Big Names Are Shown To Dominate In 2001 Lodging CEO Survey

What a difference a year makes on Wall Street. Only a few short months ago the dot-com craze was in full swing, with many executives defecting from established companies for unknown upstarts. Fast-forward 12 months and everyone is talking about recession and a flight to quality. With the NASDAQ down nearly 60% since last year, it appears that investors came back to the real estate-intensive hotel industry looking for bargains and safe havens. Marriott International, Four Seasons, Starwood and MeriStar were some of the beneficiaries of this trend. In fact, Marriott has simply been the best investment in the lodging industry, nearly doubling its stock price over the past three years. It’s no surprise then that Bill Marriott Jr. was crowned as our top performing CEO during the past year. Top Performers Based on our pay-for-performance model, Marriott Jr. was underpaid by nearly $2.5 million. Not a bad number to know when he renegotiates his new employment agreement. The model takes into consideration three primary criterion— EBITDA growth, market capitalization and stock appreciation— and compares that to total compensation. Isadore Sharp of Four Seasons was a repeat performer, having won the top spot last year. We commend Sharp because staying on top is very difficult to do. Newcomers included Tom Hewitt of Interstate and Paul Whetsell of MeriStar. Interestingly, Interstate was spun off during Patriot American’s demise, while MeriStar just sold to Felcor. These CEOs have created real value for their shareholders during difficult times. The top five investments in the lodging industry were familiar names: Marriott, Four Seasons, Carnival, Sonesta and MeriStar. Had you invested in these five companies three years ago, your portfolio would have increased a whopping 84%. In an industry that averaged an embarrassing 2.34% in stock appreciation over the same period, these CEOs have something to boast about. Top Salaries And Bonuses The average salary for a lodging CEO rose 4% to $540,391, rising at the rate of most cost-of-living estimates. This year’s top salary list included a lot of familiar faces. In fact, Henry Silverman of Cendant, Tisch, Sharp and Marriott Jr. have been on this list since 1996, while Barry Sternlicht has been making the list since 1999. The average bonus for a lodging CEO rose dramatically, moving from $405,000 to $784,493. We attribute the increase to an unprecedented rise in industry RevPAR and profitability. Most CEO bonus plans were tied to these types of financial measurements, so it was foreseeable that bonuses would increase. The other factor affecting bonus payouts was a move toward more cash compensation as a percentage of total compensation. The great bull market of the past decade passed most of the lodging industry CEOs by, leaving them to negotiate higher cash compensation packages. Top Stock Incentives The largest stock grants in 2000 went primarily to the same CEOs as last year, with Silverman, Michael Eisner of Disney and Sternlicht receiving options worth more the $20 million apiece. These CEOs continued to receive enormous grants, while only 37.5% of all industry CEOs received options in 2000. These facts bolster our premise that many CEOs opted for greater bonus payouts in 2000. Richest CEOs The biggest future payday belongs to Eisner. If he were to execute his entire stock option portfolio, he would be $266 million richer. Other big paydays belong to Marriott Jr., Sternlicht, Silverman and Micky Arison of Carnival. It seems the same cast of characters keeps getting those hefty annual stock grants. Arison and Marriott Jr. are the industry’s only billionaires, worth $5.9 billion and $1.2 billion respectively. The group welcomes Sternlicht to the richest list this year, with a total net worth of $270 million. He surpasses Sharp to become the fifth richest CEO in the industry. With the lodging segment out of favor on Wall Street, it is a real tribute to Marri