The Current Economic Storm and Hospitality Chief Executive Officer Job Stability

"Jerry Yang resigns as Chief Executive Officer of Yahoo" and "Rick Wagoner forced out of top spot at GM" are two notable examples of chief executive officer departures correlating with the current economic storm. As the hospitality industry (hotel, restaurant and gaming) has been one of the hardest hit segments HVS Executive Search reached out to leading hospitality board directors and CEOs in the U.S. to gain insight on CEO departure trends. As a starting point we culled CEO tenure statistics from large cap hotel, restaurant and gaming companies:

* Schultz regained role as CEO in 2008
** Company and Incumbent data culled from most recent public proxy information

Our findings indicate that hospitality chief executive officer job stability through the current economic storm has remained extremely strong. In fact, since the beginning of the recession (December 2007 – according to the National Bureau of Economic Research the official arbiter of recessions in the U.S.) there have only been seven departures within the above thirty-company peer group; four of the seven occurring within the gaming segment. At first glance this low turnover statistic would be counterintuitive as the assumption would be that during a severe economic downturn organizations execute survival strategies and recruit CEOs specializing as a change agent and/or turnaround expert. To better understand this trend we talked with leading hospitality board directors and chief executive officers.

Based on our discussions it is apparent that a majority of hospitality board members are currently extremely supportive of their CEOs and are working more closely than ever before to survive in this unprecedented market. As one board member put it "most of us are senior leaders of organizations … we understand the personal and professional challenges facing our CEOs in this difficult operating environment". What’s more, many board members stated they thought it would be counter-productive to make changes as over the past twelve months every CEO has taken a "batten down the hatches" approach cutting expenses and overheads so a change in leadership would be a blow to employee morale and unnecessary risk that a new leader would undo survival strategies already set in motion.

As the economy starts to pick up and hotel, restaurant and gaming demand generators improve it will be interesting to see how boards and CEOs react. Will hospitality boards pay less attention to survival mode and more to relative performance? Will CEOs stay on board believing in the long-term direction of the organization and the viability to regain "in the money" equity? Stand by.

By David Mansbach

November 5, 2009