The End Of Year Bonus | Chris Mumford Of HVS Executive Search Looks At Bonus Levels And What Hotel Executives Can Expect This Year.
As the year draws to a close and the financial strain of the holiday season starts to be felt, people's thoughts turn to their end of year bonus. In recent years however, as the hotel industry has suffered economically, executive bonuses have been in short supply and have been a shadow of what they had previously been in the high performing days of 1999 and 2000.
A bonus should play an integral role in a well structured compensation program that rewards short-term performance, both financial and non-financial. It should serve to strengthen the Win/Win link between the performance of the company and the performance of the individual. The majority of companies these days recognise the benefit of incentivising their employees and structure their employees' compensation accordingly. The size of the bonus on offer can depend on a variety of criteria and on the weighting of each criterion. For example, a Food and Beverage Director's bonus may be more heavily weighted towards departmental GOP performance than a Director of Human Resources whose bonus may be centred on other factors such as a reduction in payroll costs.
So how big a piece of the compensation pie is the bonus? A recent survey of salaries and compensation practices among luxury hotels in London showed us that the maximum achievable bonus for an Executive Committee member is approximately between 15 and 25% of base salary, as Table A illustrates.
Table A - Maximum Achievable Bonus Level
| Executive Committee | Minimum | 25th Percentile | 50th Percentile | 75th Percentile | Maximum | Average |
| Resident Manager | 4.00% | 17.50% | 20.00% | 25.00% | 25.00% | 19.14% |
| Financial Controller | 5.00% | 16.25% | 20.00% | 25.00% | 25.00% | 19.50% |
| Director of Human Resources | 7.00% | 15.00% | 20.00% | 25.00% | 25.00% | 18.86% |
| Director of Rooms | 5.00% | 15.75% | 19.00% | 20.00% | 25.00% | 17.17% |
| Director of Sales & Marketing | 7.00% | 13.75% | 20.00% | 25.00% | 25.00% | 18.38% |
| Director of Food & Beverage | 15.00% | 15.00% | 20.00% | 25.00% | 25.00% | 20.00% |
Knowing what is theoretically achievable is one thing, but in reality what can hotel executives actually expect to get? Through our work on the recently launched 2004 Lodging Property Annual Report© Europe and Middle East, we took a look at what hotel executives actually took home in 2003 in bonus as a percentage of base salary.
Table B
| Executive Committee | Average Bonus 2003 |
| Resident Manager | 12.11% |
| Controller | 15.55% |
| Director Human Resources | 13.24% |
| Director Rooms | 10.82% |
| Director Sales & Marketing | 16.85% |
| Director Food & Beverage | 11.92% |
As one would expect, General Managers' bonus levels are higher than that of their hotel colleagues. The Europe-wide average for 2003 was 19.93% of base salary. Interestingly, bonus levels appear to be less influenced by the size, type or complexity of a hotel than base salary. For example, the base bonus level in Europe for a hotel of less than 100 rooms is 18.08%, for a hotel of 200 - 300 rooms it is 18.66%, and for a hotel of over 500 rooms it is 18.91%. Similarly when one looks at other criteria such as hotel type, class and type of management there is very little difference in the bonus levels on offer.
Table C
| Hotel Type | General Manager Bonus as % of Base Salary |
| Commercial | 19.18% |
| Resort | 20.76% |
| Hotel Type | |
| First Class | 20.10% |
| Luxury | 18.26% |
| Hotel Management | |
| Independent | 18.54% |
| Chain | 22.20% |
On a geographic basis however, there does appear to be a reward for working in developing markets such as Prague, St Petersburg, Budapest, or Warsaw. The average bonus level for countries in Eastern Europe is 22% against 18% in Western European countries. This most likely reflects the sharper performance gains that hotels have been able to make in these growing markets compared to those in established marketplaces.
As for bonus results in 2004, hotel executives should have more to look forward to than in the past couple of years. Trading conditions and operating performance have improved in most markets during the year and, as a result, we expect more people to be hitting their targets and enjoying higher bonuses. The average bonus percentage should start to move closer to the maximum achievable bonus level and put a smile on some more faces this year-end.
For details on the 2004 Lodging Property Annual Report© Europe and Middle East please click: .
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...
Leora Lanz
HVS Sales & Marketing Services
516-248-8828 Ext 278
HVS
