Industry Update
Opinion Article14 March 2007

"Moscow's General Managers Are Overpaid - Myth or Reality?" (Part II)

Comparison of compensation packages awarded to hotel General Managers in key cities in Russia with other international markets.

By Tatiana Veller

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In our most recent article, we compared General Manager compensation in Moscow and St. Petersburg to other global cities. In our second installment, we examine how General Manager pay compares to other senior managers in the same property. The compensation data is derived from surveys conducted by HVS Executive Search in 2005-06. 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 accompanying footnotes.

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Table 1

Position

Bonus as % of Salary

General Manager

51%

Executive Chef

10%

Controller

19%

Director F&B

27%

Director Sales & Marketing

23%

Chief Engineer

21%

Director HR

26%

Executive Housekeeper

16%

Front Office Manager

14%

In Moscow, the two highest salaried executives after GM are Executive Chef and Controller at 49% and 46% respectively. One of the primary reasons is the high number of expatriates in Executive Chef (80%) and Controller (60%) positions.

In contrast, Director of F&B received the highest bonus after GM. This is due in part to the complexity of food and beverage operations. Furthermore, direct P&L responsibility makes it easier to formulate incentive payouts.

Table 1 shows the average bonus for each position in Moscow. Director of F&B stands out again, for the reasons described above. The Director HR derived the next highest bonus.


Table 2

Position

Bonus as % of Salary

General Manager

35%

Controller

21%

Director of Sales & Marketing

30%

Director F&B

32%

Front Office Manager

22%

Executive Housekeeper

24%

Executive Chef

21%

Chief Engineer

25%

Director HR

20%

In St. Petersburg the situation is not much different. However, the difference between GM and other salaries is even higher (39% and 38% of GM’s salary for Executive Chef and Controller, respectively). Noteworthy is the higher level of bonuses awarded to almost all managers compared to Moscow.

According to Table 2, bonus systems in St. Petersburg look more uniform across positions than in Moscow. Reasons include: more corporate-managed hotels in the market (thus bonus programs are dictated by central HR); more expatriates in managerial positions, as the local labour market is smaller; or simply more information sharing among hoteliers which results in the uniformity of compensation packages.

For an international comparison, we looked at the compensation data for two of the major US hotel markets, New York and Chicago. The main observation is that the same two positions as in Russia, Executive Chef at 59% and Controller at 55%, follow General Manager as the highest paid in Chicago. In New York, it is Executive Chef at 69% and Director of Sales and Marketing at 68%, closely followed by Controller at 67%, according to our data. Generally, the discrepancy between the highest paid manager in the Hotel (General Manager) and the lowest paid manager (in our comparison, Front Office Manager) is not nearly as high as in Russia.

The overall pattern for General Manager compensation in Russia stems from one main reason: there are significantly more expatriates in Russia than in other comparative hotel markets. Not all surveyed hotels in Russia have a No.2 position (Assistant General Manager or a Resident Manager). We note this as a strategic mistake, and encourage Russian hotel owners to hire and train locals who can one day take over from expatriate GMs.


With this article, we conclude the brief study of compensation packages awarded to General Managers in Moscow and St. Petersburg.

The Russian hotel industry, in its current stage of rapid growth, will go through a lot more adjustments in its distribution of compensation packages among management executives before it comes closer to common international practices. We will keep a close eye on the developments, and continue to report on noteworthy facts.

Forward any questions or comments to Tatiana Veller, Managing Director – Russia, HVS Executive Search, at [email protected] or at phone number +7 (909) 642-0313.

Footnotes:

1 USD – 26.5 Roubles
1 Euro – 1.25 USD
Personal income tax rate (Russia) – 13%

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 Veller

Tatiana Veller is the Managing Director of HVS in Russia. Tatiana specializes in various types of strategic consulting for all facets of the hospitality industry in Russia, Georgia, CIS and Baltics. In addition to Tatiana’s HR Consulting background with leading firms in the US, she possesses six years experience in line and management positions with top companies in the Hospitality and Food Service industries in Russia and the US, along with a Bachelor’s degree in Hotel and Restaurant Management from the Russian Academy of Economics n.

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