By: Thomas Mielke | Chris Mumford
Hotel company boardrooms were more settled places in 2014 than the previous few years with only two changes in CEO occurring among the world’s 50 largest hotel groups. In fact, 4% was the lowest rate of turnover we have measured since tracking Hotel CEO turnover from 2004. Turnover had been climbing steadily since the 2009 depths of the world financial crisis. That year only three companies dared to change their CEO. This rose to five new appointments in 2010 and six in 2011. It appears that 2012 may have been the crunch year where companies began to see signs of financial improvement and sought to replace their survival mode CEO with new leadership to manage the business through a time of recovery and positive growth. That year saw eight CEO seats revolve and this trend continued, albeit at a slower rate, in 2013 with 10% CEO turnover. In 2014 however turnover curtailed sharply with only Wyndham (enter Geoffrey Ballotti) and Jin Jiang (hello Simon Zhang) making new appointments.
The AETHOS Hotel CEO Turnover study has been reviewing annual turnover in the sector since 2004. The study’s peer group is the world’s 50 largest hotel companies by number of rooms count as reported each year by HOTELS magazine. Companies range in size from IHG with 679,050 rooms to Okura with 23,686 rooms, some are publicly listed, others are private family owned businesses. 23% of the peer group is headquartered in Asia, 32% in Europe, and 45% in North America.
Click here for an overview of the CEOs at the Top 50 hotel companies.
The median tenure for the CEO of a large hotel group is seven-and-a-half years. Many were taken aback earlier this year by the departure of Frits van Paasschen from Starwood but, having not long passed his seven year anniversary, perhaps we should not have been surprised. Furthermore, tenure is typically shorter at public companies than at privately held corporations. Chief Executives who are approaching, or have recently passed, similar seven year milestones include Chris Nassetta at Hilton, Steve Joyce at Choice, James Murren at MGM – time will tell if their shareholders experience the seven year itch?
The hotel industry continues to largely promote and recruit its senior leadership from within its borders. Half of the world’s largest hotel groups are led by CEOs possessing previous hospitality sector experience. Among other sectors from which hotel companies are drawing talent, retail is gaining ground. The dynamics of retail (property, brand, and customer service) appear to be increasingly valued by the hotel sector, as recently demonstrated by Whitbread whose incoming CEO in 2016, Alison Brittain, comes with an extensive track record in retail banking in the UK with Lloyd’s.
Brittain’s arrival at Whitbread next year will also be viewed as a positive step by advocates of greater female presence at the helm of hotel companies. With Trudy Rautio having recently departed from Carlson however and been succeeded by David Berg, overall women still represent less than 10% of all CEOs in the study. The good news, however, is that the number of women occupying the corner office is higher than at any other time in the last eleven years.
CEOs are travelling more and more, In North America in particular, there is a clear trend of executives completing an international assignment during the course of their career in order to better equip them 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 challenges of Hangzhou as of Houston.
In addition to encouraging their executives to spread their wings and experience other geographies, boards are also generally supportive of their CEOs holding a non-executive directorship on another company’s board. The exposure and insight into another business that the role of an independent director gives can provide a valuable learning opportunity and information exchange. This tends to be more commonplace among public companies than private corporations and over the past couple of years we have noticed a significant increase in external board seats being held by CEOs of Chinese companies
The average profile of a large hotel company CEO today is represented in the table below. No matter where you are in the world, the CEO is likely to be a man in his early fifties and degree educated. Region to region however there are subtle differences in the paths these individuals have trodden to the CEO office and how long they stay there once inside.
Click here for an overview of the typical CEO profile by region.
As we write mid-way through the year our prediction for the report on 2015 turnover is a slight uptick over 2014. With changes already announced in the first 6 months of this year at Starwood (forced), Carlson (retirement), Caesar’s (forced) and Whitbread (retirement) as well as increased M&A activity such as Jin Jiang’s acquisition of Groupe du Louvre and Fairmont Raffles rumoured to be on the market, we expect boards to be keeping CEO succession planning high on their agenda.
