Written By:  Keith Kefgen & Christopher Mumford

Click here to view The 2002 Hotel Industry CEO Survey

It is unlikely that many in the lodging industry will forget the year 2001 in a hurry although many may want to. The onset of a recession followed by 9/11 had a dramatic impact on industry prices.  In addition, the Enron debacle has put corporate governance under the microscope, including executive pay performance. It is a testimony to the leadership and consistency of Charles Ledsinger at Choice Hotels that, one year after collecting the HVS Executive Search ‘Board of the Year’ award, he receives the award for top performing CEO.   

Top Performers

Based on our pay-for-performance model, Mr. Ledsinger was underpaid by nearly $1.45 million in 2001. Good for him to know when it comes to contract renewal time. The model takes into consideration three primary criteria, EBITDA growth, market capitalization and stock appreciation, and compares that to total compensation. Isadore Sharp of Four Seasons was yet again a repeat performer as was Robert Winston of Winston Hotels. Staying on top is very difficult to do and, especially in light of the challenges of 2001, we commend these gentlemen on their consistency.

This year saw a number of newcomers entering the top ten with, in addition to Ledsinger, Joseph Martori of ILX Resorts; John Q. Hammons; Stephen Bellringer of Canadian Hotel Income Properties; Bruce Wardinski of Crestline; Robert Schermer of Meritage; Roger Sonnabend of Sonesta; and David Litman from Hotels.com joining the list. These CEOs have created value for their shareholders during extremely difficult times.

Top Appreciators

Many of the familiar names once again proved to be some of the top investments in the lodging industry with the likes of Marriott, Four Seasons and Starwood joined this year by Boca Resorts, ILX Resorts, Choice and Crestline. These firms performed exceptionally well in a year that saw stalwarts such as Walt Disney, Hilton Hotels, and Carnival experience stock declines. 

Top Salaries and Bonuses

As might be expected, the average CEO salary increased but at a rate of only 2.3% to $552,693. Silverman, Tisch, Sharp, Marriott and Sternlicht are perennial fixtures at the top of this list, however they did not all make it to the top of the bonus list this year. Bonuses seemed harder to justify in 2001 and 35% of surveyed CEOs received no bonus at all, while the average bonus amount plunged 48% to around 1999 levels of $405,325. 
 

Top Stock Incentives

The largest stock grants in 2001 went primarily to the same CEOs as last year, with Henry Silverman of Cendant leading the way followed by Mr. Sternlicht of Starwood and Mr. Petrocelli of Prime Hospitality, each receiving options worth in excess of $10 million. These CEOs continued to receive enormous grants, while the number of industry CEOs receiving options in 2001 also increased to 45%.

Fortunes In Waiting

The biggest future payday belongs to Mr. Silverman of Cendant. If he were to execute his entire stock option portfolio he would be $255 million richer. Other big paydays belong to Marriott, Sternlicht, Peter Rummell of St Joe Co. and George Johnson from Extended StayAmerica.
 

Richest CEOs

Micky Arison and Bill Marriott continue to be the industry’s only billionaires, worth $6.4 and $1.3 billion respectively. Henry Silverman, Michael Eisner and Barry Sternlicht round out the top five richest CEOs.

It appears that in a climate where trimming costs and cutting staff were the order of the day, CEOs in the lodging industry took a more moderate view towards their own compensation in 2001. Some managed to steer their way through troubled waters better than others and in terms of pay for performance, Charles Ledsinger proved again that Choice Hotels International is charting the right course.

Click here to view The 2002 Hotel Industry CEO Survey