InterContinental Hotels Group PLC

Thank you, Mandy. Good morning, everybody, and thanks for joining us on our first quarter results conference call.

So this is Richard Solomons, Chief Executive of IHG; and Tom Singer, our CFO, is with me today and will join me in answering your questions later. Before that, I'll just make a few remarks on the results and achievements in the first quarter, as well as the trading environment as we see it today.

So we delivered strong performance through the first quarter, with global RevPAR growth of 7% and grew revenues up 6%. Good use of our scale and the efficiency of our business model converted this into underlying operating profit growth of 16%.

These figures are at constant currency and exclude the impact of $10 million of liquidated damages received in quarter 1 2011.

Before I get into the detail of the numbers, I just wanted to give you a little more color on 2 recent changes to IHG's Executive Committee and tell you about our 2 new brand launches. So a few weeks ago, we announced that I've appointed Eric Pearson as Chief Information Officer and Larry Light as Chief Brands Officer.

So Eric's been with IHG for 15 years, and he has a unique mix of experience across a variety of areas, including engineering, emerging technologies and sales and marketing. Now technology is at the core of our business, whether thinking about reservations, the websites or even the guest experience.

It is a competitive advantage for IHG. So an executive with Eric's unique breadth of experience will help to keep us ahead of the game.

And Larry is widely recognized as one of the world's leading marketeers, having served as Global Chief Marketing Officer at McDonald's from 2002 to 2005, as well as working with other high-profile organizations, including Mars, Nissan, 3M and IBM. So with his depth of experience, he's ideally qualified to lead our strategic priority of building preferred brands.

So I'm delighted to welcome Eric and Larry onto the Executive Committee, which I'm now confident is the right team of people to drive high-quality growth for IHG into the future.

Larry's appointment coincided with the launch of our 2 exciting new brands during the quarter, EVEN Hotels in U.S. will meet the large and growing customer demand for healthier travel at a mainstream price point and HUALUXE Hotels and Resorts is the first upscale international hotel brand designed specifically for the Chinese consumer.

We expect the first EVEN Hotel to open in the first half of next year and the first HUALUXE Hotel to be open by early 2014.

No other hotel company has ever launched 2 new brands on opposite sides of the world in less than 1 month. The fact that IHG has been able to do this demonstrates the benefits of our scale and our depth of capability.

And these brands have been developed off the back of extensive research, which generated clear insight into current and evolving consumer needs and clearly shows our ability to create distinctive and innovative new brands.

So let's look now at our performance in the quarter and taking RevPAR first. In each of our 4 regions, there was a continuation of the positive trends we saw in January through the remainder of the quarter.

Global industry demand for hotel rooms set a new record high for the first quarter. In fact, demand records have now been broken each month for the past consecutive 12 months, and supply growth in many of our major developed hotel markets is close to record lows.

This continues to enable us to push room rates, which we grew 3.3% for the group in the quarter. This marks our seventh successive quarter of rate growth with 0.5 percentage point improvement between the last 2 quarters, demonstrating both the sophistication of our revenue management systems and the strength of our brands.

Greater China continues to deliver the strongest growth with RevPAR up almost 12%. The negative impact of the shift in timing of Chinese New Year on January's results reversed as expected, resulting in significant growth in February.

RevPAR in Asia, Middle East and Africa was up almost 7%. High single-digit RevPAR growth in several key markets, such as Saudi Arabia, the UAE and Southeast Asia, continues to be partially offset by the ongoing political unrest in Egypt and Bahrain, both down 14%.

RevPAR in Japan was up 4% in the quarter, with particular strength in March as we start to lap the weaker comparatives as a result of last year's earthquake and tsunami. Europe RevPAR grew 2.6% despite the continued economic uncertainty in the region as a whole.

And this was driven by relative resilience in our key markets of U.K., France and Germany, all up between 2% and just over 3%.

RevPAR growth in the Americas continues to be strong at 7.7%, with the U.S. at a similar level.

On a total RevPAR basis, which includes the benefit of new hotels and is calculated in the same way as the Smith Travel Research market data, our U.S. RevPAR grew 8.4%, 0.5 percentage point better than the industry.

Our largest brands, Holiday Inn and Holiday Inn Express, continue to drive market outperformance and share gains for IHG and for our franchisees. Their total U.S.

RevPAR grew 8.6% and 9.6%, respectively, in the quarter compared to 8% growth in the industry upper mid-scale segment.

Turning now to our financial performance in the quarter. Franchised hotel revenue grew 8%, driven by 7.2% RevPAR growth and a small increase in the number of rooms.

Operating profit grew 9% at constant currency as continued tight cost control improved franchise margins by 1 percentage point. Managed hotel revenue grew 16%, and operating profit grew 28%, excluding the liquidated damages I mentioned earlier.

After also adjusting for the impact of managed lease hotels and the disposal of a partnership interest last year, revenue grew 5% and operating profit grew 36%. This was due to a combination of good RevPAR growth and an increase in managed rooms, predominantly in Greater China, where our managed estate has grown 14% year-on-year.

In our owned hotels, excluding the impact of hotel disposals last year, revenues grew 2% and operating profit was flat at $16 million. Solid performance across our larger InterContinental hotels was somewhat offset by the impact of the partial closure of our hotel in the Caribbean as part of an exercise to reposition it in its market.

Regional and central costs were slightly impacted in the quarter due to the phasing of certain central costs. For the full year, we remain on track to achieve sustainable growth in our fee-based margins.

Looking at system and pipeline. Our net system size grew 1% year-on-year, with a continued focus on improving the quality of our hotels.

We added 7,100 rooms in the quarter and removed almost 4,300 rooms. This openings figure is broadly in line with the first quarter 2011 when adjusted for the 7,000 rooms added by our first InterContinental Alliance Resorts last year.

Our brands are gaining traction in new markets, with the first Holiday Inn Express opening in Bangkok and a Hotel Indigo opening in Berlin, the first for the brand in InterContinental Europe. Financing for new hotel construction remains constrained in some of our biggest markets, and we don't anticipate much change in the short term.

It's important to remember, though, that IHG's revenues are based on total industry demand, which, as I said earlier, is at a record high. So as long as we grow IHG's RevPAR and system size faster than the industry, we will capture a greater proportion of available revenues, so we will continue to gain market share and outperform.

The strength of our system and our brands does still continue to bring new owners and new deals to IHG. We signed over 9,300 rooms into our development pipeline in the quarter, up on 2011 levels.

Furthermore, over half of these signings were for our Holiday Inn brand family, demonstrating the ongoing success of the relaunch.

We continue to lead the industry with 15% of the active newbuild global hotel pipeline, according to Smith Travel. And our pipeline is high quality, with 75,000 rooms, which is more than 40% now under construction.

Importantly, 30% of our pipeline is in Greater China, where our combined system and pipeline is now at record levels, with 170 hotels opened and a further 155 hotels which we expect to open over the next 3 to 5 years.

Having already established our position in all key gateway cities in China, we are continuing to rapidly build out our distribution across the country. Once the pipeline is open, our brands will be in 94 cities across mainland China, including each of the 4 Tier 1 cities and all but 2 of the 38 Tier 2 cities.

This extensive distribution is unrivaled by any of our international peers and gives us a clear competitive and scale advantage in the marketplace.

As you're no doubt aware, over the past year, the Chinese government has introduced measures aimed to cool the residential real estate market in China. This recently led to some impact on hotel developments, where they are part of mixed-use construction projects.

To-date, though, we've only experienced some slight delays on a handful of development projects in the region. At this stage, we do expect these delays to be short-lived.

We've talked before about the scale of our opportunity in Greater China, and the underlying drivers of demand remain very strong. The overall health of our pipeline in the region is excellent with more than 70% of rooms under construction, an increase on this time last year.

HUALUXE Hotels and Resorts will allow us to further build upon our position in Greater China, and we already have 20 letters of intent signed from interested owners. The launch of this brand is just one example of us expanding and strengthening our offering to appeal more to Chinese guests.

The benefits we're now deriving from our scale position in Greater China, together with our significant infrastructure and expertise, can be clearly seen in our reported results. In the first quarter, our China managed profit of $11 million were double those in the same period 2 years ago.

And last year, 85% of managed hotels in the region were paying incentive fees. This demonstrates not just the speed at which we're adding new hotels, but also how quickly we are ramping them up, contributing to our bottom line.

Turning now to the balance sheet. Net debt at the end of March stands at $577 million, down from $846 million at quarter 1 last year but up by around $40 million on the year-end position due to the usual seasonal working capital movements.

Tom and I talked in depth in February at our preliminary results about our strategy to invest behind the growth of our brands, existing and new, funded, where possible, through recycled capital. We see substantial growth and value-creating opportunities to the business, but we do, of course, apply strict strategic and financial criteria when assessing any investments.

In the seasonally weak first quarter, total capital expenditure was only $21 million. We're still guiding that growth capital expenditure in 2012 and into the medium term will be in the range of $100 million to $200 million per annum, in addition to maintenance capital expenditure of around $150 million per annum.

Our strong balance sheet does, of course, provide us with additional scope for value-adding investments or acquisitions should the right opportunities arise.

Included in our guidance is up to $150 million, which we will invest over a 3-year period to ensure we secure the best locations for the first few EVEN Hotels. It would also include some spend on Crowne Plaza to ensure the brand is in the right locations with the right assets to build brand awareness.

We continue to make good progress with the ongoing work to reposition this brand and remain on track to start the 3-year rollout of new brand hallmarks from 2013.

Just a quick word on InterContinental New York Barclay. The disposal process is progressing as we continue our discussions with one party.

We will update you as and when we have more news.

Finally, some comments on the outlook where we remain confident. The strong trading momentum from the first quarter carried on into April with RevPAR for the group up 6.1%, driven by rate of 4.2%.

Encouraging growth of 5.2% in Europe was driven by strength in our key markets of U.K., Germany and France, all up around 9%. Our Asia, Middle East and Africa region was also strong with RevPAR growth of 9.1%, but this was partially due to the very weak comparatives for Japan and the Middle East in April last year.

The Americas was up 5.6%, slightly lower growth than for the first quarter, but in line with expectations due to the impact that the Easter and Passover holidays have each year on our mix of business in April. In Greater China, RevPAR grew 7.1%, adversely impacted by the timing of holidays during the month.

Overall, booking pace is up across all regions, with double-digit increases in rooms on the books for the group as a whole for the rest of the second quarter. Remember, though, that our forward visibility does remain short, so this only represents a portion of the total rooms we expect to sell.

Future travel intentions data collected from guests staying in our hotels is up. 2/3 of guests are saying they will travel more or the same over the next 12 months for business and almost 80% for leisure.

This is particularly important as we head into the key summer leisure season.

Despite the current uncertainties in the world economy, our industry continues to benefit from sustainable global growth in business and leisure travel and a favorable balance of supply and demand in many markets, which will continue to support good RevPAR growth. The considerable strengths of our business, including our resilient model, our exposure to growth economies and robust balance sheet, make us confident that we will continue to deliver high-quality growth and strong results in 2012 and beyond.

Before I open the call to questions, I just wanted to mention our half-year results, which we release on the 7th of August. These will coincide with the Olympic Games, which I'm sure will be a huge success.

But recognizing the large numbers of people that will be traveling around London at that time, we've decided not to hold a live presentation, instead having a conference call with slide cast. At IHG, we have particular reason to be excited about the Olympics, as we'll be the first hotel company ever to look after the 15,000 athletes housed in the Olympic Village, and we will be hosting the torch relay at our Holiday Inn and Holiday Inn Express hotels around the U.K.

So we will be playing a central role in this great event for London and the U.K.

So thank you. With that, Tom and I will now take your questions.

It's Jamie Rollo at Morgan Stanley. Just some numbers questions, really, if that's okay.

First of all, on some of the managed EBIT movements, particularly in the Americas and Europe, up very strongly adjusting for LDs, but on fairly flattish revenues and room count. What sort of drove those numbers?

I know it's only one quarter, but is there any benefit at all from the movement of hotels between managed and lease and vice versa? Second one is just trying to square -- circle on Americas franchised.

Your costs are broadly flat. Your RevPAR is up just below 8%.

System size flat, with the EBIT up 11%. Is that sort of signing on fees and royalty rates?

And then finally, it looks like the pipeline, you got rid of about 8,000 rooms or about 5% in the quarter, quite a high level compared to historical levels. Is that the new sort of normal level going forwards?

Because I think Q4 was quite high as well.

Okay. I'll pick up the pipeline one.

Maybe then Tom will pick up the managed and franchised, Jamie. Yes, I think pipeline movement is, effectively, as we clear up on the pipeline, is quarter-by-quarter.

So I don't think you can read too much into it. Certainly, in this first quarter, we have had a bit of cleaning up of the pipeline in the Middle East, for example, where clearly, with the change of economic circumstances, some projects that were going ahead were -- may have been canceled or delayed significantly.

So we're always looking at the pipeline, and we're always scrubbing it. And I think the -- with the way we look at it is, as I sort of mentioned in my remark, is really about the overall demand in the industry, as you know, is what drives our top line.

And where you've got constrained supply, that tends to support RevPAR. So the pipeline, in some respects, will be what it will be in absolute terms.

Obviously, in relative terms, we're very keen to see that we continue to grow our share of supply. With 15% of the world's pipeline, we're in a very good position to do that.

So don't read too much into the quarter's pipeline. We will just continue to keep it scrubbed.

Tom, do you want to pick up on the managed franchised questions?

Just in terms of the managed business, I mean, as we've said, the revenue was up 5% and operating profit grew 36%. And it's really just a function of good RevPAR growth and the increase in managed rooms, and that dropping through to the bottom line.

It's just a function of this increased scale of the business. There is nothing in there that's sort of one-off that I would flag up, that's a particular large signing fee or anything of that nature.

So it is really just a function of that. And similarly, in the U.S., on franchised, we are continuing to see the benefits of successive quarters of RevPAR growth and strong growth in royalties.

So again, nothing unusual in those numbers, just a function of growing scale.

Just on the managed business. If I do take 5% of last year's revenues and obviously, I except bunnies [ph] between the years, you don't get anything like the increase in profit you reported.

Is there some incentive fees going on there, or is it anything to do with the lease conversions?

There's a little bit more in terms of incentive fees. As we've seen increases in RevPAR, then clearly, there's a greater number of hotels are paying incentive fees, but that's a small positive in the overall scheme of things.

It's generally just a function of a growing estate and continuing strong RevPAR performance.

And in the quarter, there's always a few movements. If you got real more detailed questions, we'll pick it with you after this, Jamie.

It's Simon Champion from Deutsche Bank. Three questions.

The first one is, is there anything you can add in terms of the timeframe in terms of the New York Barclay sale? Will, for example, you think you'll be concluded either way by the 7th of August interims?

The second question is I missed slightly what you said about Chinese hotel development. I think you were saying that you're seeing some slowdown.

I know Marriott also alluded to the Chinese government sort of purposely slowing down some of the development in terms of hotels in the Tier 1 cities. So if you could just give us some extra flavor and clarify what you're saying there.

And the third point is, you talked about very tight financing markets, which is consistent with everybody. In terms of as you look forward, I understand that tight capacity is good for the RevPAR of the incumbent estate.

But as you look forward, how realistic do you think is the 3% to 5% system growth target in 2013 is at this stage?

Okay, Simon. A couple of questions.

Look, in terms of China, what I said was that -- is we know that the tightening up of credit into the residential market, which is where the government's been focused because of all the speculation and huge inflation there in property prices, has had some knock-on effect in a few instances, back into the hotel market because of the preponderance of mixed-use developments, where the disposal of some residential real estate has helped fund some of the other development that's going on. So we've had, literally, a few delays in a few projects.

We are relatively protected compared to many others for 2 reasons. One, we are signed up generally with some of the very best, largest, best-funded developers in China, who are much less impacted, clearly, because they have a bigger, more sustainable business.

And secondly, a lot of our developments are right in these hub construction areas where the government is driving development. So we expect it to be short-lived, because clearly, the impact is meant to be on residential, not on commercial.

We'll have to wait and see, but it's really very, very marginal for us, as you can see with the pace of openings and the pace of signings that we've continued to see in China, not least the 20-plus resident tender that we signed on, on HUALUXE. So we're in a pretty good place on that.

In terms of just the future system size growth, I think when we talked about the 3% to 5%, I don't think I've ever put a timeframe on that, that was really looking at likely future hotel demands, as you know. I've told many times, GDP growth drives that.

Looking at what historic supply levels have been in the marketplace and saying, well, if that pans out in the medium to long term, 3% to 5% is broadly where we'll be in system size to help support the demand growth. But I think we've talked many times, both Tom and I, about if credit is tight, that will limit supply growth.

I mean, there's just no question about it. So how long is that sustainable?

That's a good question. At the moment, we're still not back to peak occupancy, peak rates in many markets, although clearly, we've seen continued growth towards that.

So I think there's -- at the moment, the sort of 2% to 3% that we talked about looks more realistic in the shorter term. In the medium term, we'll just have to see what happens.

And again, that is a little bit market by market. So I think it's a judgment.

But there is no question that financing remains tight. Now you can get it, but again, it's the better operators and those with a chunk of equity and slightly longer-term view who are putting that in place.

And again, it is favoring the big brands. So there's no question that with owners who are putting our brands on their hotels, find it easier to get financing than others, but it's within the constraints of the overall market.

So I think we'll have to play it quarter-by-quarter and see how it goes. Tom, do you want to pick on the Barclay?

Just -- yes. Just on the Barclay, I mean, we continue to be in discussions with the party to whom we've granted exclusivity, and those discussions are moving forward well.

They're conducting physical due diligence on the property, and they're talking about the renovation plan for the asset. And as you know, the asset needs in excess of $100 million spent on it to really bring it up to the standards that we would have for and InterCon in New York.

So there is no news as of today, and we'll continue to move the negotiation forward. But in terms of the pace of that discussion, I'm not able to predict whether those discussions will have concluded by the date of our interims, but obviously, I hope that they will.

And we'll just have to see where we get to later in the year.

Couple of questions. Just firstly, I saw some comments from you, Richard, on Bloomberg, talking about the Olympics, saying you expect a broadly neutral impact.

Just hoping you could flesh that out a little. Just what you are seeing in terms of booking, pricing trends and sort of how that nets out for a broadly even overall impact?

And then just secondly, coming back on the financing point. I know you've obviously commented on this before.

But does there come a point when it actually makes sense for you to start putting a little bit more of your cash to work if your developers aren't able to get much financing? But obviously, you've got quite a bit of cash yourselves.

Yes. Okay.

Let me just pick up on the Olympics. Yes, I think I've got a question on the news of our call we did this morning.

And my point on there is just overall in terms of neutral is the effects of the business you get during the Olympic period substitutes for the normal business or leisure travel that you would have; so net-net, broadly neutral. And obviously, for us, the U.K.

is a relatively small market, as you know. The other thing is that, initially, most of our London hotel had to give up 2/3 of their room nights to Locog at pretty good rates early on the process.

That was part of the bid process. Now we've had some of those rooms back.

I think about 20% of those rooms have come back, and those will get sold in the normal course. So what are we, 79 days to go until the opening ceremony.

I'm reliably informed. And that for us, there is still quite a lot of good rates available.

So the hotels aren't all full at this point, although we certainly do expect them to fill up. So I think it's looking pretty good, and it has been actually a good thing for us.

Holiday Inn is the sponsoring hotel company. And running the Olympic Village, or the athletes' village, is unique, nobody's done that before.

And we've actually seen some pretty big spikes and awareness for Holiday Inn brand on the back of the advertising and sponsorship, partly because it makes so much sense to people that a hotel company should run a village and should sponsor the Olympics. So it's done well for us.

So I think the long-term benefits will be there, but I think -- I wouldn't build anything in the numbers for the short term. Tom, do you want to talk about the financing?

In terms of your financing question, I mean, as we've talked about before, the criteria that we apply in terms of applying our own balance sheets are that we need to be able to see a good financial return from an investment and we also need to be able to demonstrate that it's strategically important for us to deploy our own balance sheet in support of the business. So source of growth investments that we've talked about, which are included within the $100 million to $200 million guidance that we've given you are around opening EVEN Hotels in the States, where we've said we'll invest around $150 million over 3 years, and also in ensuring that we have the right assets, a number of halo assets for the Crowne Plaza brand that we're in the process of repositioning in the market.

I don't see us generally using our balance sheet to support owners and to unstick the pipeline. That wouldn't meet the strategic criteria even if we had reasonable financial returns.

So that's not the intention. It's absolutely around driving the business forwards in terms of either entering new markets or supporting new brands or developing relationships with key owners in a strategic way.

I would just add to that, Vicki, that with 1,100 hotels in the pipeline, only a very, very tiny number have any financial support behind them. Just -- the beauty of our model is the scale and the ability to drive very large growth you couldn't afford.

And even if we wanted to, and to Tom's point, the numbers really wouldn't add up. You couldn't incent enough to make a material difference.

It's got to be for strategic reasons. So I think -- we talk a lot about tight financing markets and Simon asked a question about it.

It is an issue, but I wouldn't exaggerate the issue, I mean, to the point we have 1,100 hotels in the pipeline or 1,098. We have 15% of the global pipeline, and we continue to sign quite a few deals, not just in emerging markets, in developed as well.

So there is activity. It just isn't necessarily quite at the peak.

And what it has done probably, in terms of having tight financing markets, is put out the quality of what we do have in the pipeline, because it's got to be a great opportunity and you've got to have a very committed owner, be prepared to put more equity in and take that risk. So I don't think it's all bad, and I think, overall, we are still significantly growing the business.

I have 2 questions, please. The first is just in terms of management contracts and earning incentive fees.

You sort of touched on this when answering Jamie's question. But can you just remind us where you're at in terms of the proportion of your estate earning incentive fees relative to the peak?

And maybe you could give us that, both for the U.S. and for the group overall?

And then the second question was just around other large-scale disposals. Can you just give us an update as to where you're at in terms of finding secondary representation in Hong Kong, Paris and London?

And I suppose specifically with London, when is the second InterCon now expected to open?

Okay. What is -- I'll pick up on the disposal one.

Tom will come back on the management contract. But I think the principles of when and how we invest in real estate, which Tom just reiterated and -- have not changed at all.

And on the big InterContinental assets, it's a combination, obviously, of the sort of economic environment, performance of those assets and, as you rightly point out, additional representation. So the only market where we have additional representation coming in is London, and I can't give you the date of that.

Because I think you may recall, there was some issues with the ownership of the -- that InterContinental in London that's I believe, if not resolved, getting resolved. But I don't know what the revised opening date is.

So it's not imminent. It might be back end of this year.

It might be next year. But clearly, it takes time for that to happen, time for the hotel to ramp up, and it's certainly something we'll consider.

So I can assure you that our strategy remains the same, but timing, we'll have to see how things unfold. Tom, do you want to…

In terms of incentive fees, for the group, roughly half the hotels that potentially could pay incentive fees are paying incentive fees. And outside the Americas, that percentage increases to some 80%.

We can't say where we are relative to the peak, but we are seeing an increasing proportion of hotels paying incentive fees as we see strong RevPAR performance come through generally.

If I follow up later, could you -- I think you've given us the numbers in the past as to where the proportion of the incentive fees has been, it's just…

I'm not sure we have. But by all means, give us a ring later on and then we'll give you whatever guidance we can.

Just on Europe, are you surprised by the resilience of those markets, the U.K., Germany and France in particular, and what do you think is causing it?

Well, it's relatively early days because we get the data, what we don't have quite buttoned down because it's so close to the end of the month is the InterCon data. So it's -- one of the things we always look at is what's happened to our share and have we driven something, has the market moved it, what's going on.

And I don't have full insight into that yet as we're only a few days into May. But I think for a particular month, which let's just talk about April, it will depend on the comparables as to what's going on.

And obviously, Germany tends to go up, down quite – we've talked a lot about the fairs in Germany, which do drive, because of their timing, a lot of them are every other year. So I know that last year in April, the comparables were a bit weak.

I think the others, it just looks to be reasonably strong month, and I don't have an awful lot of insight into what's driving that. I know I always say it, "But a month is a month."

And all it -- it can just literally take a weekend moving from one month to another, and that can skew things or something else going on. We're going to have -- obviously, move into the Olympics.

We've got the jubilee weekend coming back at the beginning of -- end of May and beginning of June. So there may even be some movement up and down in those months.

I think the important thing is though that we have continued to see growth in rate and occupancy, albeit slow. And for us and, certainly, across Europe in this year, we've gained -- we've been gaining share.

And that is really important to us, and obviously, we work hard to do that. And that, for our owners and for us, is one of our key measures.

We can't necessarily do much to confirm overall absolute numbers. But the gaining share is important, and we've definitely been doing that.

Okay. But in Q1, you're up sort of 2.6% and talked about between 2% and 3% in the main markets.

Was that sort of in line with expectations or better than you thought?

Broadly in line, I think. Tom?

Yes, broadly in line with where we thought we'd be for the first quarter. As we said, though, it's gratifying to see that it's strengthening through April with those major markets of the U.K., France, Germany, all returning around 9% growth in RevPAR terms.

A couple of things, please. Can you talk about the Middle East?

There's a few numbers in there. But in the round, can you talk about how much of the disruption and the drag of $15 million to $20 million that you highlighted last year that you feel you're on track to recover this year?

And then the second question was on EVEN Hotels, the $150 million that you've mentioned a couple of times. Do you think that'll be spent pretty much on a straight line?

And what exactly are you budgeting to spend it on?

Well, look, in terms of Middle East -- getting notes written for me here. I think in terms of the $15 million to $20 million, very difficult to say exactly when that's going to come back.

I think in terms of what we've seen in the Middle East, as I think we touched upon in the remarks, is that certain markets, Saudi Arabia, UAE, have actually been very strong. And then clearly, Egypt and Bahrain, we've had big double-digit falls in RevPAR, which is not surprising.

And I don't see that recovering certainly in a hurry, and Egypt will depend, I think, on a lot more stability in government. Because so much of the Egypt business is either wholesale leisure or, obviously, leisure travel.

Until there's some more confidence in stability of government, that will take quite a bit of time to come back through. Meantime, on the back of robust oil and gas prices, infrastructure development and so on, Saudi and UAE have been very, very strong for us, and that looks pretty good.

Okay. But Japan and New Zealand, which were also impacted last year are now normalized, are they?

No, no. New Zealand hotels are just -- I think 2 of the 3 are definitely being knocked down and the third is still closed.

That's going to take a long time to recover. Japan is starting to come back.

I think I talked about 4% or 5% growth in Japan against weak comparables. So we've seen quite big increases in domestic Japanese travel.

International is taking longer to come back. So I think we're definitely seeing recoveries there, still reasonably good about where we're at.

And that's probably the picture, actually. Tom, do you want to touch on EVEN, and is it going to be straight line or not?

Yes. Well, that money is really going to be invested in supporting the first few hotels that open, and clearly, that depends on the timing of when we can find properties.

So it's not necessarily going to be evenly spread, no pun intended. But what we hope to be able to announce in the second quarter is the site of our first EVEN Hotel, and as we said, that will hopefully open sometime in the first half of 2013.

So any expectation that's going to be a conversion property, I would expect us to start spend capital expenditure on it towards the back end of this year into the early part of next year.

As well as buy the property?

Yes. So it's going to be lumpy because it's just a function of when we find the right properties.

But some of the $150 million that we've earmarked over the next few years will start to get spent towards the back end of this year.

Okay. Well, thank you very much.

Thank you, everybody. I appreciate you calling in, and we'll no doubt speak to some of you in the course of the today.

Thank you very much. Operator, we're done.