Over the last few years, executive comperssation has been a hot topic. The basic question is - are these CEOs worth it? Take a look at our survey of hospitality industry executives, and judge for yourself!
Our survey is unique, in that it includes the value of stock grants given out in 1992 as part of the annual cornpensation figure. We believe - as does the SEC - that this inclusion provides a more accurate reading on what CEOs actually made during 1992. The value of these stock grants were calculated using the BlackScholes pricing method, which determines a present value for options exerdsable over a defined period of time.
This year's big winner was Henry Silverman of Hospitality Franchise Sys tems. Mr. Silverman, a self-professed deal junkie, masterminded the acquisition of Ramada, Days Inns, Howard Johnson and Super 8, and has recenily announced plans to open casinos. The runner-up was Steve Wynn, the high profile leader of Mirage Resorts. With the opening in October of his newest venture, Treasure Island, Mr. Wynn continues to build his gaming empire.
Our survey showed that 20 of the 28 CEOs either started the company they run, or inherited it - an indication that the hospitality industry remains highly entrepreneurial. The gaming sector, in particular, was responsible for a tremendous amount of the new investment in the hospitality industry. Nineteen of the CEOs surveyed run companies involved in gaming. Initial public offerings for new gaming concerns hit a record high on Wall Street this year. Marlin Torguson at Casino Magic, J. Thomas Long at Argosy and Bernard Goldstein at Casino America have pioneered the latest gaming market - riverboat casinos.
The survey also indicated that only five CEOs exerdsed stock options in 1992 - a clear sign that hospitality stocks were undervalued. A strong rebound in 1993 prices has proven this to be the case.
As with any entrepreneurial endeavor, high risk and high reward go hand-in-hand. Our advice to hospitality investors: make sure you know what you are buying. Look at the long-term viability of the company and what the CEO has invested in the organization. Scrutinize the compensation of the CEO and key executives especially where stock options are involved. The HVS return-on-executive pay model which relates corporate financial performance to CEO compensation can assist you with this analysis.
Our advice to would-be entrepreneurs: if you want to make the big bucks, start your own business, build demand, and then take the company public!
The Hotel Valuation Journal