Comparison of compensation packages awarded to hotel General Managers in key cities in Russia with other international markets.

In our most recent article, we compared General Manager compensation in Moscow and St. Petersburg to other global cities. In our second installment, we examine how General Manager pay compares to other senior managers in the same property. The compensation data is derived from surveys conducted by HVS Executive Search in 2005-06.

All of the data has been grossed up to reflect pre-tax compensation, and exchange rates were applied to bring all packages to the common USD denominator. Exchange rates and personal income tax rates are disclosed in accompanying footnotes.

Table 1

Position / Bonus as % of Salary
General Manager 51%
Executive Chef 10%
Controller 19%
Director F&B 27%
Director Sales & Marketing 23%
Chief Engineer 21%
Director HR 26%
Executive Housekeeper 16%
Front Office Manager 14%

In Moscow, the two highest salaried executives after GM are Executive Chef and Controller at 49% and 46% respectively. One of the primary reasons is the high number of expatriates in Executive Chef (80%) and Controller (60%) positions.

In contrast, Director of F&B received the highest bonus after GM. This is due in part to the complexity of food and beverage operations. Furthermore, direct P&L responsibility makes it easier to formulate incentive payouts.

Table 1 shows the average bonus for each position in Moscow. Director of F&B stands out again, for the reasons described above. The Director HR derived the next highest bonus.

Table 2

Position / Bonus as % of Salary
General Manager 35%
Controller 21%
Director of Sales & Marketing 30%
Director F&B 32%
Front Office Manager 22%
Executive Housekeeper 24%
Executive Chef 21%
Chief Engineer 25%
Director HR 20%

In St. Petersburg the situation is not much different. However, the difference between GM and other salaries is even higher (39% and 38% of GM's salary for Executive Chef and Controller, respectively). Noteworthy is the higher level of bonuses awarded to almost all managers compared to Moscow.

According to Table 2, bonus systems in St. Petersburg look more uniform across positions than in Moscow. Reasons include: more corporate-managed hotels in the market (thus bonus programs are dictated by central HR); more expatriates in managerial positions, as the local labour market is smaller; or simply more information sharing among hoteliers which results in the uniformity of compensation packages.

For an international comparison, we looked at the compensation data for two of the major US hotel markets, New York and Chicago. The main observation is that the same two positions as in Russia, Executive Chef at 59% and Controller at 55%, follow General Manager as the highest paid in Chicago. In New York, it is Executive Chef at 69% and Director of Sales and Marketing at 68%, closely followed by Controller at 67%, according to our data. Generally, the discrepancy between the highest paid manager in the Hotel (General Manager) and the lowest paid manager (in our comparison, Front Office Manager) is not nearly as high as in Russia.

The overall pattern for General Manager compensation in Russia stems from one main reason: there are significantly more expatriates in Russia than in other comparative hotel markets. Not all surveyed hotels in Russia have a No.2 position (Assistant General Manager or a Resident Manager). We note this as a strategic mistake, and encourage Russian hotel owners to hire and train locals who can one day take over from expatriate GMs.

With this article, we conclude the brief study of compensation packages awarded to General Managers in Moscow and St. Petersburg.

The Russian hotel industry, in its current stage of rapid growth, will go through a lot more adjustments in its distribution of compensation packages among management executives before it comes closer to common international practices. We will keep a close eye on the developments, and continue to report on noteworthy facts.

Forward any questions or comments to Tatiana Veller, Managing Director – Russia, HVS Executive Search, at tveller@hvs.com or at phone number +7 (909) 642-0313.

Footnotes:

1 USD – 26.5 Roubles
1 Euro – 1.25 USD
Personal income tax rate (Russia) – 13%