted to welcome Sharon Rothstein, Graham Allan, Duriya Farooqui, Richard Anderson and Daniela Barone Soares to IHG as independent nonexecutive directors. Each brings significant experience and will strengthen the Board's oversight of the business, including in evolving areas such as sustainability, diversity, equity and inclusion. Equally, I would like to express my sincere thanks and appreciation to Luke Mayhew who retired from the Board in December after 9 years of service. And to Anne Busquet who retires from the Board today after 6 years with IHG. Now turning to shareholder returns. As set out in our preliminary results in February, we did not propose a dividend for 2020 and will only consider future dividends once visibility of the pace and scale of market recovery has improved. We place high importance on our track record of shareholder returns. And we understand the importance of dividends to all of our investors, both institutional and retail. However, in the current environment, it remains necessary to be prudent, protect liquidity and ensure we are investing in the areas that we know will be key to strong recovery and future growth. Throughout this period, we have worked hard to keep our shareholders well informed of our actions and intentions, and that will remain the case as we work toward better times. A huge amount of progress has been made in recent years in ensuring IHG is well placed to grow, whether that be the investments we have made in our brands and expanding our portfolio, digital enhancements in our hotels and systems or how we work with greater speed, flexibility and focus to deliver priorities. To that end, we entered the pandemic in the strongest position this organization has ever been in. And whilst the impact of COVID-19 is there for all to see, the inherent strengths of our business and our reputation provides a strong foundation for us to build on in a recovery. As we do that, we are investing in our business and adjusting operations in ways that position us to meet shifting expectations from guests, owners, colleagues and communities. This work is being guided by refreshed strategy that preserves our business model and growth aspirations, but refine the priorities that guide our actions, ensuring we focus on areas of greatest value to all our stakeholders. As has always been the case for IHG, we are committed to ensuring that how we operate and grow, meets our values to be a responsible and sustainable business. This year, we launched Journey to Tomorrow, a new 10-year plan to help shape the future of responsible travel, together with those who stay, work and partner with us through a series of ambitious targets. So to summarize, the impact of COVID-19 on our industry cannot be underestimated. But as a company, we are confident that the speed of our actions and strength of our business and strategy position us well to recover strongly and continue to grow. The recovery will, of course, take time and it will look different by market, but there are signs of encouragement already that confidence and demand is returning in some parts of the world. Longer term, the prospects for our industry also remains a source of great confidence, not least, population growth, rising wealth in emerging markets and consumer appetite for branded hotels, they can trust for quality, cleanliness and rewarding experiences. I am so proud of the collective effort of everyone at IHG to come through so many challenges. And I would like to finish by sincerely thanking our colleagues, owners and partners for all their efforts. We will continue to work towards a brighter future. With that, I would like to hand over to Keith.

Hello, everyone. As Patrick said, it's been a time of great change and challenge both for IHG and our industry. I wanted to reflect in more detail on our response to the pandemic and on what's needed to succeed in this new environment. Before I do that, we announced our first quarter trading update this morning so let me touch on that first. We saw trading continue to improve in Q1 with RevPAR down 51% versus 2019 and industry outperformance maintained in our key markets. Encouragingly, there was a notable pickup in demand in March, particularly in the U.S. and China, which continued into April. And while the risk of volatility remains for the balance of the year, there's clear evidence from forward booking data of further improvement as we look to the months ahead. If we look at our estate, our net system size is broadly flat year-to-date, standing at around 884,000 rooms. We opened 7,000 rooms in the quarter, but we also exited around 9,000 as we continue to focus on the quality of our estate. Despite obvious trading challenges, we're still seeing healthy development activity with 92 hotels added to our pipeline in Q1 and construction started on 27 new properties. Finally, as part of today's update, we also shared that we have repaid our maturity, the GBP 600 million we borrowed through to the U.K. government's COVID Corporate Financing Facility. Our total available liquidity at the end of March was $2.1 billion. It's perhaps important to say here that we took the U.K. government's financing facility during the very depths of the pandemic as a precautionary measure, and we paid it back in full by the end of the payment term. Looking back on 2020, a 52% fall in global RevPAR and a 75% fall in underlying operating profit tells its own story of the impact of COVID-19. And while we're confident in our ability to recover strongly, we and the industry are having to work our way back from a major period of disruption. Difficult decisions required to balance what's been needed to protect the business while still investing in growth. We quickly adjusted financing arrangements, accessed increased liquidity and protected our cash flow through actions such as cost reductions. And we're still able to generate positive cash flows in what was the most difficult of years. Amid the challenges, there's much to be proud of, outperforming the industry in key markets and segments, opening and signing more hotels, refining how we deliver our strategy and strengthening our relationship with owners as we do everything in our power to support them and their businesses. We've tried to be there when it matters for all our stakeholders. Our hotel colleagues have had to adapt quickly to new operating procedures in an uncertain environment, and we've done everything we can to keep everybody safe, whether that be personal protective equipment, enhanced cleaning protocols, training or screens at the front desks. At a corporate level, a lot of our business is still being run remotely, and we focused on providing flexible working guidance and health and well-being resources, alongside regular communication to help our colleagues deal with the challenge of working in this way. In our communities, whether through our people or partnerships, we have tried to be a part of the solution. Our amazing hotel teams have organized donation drives and food deliveries. We're providing hotel rooms for frontline workers, quarantining travelers and the homeless, and we're supporting the invaluable work of our charity partners. When it comes to our guests, we know that people's appetite to explore, rest or work on their travels hasn't changed, but understandably their confidence on when it's safe to do so has. Flexibility has been key, and so we've waived cancellation fees and introduce things like a Book Now, Pay Later offer, alongside extending points expiry dates and protecting member status for our loyalty members. We also launched a new global Meet With Confidence offer for our corporate guests. which gives corporate brokerage discounts and greater flexibility on cancellations. We've also had to reassure guests that health and safety is top of mind for us. It's always been important. But in response to COVID-19, we took things further by ensuring all hotels deliver an enhanced IHG Way of Clean program, using new science-led protocols and service measures. Having clear standards and checks in place means that wherever in the world a guest stays with us, they can rely on our IHG Clean promise, which is the reassurance that their room meets industry-leading levels of cleanliness. Since we launched the promise, we've seen positive social media reviews on cleanliness increase by more than 30%. And in fact, IHG outperformed our competitors throughout 2020 on a guest satisfaction index. Thinking about our owners. Firstly, it's important to recognize many are small businesses, and so this pandemic has been unimaginably challenging. At the height of the crisis, we had around 1,000 hotels temporarily closed. And while that number is now thankfully, much smaller, all of our hotels are having to adjust to significantly lower occupancy levels and the uncertainty that comes with an unpredictable recovery period. IHG has been able to capture and essentially coordinate COVID-19-related hotel demand, whether that's medical staff, people quarantining or delivery drivers needing accommodation. And we've been able to use data-driven marketing to target and capture leisure demand for our hotels, too. We've also looked at every possible way to help owners with their operations and cash flows, offering fee relief, supplier savings, relaxed brand standards and procurement support. And we remain focused on working on behalf of our owners at the highest level of government, from the White House to number 10, to help secure invaluable stimulus packages for the hospitality industry and advocate for a safe reopening of domestic and international travel. Patrick spoke about the importance of ensuring our actions strengthen our business, both now and into the future, and that's certainly been our guiding principle. Our refreshed strategy is very much designed to deliver industry-leading net rooms growth as the market recovers. And I want to spend just a few minutes talking about our priorities, which plays an even sharper focus on our services, products, returns and reputation. Firstly, building loved and trusted brands for our leisure guests, business customers and our owners. Since 2017, we've added 5 brands to our portfolio and invested in our existing brands to create a much richer, distinctive offer that will help drive growth in high-value industry segments. Earlier this year, we moved to present our brands in 4 collections, luxury and lifestyle; premium; essentials; and suites, alongside refreshed branding for our loyalty program, IHG Rewards. This more intuitive presentation of our portfolio forms part of a refreshed approach to use IHG Hotels and Resorts master brand to more prominently enhance our brand perception, sharpen our marketing and help us capture a greater share of demand. Let me quickly go into some of our brands in a little more detail. First, our newest organic brands, which we are rapidly expanding. Building on our extensive expertise in the mid-scale and upper mid-scale segments, we're excited about the prospects for Avid and Atwell Suites. We expect Avid to be our next brand of scale. Its low cost to build and operate, together with its competitive price point, make it attractive to owners and guests. And its appeal is likely to increase in a constrained economic environment. 24 hotels were opened by the end of last year with almost 90 under construction or with plans approved. During 2020, we also expanded beyond the U.S., with our first opening in Mexico and first signings and ground break in Canada. In the upper midscale segment, our all-suites brand, Atwell Suites, is also gaining momentum. Since launching in late 2019, with 19 signings in vibrant locations and construction underway on our first property in Miami. And in the upscale market, we have our conversion brand, voco, which after a very successful start in EMEA, was launched in both the Americas and Greater China in 2020, the fastest pace at which any of our brands has gone global. It's on track to grow to more than 200 hotels within 10 years. Turning now to our established brands, which are driving the market outperformance we've seen throughout the pandemic. Holiday Inn Express is a key growth engine of our business and the strength of the brand, combined with having more of our hotels in nonurban domestic-focused locations, led to outperforming in the U.S. throughout 2020. We continue to invest in the brand to ensure it remains preferred choice for guests and owners, including fresh public space and guest room designs rolling out in the Americas and across Europe. Moving now to our other established brands where we continue to invest and grow. Our newbuild Holiday Inn prototype, which brings fresh and modern designs to our hotels across the Americas, is in around 90 hotels and delivering improvements in guest satisfaction. And in Europe, our open lobby concept is being adopted in 90% of the estate, generating meaningful improvements in guest satisfaction and increased food and beverage revenues for owners. For Crowne Plaza, we opened 19 properties in the year, including the brand's 100th in Greater China. And we added 27 new signings. We also saw a good increase in guest satisfaction scores at properties that have completed renovations to their public spaces and guest rooms. Holiday Inn and Crowne Plaza are both powerful global brands with significant further growth prospects. But to support this, we know we've got to continue delivering against guest expectations for quality and consistency, which will become even more important with COVID-19. Across the 2 brands, which have a total global estate of around 1,700 hotels, there are around 200 that are currently being reviewed to improve the guest experience. We are working very closely with these hotel owners to implement service or property improvement plans, and we're confident this will support IHG being well placed for the industry recovery and will ensure long-term sustainable growth. Turning to our luxury and lifestyle collection. In the year, we opened 32 hotels and now have a portfolio of more than 430 properties across 5 brands spanning more than 70 countries. We also signed a further 56 into the pipeline, and of these, around 30% were conversions, which represents a growing opportunity across the portfolio. Since we acquired Regent, 4 properties have been signed, taking the pipeline to 6 with a further 7 open. You may recall that we're renovating the InterContinental Hong Kong as part of a rebrand back to Regent. We hope to see this open in 2022 and what will be a flagship property for the brand. We also continue to reinforce the position of InterContinental as the world's largest luxury hotel brand. We've got more than 200 hotels in over 60 countries, and we reentered some key markets such as Italy and Morocco in 2020. Moving now to our next priority, which is really to make sure we're thinking like our guests and owners in everything that we do. This is what will allow us to create the tailored services and solutions needed to increase demand, strengthen guest preference and deliver strong owner returns. I mentioned earlier the steps we've taken around booking flexibility, cleanliness, health and safety for our guests and the steps taken to protect our owners and their businesses. These have been highly effective because of the way we've worked with a more heightened customer-centric mindset, and that's how we will continue to operate going forward. A few more examples are the work we've done to add virtual and hybrid meeting solutions to our Meet With Confidence program and the rollout of our dynamic pricing for reward nights, which can offer loyalty members more value when they're booking outside of peak times, a win for our members and for owners who are seeing bookings increase as a result. Our next priority is all about how we create digital advantage as a company, from our products and prices to the channels in which we operate. A key pillar of this is our investment in our cloud-based hotel technology platform, IHG Concerto, which is allowing us to develop and roll out performance-enhancing tools faster and easier than ever. Attribute pricing, the next phase of our guest reservation system, is expected to be live across the estate by the end of this year and will allow guests to tailor their stay and select add-ons that they value most. Our initial pilots in 2020 really demonstrated to owners the ability to generate maximum value from their hotel's unique attributes, and this will become a powerful tool for IHG. We've also been able to remotely and rapidly deploy technology that can help support safe and secure guest experiences, such as contactless check-in. It's now live in more than 3,000 hotels and receiving great guest feedback. This is in addition to digital checkout, which is already live in 4,000 hotels. The solutions enabled by IHG Concerto play a key role in the experience we create, but they also have drive hotel performance too, such as our owner engagement portal, which we built to provide real-time data on how a hotel is performing and to suggest actions for improvements. It's critical that we continue to focus on maximizing returns in every way we can, and the work we're doing in the digital space is central to that. Our final priority is how we care for our people, communities and planet. We have ambitious growth plans as a company, but equally important to us is how we grow. Our Journey to Tomorrow program draws a chapter of new commitment for IHG over the next decade. Starting with our people. It's crucial that we keep investing in our culture so we support, develop and empower colleagues and also attract new talent into the business. We're committed to driving gender balance and doubling underrepresented groups across our leadership, supporting all colleagues to prioritize their well-being and advancing human rights. In our communities, we want to improve the lives of 30 million people around the world by driving economic and social change through skills training and innovation, supporting our communities when natural disaster strike and collaborating to help those facing food poverty. And with such a global footprint of hotels, It's vital that we work with owners and partners to operate and grow in ways that protect the world around us when it comes to carbon, waste and water. Our new environmental targets include significantly lowering carbon emissions across our hotel estate. And for newbuild hotels, our ambition is that within 3 to 5 years, these will operate at very low or 0 carbon emissions. We also want to help pioneer the transformation to a minimal waste hospitality industry, targeting a reduction of food waste through a prevent, donate and divert plan and circular solutions for major commodity items. In respect of water, we use new tools to reduce the footprint of our hotels and help secure water access to those in communities at greatest risk. We've done some important work in all these areas in recent years, and there's a real energy in the business to go further with these commitments. So to sum it up, it's been a unique and very challenging time, and I want to express my admiration and sincere thanks to all of our colleagues and owners for their unrelenting efforts, which have continued into 2021. Our purpose of true hospitality for good has really shone through during these times, and I couldn't be prouder of everyone in the business. As well as stepping up on the challenge of this pandemic, in many ways, I believe we have strengthened our company, learning how to better prioritize and adapt a pace under enormous pressure, evolving our brands, products and guest experiences, outperforming in key markets and segments and continuing to grow, knowing our industry will recover from this in time. Our owners share that view, as reflected in another 285 hotels opening during 2020 and an average of one new signing almost every day throughout the year. We will need to be patient in this recovery, but with vaccines rolling out, signs of demand returning and strong industry fundamentals unchanged, we have the brands and strategy in place to gain further share in the largest and most attractive markets and segments. To finish, I'd just like to share a very short film on Journey to Tomorrow, which brings together some of the program's core elements that I mentioned a little earlier. Thank you. [Presentation]

We'll now move to the question-and-answer session, and I thank you for submitting questions before today's AGM and during the preceding section. We very much welcome the chance for this engagement and remain committed to open dialogue with our shareholders and other stakeholders. Now I will ask Nicolette Henfrey to please read out the first question. Nicolette?

Thank you, Patrick. Our first pre-submitted question is from [ Colin Williams ]. Why were the AGM details not sent to shareholders at the same time as the annual report distribution?

Thank you, [ Colin ], for the question. The reason is simple. The details were released at a later date. In order to fully consider government guidance and restrictions relating to COVID-19, IHG needed indeed to ensure that its AGM would be compliant with both government restrictions and corporate governance requirements. That explains the delay.

Thanks, Patrick. Our next pre-submitted question is from [ Catherine Williams ]. Please can you tell me why you do not use 100% post-consumer waste paper in your annual report and notice of the Annual General Meeting?

Well, we do use environmentally friendly paper and one which is certified by the Forest Stewardship Council, or FSC. FSC certification is a credible worldwide certification that allows us to guarantee how much of the paper is recycled. And the paper we use for the annual report is free from elemental chlorine and it contains a minimum of 30% of recycled paper. Now our ancillary documents, such as the notice of the meeting, were printed on 1% recycled with uncoated material. Now we'll continue to review the paper we use for the annual report and shareholder communication regularly. And these are better, more friendly alternative, we'll certainly consider them.

Thanks, Patrick. We now have 3 pre-submitted questions from [ Anthony Percy ]. His first question, the size of the annual report keeps increasing and it must cost a fortune to produce. Page 115 onwards could surely be provided separately on demand if required. Could a condensed report be provided to those shareholders who still want a hard copy?

Well, IHG must satisfy numerous regulatory requirements relating to corporate and financial governance. And to be honest, they keep on increasing. We do review the size of the annual report each year against most our regulatory requirements and our best practice. I would suggest that you consider going to our online documentation. That's a different experience. That's a more selective experience and one that is certainly environmentally more friendly.

Thanks, Patrick. The second question from [Anthony Percy ]. It would have been useful for the AGM notice of meeting and chair's later to include a reply card for questions. Is this possible?

Well, I mean, first, recent question by e-mail is clearly more reliable, and also, that's important to us, better for the environment. This being said, our team has been working from home at this for more than a year due to COVID-19 restriction and was not in a position to process questions received by Reply card. So...

Thank you, Patrick. And the last question from [ Anthony Percy ]. When are you resuming dividend payments again? A rough date, please, not a policy statement.

Well, no policy statement, but no rough date either. We have been very clear that we will resume or consider resuming dividends when, first, it is financially responsible to do so; and second, when the pace and scale of the visibility of the market recovery has improved.

Thanks, Patrick. We now have 2 pre-submitted questions from [ Phil Cooper ]. His first question, could you please explain why you redeemed some of the 3.875% bond that was due to mature in November 2022? This was hardly expensive debt, but must have attracted a premium and are therefore expensive to redeem early.

Thank you. Thank you, Phil, for your question. The decision was clearly about managing maturity -- maturities and debt profile. And you will be pleased to know that whilst it came at a cost, exceptional costs, indeed, as you suggest, of some $14 million, we issued in 2020 a euro bond for EUR 500 million at 1.6% swapped into pound sterling to some 2.6%. And the net result of that is, in fact, our average cost of financing has reduced from 3.3% to 3.1%. So a decision to manage maturity that -- and reduce the risk of refinancing because as you know, this bond was maturing in 2022.

Thanks, Patrick. And the second question from [ Phil Cooper ]. Page 60 of the annual report shows that the number of Candlewood Suites hotels fell dramatically by 44 hotels, more than any other brand. However, Page 217 shows occupancy of this brand in 2020 at 61.7%, which is higher than our other brands. We seem to be closing our most successful hotels in the pandemic. Can you help me understand, please?

Sure. Well, the net reduction that you have noted in the number of Candlewood Suites hotel in the Americas region was a result of a single event, which is one of the owner, SBC, transitioned its portfolio of hotels to different brands. And this particular owner removed 1 or 2 hotel from our portfolio. We give you some detail in our report. Of these hotels, 61 were Candlewood Suites. And if I, for the sake of answering your question, eliminate, remove this as we see, exit, then in fact, the brand grew by some 17 hotel in the year. And you're absolutely right to note that Candlewood has been one of our best performer. And we see that in quarter 1 where about half of the signings in America were for our Swiss brand, of which Candlewood is in an important part. Thank you.

Thanks, Patrick. We have a pre-submitted question from CCLA Investment Management. CCLA has the goal of encouraging companies to adopt a best practice approach to modern slavery. CCLA believes that best practice is for companies to proactively find, fix and prevent instances of modern slavery. CCLA thanks IHG for the steps it has already taken to identify risks of modern slavery. In particular, IHG's recent modern slavery statement provided detail on a project carried out in Oman to assess risks related to forced labor. CCLA thanks IHG for its transparency and for publishing details of this work. CCLA would like to know where this work will go next, including any work to rectify problems identified in the Oman project? Whether the IHG will support remedies for victims of forced labor, such as repayment of recruitment fees? Whether IHG will expand this work to other markets? And how IHG will continue to report on this area?

Well, let me answer that by first acknowledging the positive response to our work in this area. Modern slavery and forced labor are very complex issue, but we are committed to helping drive best practices across the industry and in our own organization. We are indeed expanding the work we've done to date across more countries. And that includes our due diligence efforts. The work include a focus on preventing payment of recruitment fees and costs in our hotel as well as providing guidance and setting expectation on the ethical recruitment, employment, contract transparency and third-party labor suppliers. We are committed to ongoing due diligence. And where issues are identified, working with our owners, our hotels and our supplier to remedy them. And that's to -- as to information and communication, we strongly believe that increased transparencies in a way businesses are addressing these issues is important. And we'll continue to provide ongoing detail about the action we are taking in our hotels and do that in our modern slavery statement. Thank you.

Thank you, Patrick. We have also received pre-submitted questions from [ Stuart Jones ]. We've received a number of pre-submitted questions, which relate to the way in which IHG responded to the COVID-19 pandemic, including the cost-saving measures we took to protect the business and particularly the impact of our decisions on our employees.

Well, thank you, Nicolette. As our CEO, Keith Barr, led our response to the COVID-19 pandemic, I will ask him to address these questions. But first, I would like to say that in response to the crisis, IHG's management team had to take a number of difficult decisions, and it did so with the full support of the Board. I'm satisfied that the decisions taken to address short-term challenges, but also to protect the business in the long term, were made with empathy, compassion and in full and strict respect of our legal and social obligations. At no moment during the crisis did our value take a backseat. So with that introduction, Keith, could you provide some details on the themes that have been -- and question raised by Mr. [ Jones ], please? Over to you.

Thank you, Patrick. And looking at the long list of questions, I'm going to try to group them into 4 themes. I think the first is around corporate cost-saving measures as a result of COVID-19. And clearly, as you saw and have seen through our results, the impact of COVID-19 was unparalleled in our lifetime and demand for hotels reach unprecedented levels and really put our business under a significant challenge. We had to introduce a series of cost-cutting measures to give us the financial capacity to manage through the crisis and set ourselves up for success. These steps included things such as restricting travel and discretionary expenditures, reducing our marketing expenditures and also specific steps, reducing executive remuneration. None of these were easy choices, but we were mindful of the impact the decisions would have on all of our stakeholders, particularly our colleagues. But we believe these steps were essential to ensuring that the business came through the crisis intact and was set up for success for the recovery. And as we now look to the recovery, we've evolved our purpose, our master brand and our strategic priorities to take advantage of the growth opportunities that this industry presents for the long term. The next theme, Patrick, was about people impact and colleague support. Now as you can imagine, with regard to our colleagues, 2020 was an incredibly challenging year, and I am so proud of all of our colleagues around the world with the spirit, the determination, the energy they showed in helping us manage through the crisis, and it's really a source of inspiration and pride for all of us. We did have to make some very tough decisions, and I appreciate and understand how tough that was on our colleagues. Our overriding principle was to keep as many people employed for as long as we possibly could. So the early days of the crisis, we didn't move to furloughs in day 1 nor to redundancies. We looked instead at how we could take other measures like reducing salaries and benefits temporarily, and other measures such as putting on hiring freezes on nonbusiness-critical roles. But as the reality of the crisis preceded and the depth of the crisis deepened, we recognize we had to be realistic about our options. 2020 was going to be the worst period of demand in the industry's history. This included the difficult -- the incredibly difficult decisions to reduce some corporate roles. But at the heart of that and making those decisions, we made sure employee well-being was a priority. We provided a range of advice, additional programs and assistance for our colleagues who have been unfortunately impacted by the need to be furloughed or work reduced hours or by consultation and reorganization processes. We communicated regularly with our colleagues whose feedback to our responses has actually been very positive. 94% of our corporate colleagues felt positive about our response to the crisis, and 86% felt we have looked after their well-being throughout the year. The next theme, Patrick, is the impact on our managed and leased U.K. hotel operations. The difficult reality is that a large number of our hotels were closed for an extended time, and there has been a sustained period of lower activity. In fact, some of our hotels are still closed today. We considered all options to avoid, reduce or mitigate redundancies at our hotels. But given the impact on demand and the continued impact on demand, there are some roles where there's no work to be done. So we had to be realistic and look at the proportionate reductions in our workforce. Throughout these reductions, we followed a fair and transparent process, allowing all colleagues to fully participate and remain committed to reemploying as many of our former team members as we can. The final theme, Patrick, is about commitment to diversity, equity, inclusion, and something that I'm personally passionate about. Our commitment to diversity, equity and inclusion is a cornerstone of our culture. It sits at the heart of our purpose of true hospitality for good -- for our guests, for our hotels, for our owners, for our colleagues and for our communities. It's an incredibly powerful thing when a company creates an environment that's truly understanding of others that's fair and unafraid of difference. I'm proud of the many recognitions we've received over the years, but know that we can go further. We are committed to cultivating a diverse and inclusive culture for our colleagues, for our owners and suppliers, and it's at the heart of our long-term journey to tomorrow, responsible business plans, and you saw the target we set out today. So we believe we have the right mix of policies, commitments, programs, and we'll continue to listen to our colleagues and stakeholders to strive to be an even better company going forward. Patrick, those are the questions. Back over to you.

Nicolette, other questions?

Yes. Thank you, Patrick. We're now going to move to questions that we've received from shareholders joining us on the line today. And the first of those questions is from [ Sunil Kumarpal ]. I miss the person-to-person AGM. I hope the company will organize a shareholders' engagement meeting after the lockdown is over and before the next AGM. Can you please add to the company's history of dividend and debt on Page 2? And you talk a lot about diversity in Page 5, but I do not see any nonwhite male nonexecutive director in the Board of Directors and also in the executive committee. Why?

First, [ Sunil ], we equally miss the in-person AGM delivery, and we are committed to continuing and deepening, in fact, our dialogue with shareholders, and we certainly consider your suggestion. As to diversity, you heard just a minute ago, the CEO was really personally committed to inclusion and diversity. But specifically to your question, there are 2 important reviews. One is called the Hampton Alexander-Review, and that's about gender diversity; and the second Parker Review, which is setting targets for ethnic diversity of Board. You'll be pleased to hear that in both cases, we are exceeding the target. We are in the 36% to 38% between the Executive Committee and the Board in terms of gender balance. And as far as ethnic minority in our Board, we have 2 person with the definition of ethnic minority the definition of the Hampton review, which is way above the target set by this review. Now to the third question about the annual report and the debt as well as dividend history, if you go to Page -- in the 200 page, I think 210 towards and towards 250, you will find the information that you are looking for. And it's pretty long. And so whether or not it's appropriate to put that Page 2. We think about it and review that as we plan for next year. But the information is here in a form that you wish that somewhat further away from Page 2, then maybe you wish. Thank you.

Thank you, Patrick. The next question is from [ Paul John Carson ]. Is the reinstatement of the dividend dependent on a particular occupancy percentage is a progressive dividend plan?

I mean, first, to be clear, nothing has changed in terms of policies when it comes to allocation of cash priorities, in terms of allocation that we'll continue to be looking forward, a cash risk business and we'll continue to want to return value to our shareholders through ordinary dividend, but also through other form. So first, progressive dividend, sustainable growth as it is our policy. Nothing changed. As to the occupancy, in fact, there are many factors when we look at the dividend. In this particular case, many factor to consider from liquidity, from covenant and debt situation. But we said also very clearly, and that is what I would call being financially responsible. But also, we need to appreciate and consider the -- as we said, the pace, speed and scale of the market recovery. We're not done with this pandemic. So nothing has changed fundamentally in those policies. But as I said earlier, we'll consider resuming dividend when it is appropriate to do so, and occupancy is only one of the many factor that we'll take into consideration. Thank you.

Thank you, Patrick. Our next question is from [ Philip Clark ]. The System Fund was a net cost for each of the last 3 years. That was fully understandable in 2020. But should that be expected every year?

Well, first, just as a bit of context. The fund, the System Fund is not managed to generate a profit or loss over the long term. And the System Fund is managed for the benefit of the hotel and not for the benefit of IHG. Of course, in-year surpluses or deficit can occur. But if you look over the past couple of years, there's been a series of reason beyond this deficit. The first is a change in accounting. We move to IFRS 15 in 2019, that meant that the accumulated surpluses in the balance sheet had to be going through the P&L. Second, of course, is that with the pandemic, we face both a lot of restructuring in the System Fund, bear in mind that the revenues in the System Fund reduced by more than EUR 600 million. And that could only be partly compensated by the reduction in marketing spending. There were impairments and other costs to take into consideration. And lastly, it is important to understand that there will be plus and minuses in-year, and that it is a long-term perspective, which is important, and that is managed for the hotel and manage neither for surplus nor deficit in the long run. Anything else?

We do. We have a second question from [ Philip Clark ]. Many of us have reluctantly learned to use technology as a means of communication. Business travel will surely be impacted for many years to come as the business traveler is now used to online communication. Individuals will be nervous about travel and businesses will insist their employees minimize travel. How soon do you expect business travel to return to 2019 levels?

Well, that is a very interesting question. That's all about the so-called new normal, and you can have as many replies to these questions as you wish, depending who it's coming from. And maybe the best answer should be the one that will come from our CEO because that's really something that he and his team are clearly looking at very carefully. So Keith, would you want to answer this one?

Thank you, Patrick. I'm not sure anyone has a definitive answer on what the new normal is going to be. But you have to take a step back and think about last year, and we actually saw business travel continued last year. And essential business travel, and that drove our outperformance versus our peers and help drive that. So is business travel structurally impaired, well, we fundamentally don't believe so. We think that human connections and the need to gather are fundamental for society, and we'll see that business travel come back, but it will take time. It will be directly driven by the lifting of government restrictions, the increase in vaccination rates. And we've seen places like in Greater China, where the virus is basically under control, business travel isn't back to normal, but it's definitely trending in that direction, and we're now seeing an increased demand in business travel, too. So we think it will accelerate in the second half of this year and into 2022 and then begin to return to normal in the coming years, too. But we're well positioned with our brands and our portfolio and the markets where we compete to take advantage of it and continue to outperform. Back to you, Patrick.

Thank you, Keith. Do we have any other question, Nicolette?

Patrick, we don't have any further questions. Thank you.

Okay. So thank you, ladies and gentlemen, that now concludes the question-and-answer session. And I would like now to hand over to Keith for the formal business of the meeting, Keith, over to you.

Thank you, Patrick. As I am the director present at the AGM, I will chair the formal business. Ladies and gentlemen, you will find details of the formal business of the meeting set out in the notice of meeting. I confirm that as per the requirements of the company's Articles of Association, I have 2 shareholders here with me, and the meeting escorts, As usual, we will have taken the notice of meeting as read. Resolutions 1 to 8 are ordinary resolutions and 9 to 12 are special resolutions. Because shareholders were unable to be with us today due to government restrictions, we thank them for submitting proxy instructions ahead of the meeting. I can confirm that proxy instructions to the chair of the meeting are voted accordingly and that 2 members of the company physically with me at the meeting have also cast their votes. Thank you. That concludes the formal part of the business. The results of the polls on ordinary resolutions 1 to 8 and special resolutions 9 to 12 will be declared later today and will be announced to the London and New York Stock Exchanges and placed on our company website. With that, I'll hand back to Patrick to close the meeting.

Thank you, Keith. Ladies and gentlemen, that now concludes our meeting. We are delighted to have had so many of you join us remotely. Thank you for taking the time to do so, and please continue to stay safe.