If the hotel industry performance matrix was the benchmark for economic growth and stability in the US, there would be a different tune in this year's presidential election. The past year by all measures was a successful one for the US hotel industry, marking the first time since 2008 that overall occupancy was over 60 percent (60.1%) and ADR finished over $100 ($101.64). Even as all three key performance metrics (occupancy, average daily rate and revenue per available room) recorded positive growth in 2011, CEO turnover increased at unusual levels. Why would a recovering industry cause such upheaval in the executive suite?

Notwithstanding the economic factors, natural succession and unbridled discourse of mission and vision between a company's management and its board, 2011 marked changes at the top spot for 1 out of every 8 publicly trading lodging companies. Change continues into the first half of 2012 with the promotion of Arne Sorensen at Marriott and Paul Whetsell becoming CEO at Loews Hotels. Moreover, the past two years have seen 8 CEO replacements at 31 publicly traded lodging companies in the US. While change was the theme for hotel leaders, CEO compensation continued to rise unabated.

Our survey revealed that hotel CEOs had smaller salaries as a percentage of their total pay, in lieu of more short and long-term incentives. Base pay represented only 13% of the average CEO pay package. In contrast, long-term incentive increased from 45% to 52%, while short-term incentives covered 28% in 2011. Other compensation (benefits & perquisites) made up the remaining 7%, increasing from 3% the previous year. In dollar terms, the average salary for a hotel CEO increased $19,000 to $735,000 in 2011. In addition to a number of CEOs taking smaller salaries, Michael Gross at Morgan Hotels; Park Brady with St. Joe Co; Kenneth Cruse, the new CEO at Sunstone Hotel Investors and David LaRue of Forest City were all newcomers to HVS's annual CEO survey and earned below average base salaries.

Bonus and Long-Term Incentives

The average bonus for a hotel CEO dropped from $1.7 million in 2010, to $1.6 million in 2011. Several of the top earners including, Robert Iger of Walt Disney, Jeffrey Boyd of Priceline.com and Stephen Holmes of Wyndham Worldwide received higher bonuses, with Iger receiving the largest at $15.5 million. Overall, 13 CEO's received bonus pay in excess of $1 million, while 2 received no bonus at all.

Equity pay shifted upward from an average of $2.3 million in 2010, to $2.6 million in 2011. Robert Iger, Montgomery Bennett of Ashford Hospitality and Edward Walter of Host Hotels & Resorts received the largest long-term incentives, while four received nothing in the form of long-term compensation. As expected, the increase in equity pay took total CEO pay up in 2011. When combining all components, the average 2011 CEO pay package was $5,652,000 as compared to $5,262,000 in 2010. Mickey Arison and Bill Marriott remained the "richest" CEO's in the industry with both having a net worth of over a billion dollars.

Providing Value

We created the HVS Pay-For-Performance Index to determine which CEOs, related to their pay, provided shareholders the best value. The model compares CEO compensation to financial indicators such as stock appreciation, market capitalization and increases in EBITDA or FFO. Based on our analysis, Monty J. Bennett at Ashford was the best performing CEO in the hotel industry. Despite Bennett's $10M paycheck, he was still underpaid by a whopping 76% according to our PFP model.

HVS Executive Search has presented the Top-Performing CEO Award each year since 1994. Past winners include Jeffery H. Boyd, Stephen Holmes, Jon E. Bortz, William McCarten, Stephen Bollenbach, Hasu Shah, Jonathan Tisch, David Litman, Charles A. Ledsinger, Jr., J.W. Marriott, Jr., Isadore Sharp, Michael Leven, Barry Sternlicht, Tony Wilson, David Simon, and Michael Rose.

The author would like to thank Elizabeth Warmingham for her contributions to the coordination of the study.