NEW YORK—Using a proprietary pay-for-performance model, hospitality advisory firm AETHOS Consulting Group has just released its 2016 report evaluating the performance of top CEOs (from the previous year) in the hospitality, travel and entertainment industries. And the results are in:
“One could say that our industry is a vehicle for getting rich,” explains Keith Kefgen, CEO and Managing Director of AETHOS Consulting Group, and co-author of the report. “Our analysis shows that the average paycheck of a hotel CEO was more than $6 million in 2015, while the average stock ownership was over $40 million. Not bad for an industry with a tight-fisted reputation.”
The AETHOS Pay-for-Performance Model analyzes key financial metrics such as market capitalization, stock appreciation, EBITDA growth and total direct compensation. The market capitalization of the peer group ranged from Walt Disney’s colossal $163 billion to Condor’s $9 million.
“Comparing CEOs from two vastly different companies may seem puzzling,” adds AETHOS Managing Director Andrew Hazelton, also co-author of the report, “but that is precisely what the model is intended to do.”
“In fact, the model illustrates that Bob Iger truly deserved his very large $40 million paycheck,” shares Kefgen. “It also shows that Bill Blackham at Condor warranted a raise to $1.7 million. It also indicates that Jeff Keil at St. Joes barely deserved any pay at all. We still believe that value creation should be the most significant factor in doling out CEO pay. In that regard, investments in Hersha, Disney, Royal Caribbean, and Priceline and their CEOs would have been the smartest decision.”
As in previous years, the highest paid CEOs in the industry arise from the largest companies. The Top 10 CEOs each earned more than $7 million, with Bob Igor topping the list at $46 million. Priceline’s Darren Huston received just over $15 million, followed closely by the CEOs at Marriott, Wyndham, Starwood and Hilton. Although their pay packages were significant, these CEOs generally deserved their compensation. All had an AETHOS Value Index (AVI) ranging from Richard Fain’s 110 to Ed Walters at 87 (a score of 100 would be spot on). This year’s top performing CEO base on the model was Jay Shah at Hersha with an AVI of 201. Following Shah were Warren Haruki at Maui Land, David LaRue at Forest City, Andrew Sims at Sotherly and Bill Blackham at Condor.
Ten CEOs in the hospitality industry received a base salary of $1 million or more. Bob Iger topped the list with a salary of $2.5 million, while NCL paid Frank Del Rio $1.8 million. Five of the big hotel chains paid their CEO a seven figure salary ranging from $1 million to $1.6 million. Many of these same CEOs also received the largest bonuses in 2015, with Iger taking home a $22 million bonus while Wyndham’s Stephen Holmes was next with a bonus of $4.8 million. This makes sense as most EO bonus programs are pegged at a percentage of base salary. Additionally, the average CEO bonus in 2015 was $1.8 million, a nearly 30% decrease from the previous year.
“In addition to bonuses, long-term incentives plans (LTIPs) were a significant portion of overall CEO pay,” adds Hazelton. “Most LTIPs were in the form of stock option and restricted stock grants. The largest stock grant in 2015 went to Del Rio at NCL, with a value of just over $28 million. The average LTIP in 2015 was $4.1 million, a $1 million increase from last year.”
When taking into consideration the value of common shares owned, the richest CEO in the hospitality industry remains Loews’ Jonathan Tisch, with an ownership interest worth $338 million. Chris Nassetta at Hilton is next with an ownership interest of $184 million. Almost every other CEO on the AETHOS list was worth double digit millions.
“To all you aspiring hotel executives, start thinking big,” says Kefgen. “Our industry has become a great incubator for wealth creation, new technology applications and innovation. This might be the perfect time in the cycle to make your mark.”
