(February 4, 2020) –  In his annual review of CEO compensation in the U.S. lodging sector, AETHOS Consulting Group CEO Keith Kefgen shares candid insights as a result of his most recent assessment.

“A year passes with the hotel industry having solid but unspectacular performance,” shares Kefgen. “But what we did glean from last year’s hotel industry performance is that ‘big companies outperformed their smaller brethren, while REITs were on the sidelines. “

Utilizing the AETHOS pay-for-performance model, which analyzes key financial metrics such as market capitalization, stock appreciation, EBITDA growth, and total direct compensation, Kefgen observes that as in previous years, the highest paid CEOs in the industry ran the largest companies. The top ten CEOs each earned more than $8M in total compensation, with Bob Iger topping the list at $65M. Frank Del Rio at NCL earned nearly $22M and Glenn Fogel at earned just over $20M. Although their pay packages were significant, these CEOs had an AETHOS Value Index (AVI) over 80 (100 would be a perfect pay-for-performance match). This year’s top performing CEO based on the model was Adam Portnoy at RMR Group with an AVI of 205.

Some other indicators Kefgen highlights:

  • Strategy and execution were the best predictors of performance. Companies that executed poorly got penalized (Red Lion). Greg Mount was one of the top performing CEOs in 2018, but 2019 was not so kind. In contrast, RMR and Ashford has changes in strategy that had legs. “We predict that 2020 will be another ‘down in the trenches’ year as investors watch the economy and the presidential election very carefully.”
  • Size matters in public markets. The associated costs of running a public company are significant and favor the bigger players. “The market capitalization of the CEO group studied ranged from Walt Disney’s colossal $256B to InnSuites’ ultra-small $13M.” Comparing CEOs from two vastly different companies might appear difficult, but that is what the AETHOS model tries to accomplish. “It illustrates that Bob Iger at Disney generally merited his (huge) $65M paycheck, while James Wirth at InnSuites barely deserved his $130K paycheck.” In the end, investors want stock performance not payroll containment.
  • Seven CEOs in the hospitality industry received a base salary of $1M or more. Bob Iger topped the list with a salary of nearly $2.9M, followed by Frank Del Rio at $1.75M. Many of these same CEOs received hefty bonuses, with Iger taking home an $18M bonus, followed by Hyatt’s Mark Hoplamazian at $8.6M. The average salary for the group was $850K, while the average bonus was $2.4M. Note the three-times multiple.
  • Long-term incentives plans (LTIP) were a significant portion of overall CEO pay in the hotel industry at about 60% of total compensation. Most LTIPs were in the form of restricted stock grants and to a lesser extent, stock options. The largest stock grant went to Iger, with a grant value of just over $43M; followed by Chris Nassetta of Hilton at $16M. Twenty-nine of the 35 CEOs on the list had multi-million-dollar LTIP grants. We continue to see more LTIP awards with performance vesting as shareholders want to see metrics hit before vesting occurs.

Interestingly, “I discussed the issue of income equality when publishing the 2018 report and it appears that a Disney heir caused a stir discussing the matter,” continues Kefgen. “Abigail Disney (in a series of tweets) condemned Bob Iger’s pay for having ‘deepened wealth inequality,’ making $65.6m in 2018 – 1,424 times the median salary of a Disney employee. While she called his pay ‘insane’, I believe the issues are separate but emotionally connected. Putting a dollar value on anyone’s work is not easy. Is an actor worth $45M a movie? Is someone worth $350M for throwing a baseball or dunking a basketball? Is an Army private only worth $20K a year?

“In a free market system, I believe that you get paid what someone is willing to pay you,” exclaims Kefgen. “It comes down to supply and demand. Ms. Disney can give away her inheritance, which she clearly did not earn, but that is her choice. In the meantime, hotel CEOs are graded on how well they deliver on their strategy.

“I also predict that more companies will go private as investors and CEOs look to get out of the public spotlight.”


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Keith Kefgen, New York
CEO & Managing Director

[email protected]