Do increases in RevPAR performance translate to increases in salary?, Chris Mumford of HVS Executive Search takes a look at the London market to see if management salaries have increased in line with RevPAR.
It is generally the case that when trading conditions improve so too does an employee's earning power. Typically, people make more when the market is strong than during a downturn.
The London hotel market has been showing signs of improved health in 2005. According to figures produced by The Daily Bench, London's five star hotels have experienced a year-on-year gain of 5.10% in RevPAR. We therefore decided to see if management's earning power has indeed increased in a corresponding manner.
Using data acquired through our proprietary HCE Hospitality Compensation Exchange® programme, we analysed average base salaries of seven key management positions at luxury hotels in London.
We took the 2005 figures and compared them against those of 2004. As the table below illustrates, every position in the peer group recorded an increase in average annual base salary:
The average increase was 8.92% with Sales and Marketing Directors recording the greatest increases. We then explored further to see if the hotel's room count had any impact on the size of salary increase.
We compared the average annual base salaries of management at hotels of less than 200 rooms against those at hotels of more than 200 rooms. The results indicate that management salaries rose modestly higher at smaller hotels than at larger hotels of over 200 rooms.
We also saw that bonuses had increased significantly year-on-year, typically a clear indicator that trading conditions have improved. This was particularly emphasised by the dramatic increase in Sales and Marketing Directors' bonus awards which are typically tied directly to performance targets such as room night production and revenue generation. Chefs also recorded a considerable increase.
It would appear therefore that salaries do indeed rise with improved market performance. In fact, London hotel management salary increases have considerably outstripped hotel operating performance increases as recorded in RevPAR. An average salary increase of 8.92% versus a recorded RevPAR increase of 5.10%.
Unsurprisingly however, it is a different story further down the career ladder for those who are not in the management ranks. Our survey of luxury hotel salaries in London showed that the average increase in base salary for non-management positions is approximately one third of that accorded to their superiors, at 3.27%.