Industry Update
Opinion Article 8 July 2016

What It Takes To Be a Successful Hotel CEO in 2016

By Chris Mumford, Managing Director at AETHOS Consulting Group and James Houran, Managing Director at AETHOS Consulting Group

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Chris  MumfordChris Mumford
James  HouranJames Houran

What do Belmond, Caesar's Entertainment, Carlson, China Lodging, Jumeirah, Mandarin Oriental, Millennium & Copthorne, Starwood Hotels & Resorts, and Whitbread have in common? The answer is they all announced a change of CEO during the past 12 months.

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The economy continues to rebound and indications suggest the road ahead is paved for growth, so boards and shareholders are maintaining a close eye on CEO performance as never before. After a quiet 2014 in which there were few changes in CEO, 2015 saw a sharp increase with annual turnover among the world's 50 largest hotel companies hitting 10%. Some of these leadership changes were abruptly forced by boards who expressed impatience with slower than expected growth. In other cases, carefully considered succession planning was at play as incumbent CEOs reached retirement and market conditions were judged favourable for a leadership transition to occur.

We have tracked CEO tenure and turnover among the world's 50 largest hotel companies (via HOTELS magazine's ranking) since 2004. In that time the peer group has evolved, reflecting the changing landscape of the global hotel industry. The '50 largest' today comprises significantly more Asia-based companies, particularly Chinese ones, than ten years ago while the dominance of North American companies has diminished. Tenure of CEOs has typically been longer among those North American companies where historically there was a higher tendency for the CEO to have been the founder of the business. The median shelf-life of a hotel CEO today is seven and a half years – a figure which has remained fairly constant over the past decade.

What does the typical CEO of a large hotel company look like these days? In just over half of cases the CEO is typically a hospitality professional seasoned in the hotel business. The remainder are immigrants to the hotel sector, coming increasingly from sectors such as retail where there is a degree of synergy with the key industry dynamics of scale, brand, and customer service. He, and yes the CEO tends to be a man in 90% of hotel companies, is in his early 50s and is often educated to a master's degree level. While men dominate hotel boardrooms, the good news is that the number of female CEOs is at its highest level since we began monitoring in 2004. Interestingly, we see more women CEOs in Asia than in the West. At some point in his career the CEO may have done a tour of duty overseas in a bid to better equip himself for the eventual challenges of running a global business. The world has become a smaller place and today's hotel CEO needs to be as familiar with the market dynamics of Shanghai as of Dubai, London and New York. He also most likely sits as an independent director on another company's board as a means to help broaden his knowledge and expertise.

What do Belmond, Caesar's Entertainment, Carlson, China Lodging, Jumeirah, Mandarin Oriental, Millennium & Copthorne, Starwood Hotels & Resorts, and Whitbread have in common? The answer is they all announced a change of CEO during the past 12 months.

The economy continues to rebound and indications suggest the road ahead is paved for growth, so boards and shareholders are maintaining a close eye on CEO performance as never before. After a quiet 2014 in which there were few changes in CEO, 2015 saw a sharp increase with annual turnover among the world's 50 largest hotel companies hitting 10%. Some of these leadership changes were abruptly forced by boards who expressed impatience with slower than expected growth. In other cases, carefully considered succession planning was at play as incumbent CEOs reached retirement and market conditions were judged favourable for a leadership transition to occur.

We have tracked CEO tenure and turnover among the world's 50 largest hotel companies (via HOTELS magazine's ranking) since 2004. In that time the peer group has evolved, reflecting the changing landscape of the global hotel industry. The '50 largest' today comprises significantly more Asia-based companies, particularly Chinese ones, than ten years ago while the dominance of North American companies has diminished. Tenure of CEOs has typically been longer among those North American companies where historically there was a higher tendency for the CEO to have been the founder of the business. The median shelf-life of a hotel CEO today is seven and a half years – a figure which has remained fairly constant over the past decade.

What does the typical CEO of a large hotel company look like these days? In just over half of cases the CEO is typically a hospitality professional seasoned in the hotel business. The remainder are immigrants to the hotel sector, coming increasingly from sectors such as retail where there is a degree of synergy with the key industry dynamics of scale, brand, and customer service. He, and yes the CEO tends to be a man in 90% of hotel companies, is in his early 50s and is often educated to a master's degree level. While men dominate hotel boardrooms, the good news is that the number of female CEOs is at its highest level since we began monitoring in 2004. Interestingly, we see more women CEOs in Asia than in the West. At some point in his career the CEO may have done a tour of duty overseas in a bid to better equip himself for the eventual challenges of running a global business. The world has become a smaller place and today's hotel CEO needs to be as familiar with the market dynamics of Shanghai as of Dubai, London and New York. He also most likely sits as an independent director on another company's board as a means to help broaden his knowledge and expertise.

This chart reveals more than just an "above average" competency set. It's interesting to see an absence of "Very High" scores across the board, which illustrates that leaders needn't be "top of class" in every facet. Rather, leaders exhibit exceptional balance and proficiency across a range of competencies. That said, there are strengths in two particular categories, Creativity and Sense of Humour. In common terms, this translates to strengths in "Vision and Perspective." Effective CEOs clearly articulate a common mission, combined with optimism, charisma and even a touch of playfulness. The presence of marked creativity also underscores the relevance of flexibility, adaptability, and curiosity as critical business skills. This holistic profile is much more of what you would expect from a Richard Branson at Virgin versus a corporate drone.

Note that CEOs also pay close attention to Service Orientation and Team Building (group process). Indeed, the most effective CEOs are hands-on, accessible to others, and exhibit marked emotional intelligence and a management style rooted in servant leadership versus a dictatorial, self-serving demeanour. This is quite unlike the perceptions the public usually holds about "celebrity CEOs" who are always in the spotlight and seem larger-than-life. Rather, the humility CEOs exhibit adds to their effectiveness as intellectual bridge-builders, who can communication across a team to bring the best out of other people's talents and challenge their teams to exceed targets. In the end, the CEO gains a well-aligned team of specialist advisors who can inform decisions both on the big-picture, strategic level and in the field where tactical metrics and minutia rule.

Among the cohort of large hotel company CEOs globally, Arne Sorenson at Marriott and Sébastien Bazin at Accor are two that, to our mind, currently stand out as strongly reflecting the above competency profile. Adopting a generalist skill set, providing vision and perspective, and surrounding themselves with talented advisors has enabled them to be bold and confident in their leadership. Time will tell if the new intake of Chief Executives into the sector are able to display similar strengths and competency sets and to lead their companies at the forefront of the industry. After all, there's one prediction we make with 100% confidence – 2016 won't be about maintaining the status quo, it will be about facing new market conditions, unforeseen disruptors, and constant attention to talent and culture challenges that can and do affect brand equity.

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