Do increases in RevPAR performance translate to increases in salary? Chris Mumford of HVS Executive Search takes a look at the London market to see if management salaries have increased in line with RevPAR.

It is generally the case that when trading conditions improve so too does an employee's earning power. Typically, people make more when the market is strong than during a downturn. The London hotel market has been showing signs of improved health in 2005. According to figures produced by The Daily Bench, London's five star hotels have experienced a year-on-year gain of 5.10% in RevPAR. We therefore decided to see if management's earning power has indeed increased in a corresponding manner.

Using data acquired through our proprietary HCE Hospitality Compensation Exchange® programme, we analysed average base salaries of seven key management positions at luxury hotels in London. We took the 2005 figures and compared them against those of 2004. As the table below illustrates, every position in the peer group recorded an increase in average annual base salary:

Annual Base Salary 2005 Average 2004 Average % Increase
Resident Manager £69,300 £64,508 7.43%
Financial Controller £58,096 £51,747 12.27%
Director of Human Resources £50,713 £49,021 3.45%
Director of Sales & Marketing £71,275 £59,781 19.23%
Chief Engineer £44,491 £40,804 9.04%
Director of Food & Beverage £49,735 £48,093 3.41%
Executive Chef £61,560 £57,210 7.60%

The average increase was 8.92% with Sales and Marketing Directors recording the greatest increases. We then explored further to see if the hotel's room count had any impact on the size of salary increase. We compared the average annual base salaries of management at hotels of less than 200 rooms against those at hotels of more than 200 rooms. The results indicate that management salaries rose modestly higher at smaller hotels than at larger hotels of over 200 rooms.

2005 vs 2004 Increase
Average Annual Base Salary Less than 200 rooms Greater than 200 rooms
Resident Manager 1.37% 11.75%
Financial Controller -2.96% 16.01%
Director of Human Resources 24.44% -4.61%
Director of Sales & Marketing 7.87% 20.06%
Chief Engineer 11.95% 9.50%
Director of Food & Beverage 10.13% 5.92%
Executive Chef 11.40% 1.15%
Average Increase 2005 vs 2004: 9.17% 8.54%

We also saw that bonuses had increased significantly year-on-year, typically a clear indicator that trading conditions have improved. This was particularly emphasised by the dramatic increase in Sales and Marketing Directors' bonus awards which are typically tied directly to performance targets such as room night production and revenue generation. Chefs also recorded a considerable increase.

Average Annual Bonus 2005 2004 2005 vs 2004 Increase
Resident Manager £8,709 £5,604 55.41%
Financial Controller £7,137 £6,575 8.54%
Director of Human Resources £6,215 £5,543 12.14%
Director of Sales & Marketing £8,343 £4,677 78.38%
Chief Engineer £4,107 £3,663 12.11%
Director of Food & Beverage £5,951 £3,505 69.77%
Executive Chef £8,165 £3,858 111.64%

It would appear therefore that salaries do indeed rise with improved market performance. In fact, London hotel management salary increases have considerably outstripped hotel operating performance increases as recorded in RevPAR. An average salary increase of 8.92% versus a recorded RevPAR increase of 5.10%. Unsurprisingly however, it is a different story further down the career ladder for those who are not in the management ranks. Our survey of luxury hotel salaries in London showed that the average increase in base salary for non-management positions is approximately one third of that accorded to their superiors, at 3.27%.

HVS International is a hospitality services firm providing industry skill and knowledge worldwide. The organization and its specialists possess a wide range of expertise and offer market feasibility studies, valuations, strategic analyses, development planning, and litigation support. Additionally, HVS International supplies unique knowledge in the areas of executive search, investment banking, environmental sustainability, timeshare consulting, food and beverage operations, interior design, gaming, technology strategies, organizational assessments, operational management, strategy development, convention facilities consulting, marketing communications, property tax appeals and investment consulting. Since 1980, HVS International has provided hospitality services to more than 10,000 hotels throughout the world. Principals and associates of the firm have authored textbooks and thousands of articles regarding all aspects of the hospitality industry. Click here for more...

Leora Lanz
HVS Sales & Marketing Services
516-248-8828 Ext 278
HVS