HVS Salary Survey: Top Officers? Pay On Rise

MINEOLA, NY? Bigger is better in the lodging industry when it comes to executive pay. This year?s hotel salary survey exemplifies that the larger, more complex companies continue to pay out the larger paychecks. What follows is an excerpt from our 1998 HCE Lodging Corporate Annual Report, including data from 135 hotel companies. We sliced the pie three different ways: Salary Results by Gross Revenue, Number of Rooms, and by ADR.While comparing our results to those over the past two years, it is evident that executive compensation in the lodging industry is on the rise. Twenty-six percent of the positions from our full annual report experienced an increase in base salary that exceeded the inflation rate. In addition, we witnessed a trend in the use of short-term and long-term incentives. It appears that more companies are increasing the variable component of executive compensation, such as bonuses and stock option grants. Bonuses rose at an average rate of 8% per annum, while stock options increased in both size and occurrences. Examining the national results, we can also see that compensation in the lodging industry continues to be connected to the hierarchy of a traditional organization chart. Of the top five executive positions, the average CEO earned the most, while the senior director of marketing merited the least. With regard to industry trends, our 1998 results by system sales were similar to our 1996 study. When applying a regression analysis, it is evident that the size of a company continues to directly affect the size of the paycheck. A CEO of a hotel company grossing over $500 million will bring home an average total paycheck of $1.27 million, a 522% greater slice than that of the CEO from a company with revenues less than $50 million. Dividing the pie by number of rooms discloses results that are similar to gross revenue: the number of hotel rooms is directly proportionate to compensation levels. A CFO from a hotel company with rooms greater than 15,000 receives 66.1% and 111.2% more in compensation than the CFO from a company with 5,000 to 15,000 rooms and the CFO from a company with fewer than 5,000 rooms, respectively. The only exception we see is with the senior marketing officer. Although it appears that compensation is lower at companies with an ADR of less than $90 than their counterparts at companies with ADR of $90 and above, there is no strong correlation depicted through our regression analysis. For example, executives at the larger companies such as Cendant and La Quinta are well-compensated despite their low ADRs, whereas executives at smaller companies with higher ADRs, such as Rosewood and Fairmont Hotels, received comparably lower compensation packages. Thus, the size and complexity of the company has a stronger bearing on one?s salary than does ADR. Stock Option Popularity Stock options are by far the most popular form of long-term incentives for the lodging industry. Compared to our 1996 results, a CEO received an average of over 50,000 more shares, as the CFO was granted over 40,000 more. As trends would have it, the CEO is granted the most, as s/he has the largest stake in the success or failure of the company. Although senior marketing executives are paid the least, they were still granted almost 10,000 more shares than in 1996. HCE Lodging Report The 1998 HCE Lodging Corporate Annual Report also profiled 14 other positions and has an in-depth section regarding benefits and perquisites. Contact the authors for more information about the report and other HCE Hospitality Compensation Exchange services. All survey data was supplied by HVS Executive Search. The Mineola, NY-based human resources consulting firm is headed by Keith Kefgen, president, and Rosemary Mahoney-Browning, assistant vp, and provides retained executive search, compensation consulting, employee-opinion surveys and organizational development. Supporting the firm?s compensation practice is the Hospitalit