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The Boss Takes a Pay Cut - Partially
HVS Executive Search's Annual CEO Survey Shows a Decline in Base Pay

by Keith Kefgen & and Andrew Hazelton
August 31, 2011

For the first time in a long time our annual survey of CEO performance revealed that there was a decline in CEO base pay. This corresponds to a similar trend in the Fortune 500 companies. What was the driving force behind the decline? A more relevant question for the shareholders may be: did the CEO truly earn his or her pay?

Base Pay
In our opinion it looks like hotel CEOs took smaller salaries or declined salary increases in favor of more bonus pay. In fact, base pay as a percentage of total pay declined from 18% in 2009 to 13% in 2010. In contrast, bonus pay increased from 27% to 32%, while equity pay stayed unchanged at 45%. In concept, most pay-for-performance advocates should be pleased.

Please click here to view the table

In dollar terms, the average CEO base salary dropped nearly $50,000 to $700,000 in 2010. In addition to a number of CEOs taking smaller salaries, Jeffrey Fischer of Chatham Lodging, James Francis of Chesapeake Lodging Trust, Warren Haruki of Maui Land & Pineapple and John Eliassen of Red Lion Hotels where all newcomers to the survey this year and earned below average base salaries.

Bonus and Long-Term Incentives
Both bonus pay and long-term incentives were on the rise in 2010 which helped bolster overall CEO compensation. The average bonus jumped from $1.1 million in 2009 to $1.7 million in 2010. Robert Iger of Walt Disney, Richard Fain of Royal Caribbean and Jeffrey Boyd of received the largest bonuses, with Iger earning a $13.5 million bonus in 2010. Eleven other CEOs received bonuses in excess of $1 million in bonus pay while five CEOs received nothing.

Long-term incentives shifted upwards from an average of $1.8 million in 2009 to and average of $2.3 million in 2010. Iger, Bill Marriott and Edward Walter received the largest amount of long-term incentive pay. An interesting note is that out of the 31 CEOs in our survey more than half of them, 19 to be exact, received below average long-term incentive pay in 2010. Long-term wealth seemed to be concentrated in very few hands.

As previously stated, overall CEO pay increased due to larger incentive packages. When combining all components, the average CEO pay package in 2010 was $5,262,000 as compared to $4,124,000 in 2009. Bill Marriott and Micky Arison remained the 'richest' CEOs in the industry with both having a net worth of over a billion dollars.

Providing Value
There are various ways to determine value and we created the HVS Pay-For-Performance Index to determine which CEOs, relative to their pay, provided shareholders the biggest bang for the buck. The model compares CEO compensation to such indicators as stock appreciation, market capitalization, and increases in EBITDA or FFO, to determine the top-performing CEO.

This year, our pay-for-performance model concluded that Mark Hoplamazian of Hyatt Hotels is our Top-Performing CEO of the Year. The award has been presented annually since 1994 with past winners like Stephen Holmes of Wyndham, Jeffery Boyd of and Jonathan Tisch of Loews.

At the helm of the recently public Hyatt Hotels, Hoplamazian's leadership helped lift the stock price 39% and grow EBITDA by 143% from the prior year. By our calculation he was underpaid by roughly 39%, even with his total compensation of $6,036,513. Hoplamazian has been a member of the board of directors of Hyatt Hotels since November 2006.

About HVS Executive Search

HVS Executive Search provides advisory services to leaders of the hotel, restaurant and gaming industries. Practice areas include senior-level executive search, mid-management recruitment, compensation consulting and performance management. HVS Executive Search is a division of HVS, a fully integrated consulting firm focused on the hospitality industry. HVS is the world's leading specialist in hospitality consultancy. With 30 offices globally, HVS offers unparalleled market expertise.

About HVS

HVS is the world's leading consulting and services organization focused on the hotel, restaurant, shared ownership, gaming, and leisure industries. Established in 1980, the company performs more than 2,000 assignments per year for virtually every major industry participant. HVS principals are regarded as the leading professionals in their respective regions of the globe. We are client driven, entrepreneurial, and dedicated to providing the best advice and services in a timely and cost-efficient manner. Through a worldwide network of 30 offices staffed by 400 seasoned industry professionals, HVS provides an unparalleled range of complementary services for the hospitality industry. For further information regarding our expertise and specifics about our services, please visit

About the Authors

Keith Kefgen is Chief Executive Officer of HVS Executive Search, the human resource consulting practice of HVS. Keith has more than 20 years of experience in the field of hospitality executive search. He is a frequent lecturer on industry related issues and has written more than 100 articles on the topics of executive selection, pay-for-performance, corporate governance and executive leadership. He is a graduate of the Cornell University Hotel School.

Andrew R Hazelton is Vice President at HVS Executive Search New York. Andrew has spent several years in the executive search industry, including six years with Korn/Ferry International where he was responsible for completing a number of C-suite searches. He has worked on assignments for several industries including Healthcare, Technology, Finance, Hospitality and Real Estate. Andrew is a key member of HVS's North America team and focuses exclusively on assignments for the hotel industry.

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Also See: HVS Executive Search Presents Top-Performing CEO Award to Mark S. Hoplamazian of Hyatt Hotels Corporation and Top-Performing Board to LaSalle Hotel Properties / June 2011

HVS Executive Search presents Top-Performing CEO Award to Jeffery Boyd of and Stephen Holmes of Wyndham Worldwide & Top-Performing Board Award to Starwood Hotels & Resorts Worldwide, Inc. / June 2010

HVS International Honors the Board of Directors of Four Seasons Hotels Corp. and Hilton's Steve Bollenbach with Lodging Leadership Awards / June 2006

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