The leadership of global hotel companies has been stable over the last several years, with a few exceptions, but changes at the top are increasingly likely as the cycle slows.
Will 2020 see some chairs spinning in the offices of hotel company CEOs this year as incumbents up and leave? It has been very quiet the last two to three years as hoteliers have recorded consistent growth numbers and shareholders have sought stability in leadership as the needle continues to point upward.
The most recent notable changes in the office of CEO at a major multinational hotel group were the ascensions of Keith Barr at InterContinental Hotels Group and Pat Pacious at Choice Hotels International, both in 2017. Having tracked CEO turnover among hotel companies since 2004, I can assert that, with two back-to-back years of minimal change, we are currently in one of the most stable periods of company stewardship our sector has witnessed in the past 15 years, with a relatively uneventful 2014 being the only other year of note.
Beyond the world of hotels, however, 2019 saw a number of high-profile CEO departures at well-known brands such as Away, Boeing, Expedia, Gap, HSBC, McDonald’s, Nike, Under Armour and WeWork.
Why has the hotel sector been immune to the factors that are influencing leadership changes at companies in other industries?
One reason could be that hotel companies are free of drama and scandal. A number of CEO movements in other sectors were the result of alleged personal misconduct or accusations of fostering a toxic corporate culture. These days, shareholders are quick to step in and remove leadership at the slightest hint that a leader’s personal behavior might be negatively affecting company performance and/or brand image. The hotel business, thankfully, appears to be less susceptible to the inappropriate antics of its chief executives.
An additional cause of CEO stability among hoteliers could be the fact that nothing has gone wrong. The hotel world has not had a Boeing issue in which a catastrophic product or service failing has had dire ramifications for the business and resultant exit of the CEO. Where things have gone seriously wrong (Marriott International’s data breach), the company has executed a crisis management and public relations campaign to sufficiently manage the issue and, just as importantly, satisfy shareholders that corrective action is being taken.
A further reason for executive shake-up, particularly in the tech sector, was the transition (sometimes forced) from the founder to a new (perceived as safer) pair of hands. Investors showed some heightened impatience with wunderkinds who struggled to convert a great idea burning lots of money into a sustainable profit generating entity. Others such as Larry Page at Alphabet were able to make their own determination as to when best to leave the spotlight. Aside from new entrants into the sector such as Oyo Hotels and Homes, the original founders of the predominant hotel companies of today have long since departed, and so these businesses have not been subject to such succession issues.
Strategic differences also played a part in why some CEOs were shown the door. Impatience with the company’s pace of growth or concerns over declining market share and rising debts were expressed by several boards of directors, usually swiftly followed by the sound of new feet striding into the corner office. Again, hotel company performance has largely been positive in recent years, with the consequence that directors have not felt the need to oust the incumbent from the hot seat.
Looking ahead, I predict that this period of extended calm will come to an end in the next 12 to 24 months, and we will see a heightened rate of change among hotel CEOs. The average tenure of a hotel CEO has typically been six to seven years. Significantly in excess of that are Chris Nassetta at Hilton, David Kong at Best Western Hotels & Resorts and Mark Hoplamazian at Hyatt Hotels Corporation. With it generally acknowledged that the hotel business is showing signs that the top of the cycle has either been passed or will slowly begin its retreat in the near future, now is a good time to consider a move for any CEOs looking to cash in their stock and retire into a less-active, non-exec role.
Additionally, with a potential downturn or even recession on its way, boards of directors are likely to have the global financial crisis still fresh in their minds. In that instance, the storm hit and then boards made changes at the helm in a frantic bid to stay afloat and turn the ship around. This time, investors are more likely to see the early signs of waves building and act ahead of time in readiness for what is to come.
My predictions for potential CEO departures in the next 12 to 18 months are Sébastien Bazin at Accor, Arne Sorenson at Marriott International, David Kong at Best Western and possibly Chris Nassetta at Hilton. While it may be sad to see these moves occur, there is no doubt that each of these individuals will leave very large shoes to fill, and it will be fascinating to see who ultimately steps into them.
Chris Mumford is a Managing Director of the London office of AETHOS Consulting Group, the global hospitality human-capital advisory serving the hotel, restaurant, casino, cruise line, club and travel technology sectors. Core competencies include executive search, compensation consulting, organizational development and psychometric assessments. With over 20 years of hospitality-related executive search and human capital consulting experience globally, Chris is particularly active in the Asia, Europe, and Middle East regions advising hospitality organizations on compensation, leadership and organizational issues while also facilitating senior executive appointments. Chris can be reached at email@example.com.
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