Young hotel or old hotel? Where is the better salary? - By: Keith Kefgen & Christopher Mumford - HVS Executive Search
Does age matter? We live in a society that is increasingly concerned with age and, in particular, about combating the ageing process. Like people, some hotels age more gracefully than others, some, like the Waldorf Astoria in New York, grow into legendary grandes dames.
With this in mind, we questioned whether there is a disparity between old hotels and new hotels in terms of executive compensation and, beyond that, if an opening hotel commands a premium in compensation. Do younger hotels compensate better, do the challenges of older hotels command higher remuneration, or do hotels all pay the same regardless of age?
The below graph illustrates the findings from our compensation survey of first class and luxury hotels in Chicago, New York and San Francisco. We compared the average General Manager total cash compensation (base salary plus bonus) against hotel property age.
As the results show, General Managers of luxury hotels older than 30 years are paid slightly more than their peers at younger hotels. Our research also showed the same results in a comparison of other executive positions such as Director of Sales and Marketing and Controller, as well as the size of bonus payments relative to property age. From our survey range, hotels of 30 years and more are typically larger hotels (an average of 759 rooms against 641 for hotels between 15 and 30 years) which may partly explain their marginally higher average salaries. At first class hotels, remuneration is fairly consistent across the range.
But what about hotel openings? Is there not a premium in remuneration to compensate for what one General Manager described as "giving birth sideways"? Do hotel companies restructure executive compensation for openings? For such a critical event, do hotels have to pay above market price in order to attract talent?
Not so, according to Jim Kuthy of Omni Hotels, "We do not find there is an overriding need to pay premiums for hotel openings. With internal candidates, we are usually transferring them and promoting them for a job well done and they receive the appropriate salary increase as part of that promotion, and for external candidates we generally pay market rate." Jim goes on to point out that there are other ways to remunerate executives for an opening than by just increasing base salary, "We structure an incentive scheme outside of the company norm, for example, by putting into effect a one year incentive scheme based on criteria such as pre-opening booking levels or post-opening service satisfaction levels."
The same holds true at Starwood Hotels and Resorts, which has a pre-opening policy of adhering to standard salary policies for opening properties, i.e. the remuneration package at an opening hotel is the same as that for an existing property. There may be occasions however when tips for line staff are augmented during the opening phase to offset loss of gratuities as the hotel's business levels get up to speed.
One seasoned hotelier with experience of two openings in New York City however warns that once down that road there is no turning back. Paying over the market tariff at line level can severely jeopardize a hotel's profitability in the future. With regards to executive compensation, he agrees that you have to be competitive but premiums are not necessary. Rather he feels that there are usually enough people who are interested in joining a new hotel or a new company that an appropriate market value salary and benefits package will negate any need to offer a substantial premium.
There are variations by market and market conditions however. Remote resorts, for example, may find they need to pay a premium to attract the necessary talent. One luxury hotel that opened in a major US city within the last year found that they were hiring in late 2000 at the peak of a strong economy and that the only way to attract someone happy with their current employer was either by establishing a strong personal connection, or by offering an attractive financial incentive. In addition, there are occasions when, for an opening, the best candidate for the job is someone who is already in a similar position and has the relevant experience for the task rather than someone coming in to learn the job. In these instances it may be necessary to increase the financial reward to offset the subsequent delay in career promotion.
Hotel openings are generally regarded as highly challenging, stressful, demanding, yet ultimately rewarding, assignments and many opening teams suffer from burn-out and are soon replaced post opening. While it would seem that there could be a case for compensating executives for these inconveniences, our research indicates that remuneration levels at opening hotels are subject to the same criteria as at existing properties. Furthermore, it appears that salary levels are generally highest at large, well-established properties - proof that old age can have its benefits.
Keith Kefgen
President
Christopher Mumford
Managing Director
HVS Executive Search
372 Willis Avenue
Mineola, NY 11501
516-248-8828 Ext. 220
516-742-1905
Stephen Rushmore
President
516-248-8828, ext. 278
HVS