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.
The typical hotel CEO
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.
Top 5 current issues facing hotel CEOs
Top 5 current issues facing hotel CEOsThese newly appointed CEOs are navigating a market that is fast moving, ever changing, highly competitive, and both ripe with opportunity and threat. In particular, the current issues at the top of most Chief Executives’ agendas fall into these five general categories:
- Growth of market share. Consolidation has been the ongoing trend, as seen with Marriott’s acquisition of Starwood Hotels and Resorts, Jin Jiang’s acquisition of Groupe du Louvre, as well as Accor’s takeover of Fairmont Raffles Hotels International. General sentiment is that the industry anticipates more M&A activity, including other landscape-changing deals. The pressure is on CEOs to expand their portfolios rapidly. Those who cannot deliver quickly enough will pay the price, as Frits van Paasschen at Starwood can testify.
- Increase brand equity. Brand awareness and equity and the power of differentiation to stand out in a brand-saturated marketplace are crucial. As hotel companies have gone asset light, CEOs have switched their focus from underlying real estate asset values to capturing customer loyalty and driving top lne. Innovation and evolution are key, not only to grow, but merely to remain competitive. Much like the automotive sector which in the past 15-20 years has developed new market niches that its consumers didn’t realize they wanted or needed – Crossover SUVs (Nissan Qashqai ; ‘coupé’ sedans (Mercedes CLS) – so too is the hotel industry continuing to evolve product and give birth to new concepts and brands in an effort to attract consumers, for example, Generator Hostels, Marriott’s Moxy and Edition, IHG’s Chinese brand ‘Hualuxe’.
- OTAs. The most talked about issue at every hotel industry conference continues to be “how to handle OTAs.” Some embrace OTAs, some are combative and argue that hotel companies should band together much like airlines have done, and still others, like Accor, are jumping directly into the OTA space themselves. Whatever the course of action, CEOs must define and pursue a distribution strategy tailored to the best interests of the company.
- Security & Technology. Staying at the leading edge of technological changes that can impact a number of business areas from guest experience to operating efficiency, to employee engagement and talent retention, to distribution and CRM, is imperative in such a fast moving world. Disruptions to a hotel company’s well-being can take many forms and strike quickly. No longer exclusively the purview of IT or CIOs, contemporary CEOs need to take active involvement in ensuring their companies are protected again cyber-attack, have a rapid response plan in place in the event an attack occurs, and are in adherence with regulations pertaining to data protection. Efficient crisis management skills need to be part of a CEO’s toolbox in a world where few hotel markets are immune to terrorist incidents, whether it be Mali, Sharm el Sheikh, Paris, Mumbai, New York, or Istanbul.
- People. In hospitality, ultimately “people are the product.” Confounding talent acquisition and retention are a myriad of issues that any CEO must work in partnership with HR to achieve. For instance, rapidly expanding portfolios in emerging markets is difficult when there is a dearth of experienced, local talent available. Attracting high performers is a challenge in light of intense competition for service-oriented staff from other industry sectors. And once hired, companies must strive to fulfil the evolving work-life expectations of millennials, as well as those who see urbanism as a perk. And CEOs must be successful in all of these goals while focusing on building a culture that aligns with brand promises to bolster employee engagement and customer loyalty.
This is the sobering climate CEOs inherit when moving into the corner office. Given that, statistically they have 7 years ahead of them in the hot seat, what is it that will make them successful? Speaking directly to this question, the AETHOS partnership has been interviewing and psychometrically profiling “successful” CEOs for several years in its executive search and performance management work. The results and implications are carefully articulated and discussed in the new book, The Loneliness of Leadership (LuLu, 2016). Rather being a superstar in a particular area of expertise, AETHOS’ research using the next generation 20|20 Skills™ assessment (measuring Execution, People, and Cognitive skills) indicates that a strong generalist skill set is the secret sauce to address the six business challenges outlined above.
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.
About the authors
Chris Mumford is a Managing Director of Aethos Consulting Group. Based in the UK, He studied in England and began his professional life in Germany and Japan before entering the world of hotel recruitment. Following 3 years in New York, he returned to London in 2002 to set up the EMEA offices of HVS Executive Search. In 2013 Chris became a founding partner in AETHOS Consulting Group specialising in senior executive appointments, advising on compensation packages, and consulting on significant strategic organisational needs for players in the hospitality industry. A regular speaker on industry related issues, Chris is a frequent author of articles on executive selection, compensation trends, and general HR topics for a number of industry publications. Contact him at cmumford@aethoscg.com
James Houran, Ph.D., Managing Director of Aethos Consulting Group. Based in the U.S., Dr. Jim” Houran is a 20-year veteran in applied psychological research and a published expert on peak performance, online testing and interpersonal and organizational compatibility. He has authored over 100 articles, and his award-winning work has been profiled by a myriad of media outlets and programs including the Discovery Channel, A&E, BBC, National Geographic, NBC’s Today Show, USA Today, New Scientist, Psychology Today and Forbes.com. He remains a member of the American Psychological Association, the American Psychological Society, the Hospitality Sales and Marketing Association International and the American Hotel and Lodging Association, and serves as Research Professor in the Laboratory for Statistics and Computation, ISLA – Instituto Politécnico de Gestão e Tecnologia (Lisbon, Portugal). Contact him at jhouran@aethoscg.com.
