The Russian hotel market has finally appeared on the radar screen of international hotel companies. Local brands are now competing against US, European and Asian rivals in a quest for market share and talent.

Due to this rapid growth, HVS Executive Search is starting a series of articles on compensation trends in the hotel industry. We will compare Russian and CIS trends to the international standards, and identify variations in the elements that make up remuneration packages.

This article focuses on General Managers’ compensation. We compared Luxury and First-Class Hotels (according to the Smith Travel Research classification) in Moscow and St.-Petersburg to a number of other large cities.

All of the data has been grossed up to reflect pre-tax compensation, and exchange rates were applied to bring all packages to the common USD denominator. Exchange rates and personal income tax rates are disclosed in the footnotes of Table 1. The compensation data is derived from surveys conducted by HVS Executive Search in 2005-06.

There has been a feeling in the industry that compensation packages awarded to GMs in Russia are becoming overly generous. According to our data, the two biggest markets in Russia – Moscow and St.-Petersburg – are also fully staffed with expatriate General Managers in Luxury and First-Class categories.

Table 1

City
Average Actual Salary
% Expatriate Employees
Mercer COL Rating
Adjusted to COL Salary
Moscow
$141,346
100%
123.90
$114,080
London
$206,567
21%
110.60
$186,769
New York
$197,301
5%
100.00
$197,301
St. Petersburg
$135,523
100%
99.70
$135,931
Paris
$154,881
14%
93.10
$166,360
Dubai
$115,584
100%
87.80
$131,644
Sao Paulo
$38,424
0%
85.00
$45,205
Chicago
$181,238
5%
84.10
$215,503
Amsterdam
$241,925
29%
83.40
$290,078
Prague
$135,835
80%
82.10
$165,451

Footnotes:
Personal Income Tax Rates
Czech Republic Income Tax = 25%
France Income Tax = 40%
UK Income Tax = 40%
UAE Income Tax = 0%
Netherlands Income Tax ~ 43.8% 		Exchange Rates
1 Euro=1.31 USD
1 Czech Koruna=.05 USD
1 British Pound =1.95 USD
1 UAE Dirham=.272 USD

As the graph illustrates, Moscow General Managers are paid nearly a $100,000 lower salary then their counterparts in Amsterdam, and more then $60,000 less then the London GMs. St. Petersburg is even lower, with their GMs making $6K less on average then the Moscow hoteliers.

Let’s put these numbers into perspective. Table 1 combines grossed up Average Actual Salary numbers with each city’s ranking on Mercer’s 2006 Cost of Living Survey (COL), New York being the baseline (100%). The last column of Table 1 shows how much General Managers are paid relative to their city’s COL. We also included the percentage of expatriate General Managers in each market.

For example, a GM in Moscow makes an average actual salary of $141,346 a year. Adjusted for COL, he/she would only have $114,500 to spend living in New York.

On the other hand, General Managers in Amsterdam, in “NYC dollars”, receive a lavish package of almost $300,000. At the same time, Sao Paulo General Managers’ salary is only $45,205 on COL-adjusted basis.

After studying the preceding set of data one can note, that in fact GMs in Moscow, compared to their counterparts in other cities around the world, are far from being “overpaid”. The question then becomes, how well are they compensated compared to their direct reports – Executive Committee members in the hotels?

One last important take-away from this set of data concerns the number of expatriate General Managers in Russia. Note that in more mature lodging markets – New York, London, Chicago, Paris – the numbers are considerably lower, varying from 5 to 21%. The cities that top this list are Moscow, St.-Petersburg, and Dubai. Prague comes close, with its’ 80% number. What are the factors contributing to this situation?

We hope to address these and many other questions on the trends in Russian and International Hotel labour markets in our further materials.

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...

Tatiana MBA Veller
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