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 Moscow's Hotel General Managers Are Overpaid - Myth or Reality?
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Comparison of compensation packages awarded to hotel General Managers
in key cities in Russia with other international markets
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By Tatiana Veller, February 6, 2007

The Russian hotel market has finally appeared on the radar screen of international hotel companies. Local brands are now competing against US, European and Asian rivals in a quest for market share and talent.

Due to this rapid growth, HVS Executive Search is starting a series of articles on compensation trends in the hotel industry. We will compare Russian and CIS trends to the international standards, and identify ariations in the elements that make up remuneration packages.

This article focuses on General Managers’ compensation. We compared luxury and first class hotels (according to the Smith Travel Research classification) in Moscow and St. Petersburg to a number of other large cities.
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All of the data has been grossed up to reflect pre-tax compensation, and exchange rates were applied to bring all packages to the common USD denominator. Exchange rates and personal income tax rates are disclosed in the footnotes of Table 1. The compensation data is derived from surveys conducted by HVS Executive Search in 2005-06.

There has been a feeling in the industry that compensation packages awarded to GMs in Russia are becoming overly generous. According to our data, the two biggest markets in Russia – Moscow and St. Petersburg – are also fully staffed with expatriate General Managers in luxury and first class categories.

Table 1

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As the graph illustrates, Moscow General Managers are paid nearly a $100,000 lower salary than their counterparts in Amsterdam and more then $60,000 less then the London GMs. St. Petersburg is even lower, with their GMs making $6,000 less on average than the Moscow hoteliers.

Let’s put these numbers into perspective. Table 1 combines grossed up Average Actual Salary numbers with each city’s ranking on Mercer’s 2006 Cost of Living Survey (COL), New York being the baseline (100%). The last column of Table 1 shows how much General Managers are paid relative to their city’s COL. We also included the percentage of expatriate General Managers in each market.

For example, a GM in Moscow makes an average actual salary of $141,346 a year. Adjusted for COL, he/she would only have $114,500 to spend living in New York.

On the other hand, General Managers in Amsterdam, in “NYC dollars”, receive a lavish package of almost $300,000. At the same time, Sao Paulo General Managers’ salary is only $45,205 on COL adjusted basis.

After studying the preceding set of data one can note that in fact GMs in Moscow, compared to their counterparts in other cities around the world are far from being “overpaid”. The question then becomes how well are they compensated compared to their direct reports (Executive Committee members) in the hotels?

One last important take-away from this set of data concerns the number  of expatriate General Managers in Russia. Note that in more mature  lodging markets – New York, London, Chicago, Paris – the numbers are  considerably lower, varying from 5 to 21%. The cities that top this list  are Moscow, St. Petersburg and Dubai. Prague comes close with 80%.

We hope to address factors contributing to this situation and many other questions on the trends in Russian and International Hotel labour markets in future articles.



Tatiana Veller is Managing Director of HVS Executive Search – Russia. Tatiana specializes in Executive Search and compensation consulting for all facets of Hospitality industry on the territory of Russia, CIS and Baltics. Outside of Tatiana’s Executive Search background with some leading US companies, she possesses six years in managerial positions in operations and headquarters in various settings in Hospitality and Food Service industries in Russia and US, along with a Bachelor’s degree in Hotel and Restaurant Management from Russian Academy of Economics n.a. Plekhanov and a US MBA in International Management. 
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Contact:

Tatiana Veller
Managing Director – Russia
HVS Executive Search
tveller@hvsinternational.com
phone number +1 (516) 248-8838 ext. 238


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