Recovery or Double Dip?


Economists are actively debating whether the US is headed for an economic recovery or a double dip. For CEOs in the lodging industry, 2009 was one of the worst operating performance years in the industry’s history. One would have probably assumed that executive pay also fell dramatically in 2009; not exactly. In fact, total compensation for a lodging CEO was almost identical to the previous year, coming in at nearly $2.8 million. In conducting our annual review of CEO pay at hotel companies in the US, we were surprised that the median bonus nearly doubled from 2008 to over $600,000, while long-term incentives such as restricted stock grants, stock options and SAR remained about the same at $1,000,000. The big drop was in the offering of executive perks, falling nearly 50%. It makes sense that the optics of private jets, country club memberships, and private security have been highly frowned upon by shareholders. We did note that four CEOs took and made no bonus in 2009: Bill Marriott, Anupam Narayan, Kelly Walters, and Rob Katz. From a performance viewpoint, Marriott and Katz gave back their bonuses, while Narayan and Walters did not earn one. That compared to ten CEOs who declined or did not make bonuses in 2008.

* Office of CEO Loews Corp

** No Longer CEO

Top performing CEOs

There were some bright spots in the industry as Hyatt went public and a number of new hotel REITs did the same. Investment in the industry has clearly picked up and we hope it is a sign that industry leadership has weathered the storm. From a pay-for-performance standard, two CEOs stood out among their peers, Stephen Holmes at Wyndham and Jeff Boyd at Priceline. Boyd is now a two-time winner of our top performance spot. Holmes did a superb job of revitalizing the Wyndham brand and leading the company through the breakup of Cendant. By our calculations, both executives were under paid by 40% relative to their performance. That translates to nearly a $2.0 million raise for each. Other top performers include Kim Schaefer the new CEO at Great Wolf, Mark Hoplamazian at Hyatt and Rob Katz at Vail Resorts. Besides Wyndham and Priceline, the only other stocks to see positive appreciation were Disney, Vail, Loews and Hyatt.

A rough year for many

It was a very rough year for CEOs who had large real estate holdings. Many of the worst performing stocks such as Maui Land, Forest City, Strategic and St. Joes had significant financing and balance sheet issues. They will also be the best investment opportunities as the economy rebounds. Anupam Narayan was the only casualty of 2009 as he was “forced” out at Red Lion in January of this year. We also noted that seven CEOs were appointed in late 2008 and 2009, probably the largest turnover in the last two decades.

Base & bonus

Bob Iger at Disney and Bill Marriott had the largest base salaries at $2.1 and $1.2 million, respectively. Only five CEOs had a salary at $1.0 million or more. As we previously stated, bonus pay was higher than we expected. Eight CEOs had a bonus larger than $1.0 million with Iger and Holmes leading the way.

Fourteen CEOs had a long-term incentive worth more than $1.0 million, with Iger, Arison and van Paasschen leading the group. The wealthiest CEOs continue to be Arison and Marriott who are each worth over a billion dollars. Our pay-for-performance model continues to shed light on the work that compensation committees are and aren’t doing. With financial reform around the corner, it is incumbent upon board members to study the effects that poorly conceived compensation plans can have on the long-term health of a company.