Wanted: The well-rounded CEO

Running a global hospitality company, particularly one that is publicly traded, takes a broader skill set today than that gained along the typical career path of an hotelier. Senior leaders must possess organizational and leadership skills, financial acumen, capital markets expertise, and a proven track record in strategy, growth, and business development.

Ideally, a CEO should have the full package—operating expertise along with the requisite business acumen. However, given the complexities of large, global businesses, it is far less important that CEOs have hands-on experience in hotel operations. Rather, as stewards of the brand and the operating model, these CEOs must focus on profitability and growth, while addressing issues such as capital allocation, building relationships with key team members across cultures, compensation, managing relationships with large shareholders, and preserving a culture of excellence.

The departure from historical practice, when career hoteliers with predominantly operating experience moved into the C-suite, is likely a more fundamental shift, as confirmed in my recent conversations with CEOs of the largest global hospitality companies.

As one senior hotel executive commented, “What makes you the best hotel operator doesn’t really prepare you to be the CEO.” It’s not that operating experience is discounted; however, the business-side—especially finance; exposure to the capital markets; dealing with large shareholders, boards, and Wall Street; strategy and development, and leading a global team—are what ultimately determine leadership material.

For example, when Four Seasons Hotels and Resorts was recruiting a new president and CEO recently, the ideal candidate was found in an adjacent industry: Allen Smith, who had been CEO of Prudential Real Estate Investors, one of the largest real estate investment managers in the world. Among Smith’s many qualifications were his experiences as a CEO and running a global business. Having graduated from Cornell’s hotel school, Smith knows the industry, but also brings proven experience as a fiduciary of delivering attractive financial returns to investors on complex real estate projects worldwide.

For publicly held hospitality companies, there is enhanced accountability to shareholders and Wall Street, alike. Indeed, when a hotel chain is public, it faces the same demands of any large global company in any industry—demonstrating financial performance.

Consider Accor SA of France, operator of hotels such as Sofitel and Ibis, which recently named as its CEO, investor Sébastien Bazin from U.S. private equity firm Colony Capital LLC, which holds a 12.5% stake in Accor. Bazin, who represented Colony on Accor’s board, is very familiar with the company’s challenges, as well as its strategy of divesting real estate assets and investing proceeds to expand in emerging markets.

Casting a broader recruiting net

The non-hotelier CEO trend has brought executives with varied backgrounds into top jobs. For example, in 2007, Frits van Paasschen was named president and CEO of Starwood Hotels & Resorts Worldwide after serving as president and CEO of Coors Brewing Co. He also has more than 20 years of experience in retail, consumer marketing, and finance, working for companies such as Nike and The Walt Disney Company. Mark Hoplamazian of Hyatt Hotels Corp. has expertise in finance, strategy, and private equity investment across a portfolio of companies in diverse industries and global markets. Chris Nassetta of Hilton Worldwide has a background in hospitality and in real estate investment and development, having worked as CEO of Host Hotels & Resorts.

When casting a recruitment net broadly for a CEO position, it is easier to hire someone with strategic and financial acumen, as well as global, CEO experience, and then support him/her with outstanding operating executives. The broader someone’s expertise, the better. “The world is moving too fast, and there’s not enough time to get up to speed, to learn how to think strategically and to understand the financial aspects of the business,” a CEO commented.

Even those with a background in the hotel business are ultimately groomed for the CEO position by virtue of their non-operating experience. Arne Sorenson, president and CEO of Marriott International, has been with the global hospitality company since 1996. His previous positions, however, provided him with in-depth strategic, mergers and acquisitions, and global expertise, including serving as president and COO, executive vice president and CFO, and president of Continental European Lodging.

Lattice, not a ladder

For hotelier talent today, the trend of hiring outside CEOs may be disheartening. Nonetheless, acknowledging the breadth of expertise needed to become a leader today is enlightening when it comes to one’s own career path as well as the company’s succession plan. Rather than follow a more traditional hotel-operations career path, those who have their sights on senior management one day would do well to gain broader exposure to the corporate-side of the business. Such moves may not be linear promotions, but rather lateral roles to develop breadth. Instead of climbing the career ladder, a better image is exploring a lattice that expands horizontally.

This kind of “lattice” development does not necessarily mean becoming a financial expert; however, talent needs to become familiar with strategy and capital markets. Without such ease and familiarity, how can someone aspire to become a leader who is ultimately responsible for the firm’s profitability and balance sheet? Consider the career path of Richard Solomons, who became CEO of InterContinental Hotels Group in July 2011, rising to the top of the company he joined in 1992. Solomons had an extensive background in real estate and finance, having served previously as CFO and head of commercial development.

Real estate experience, as in the case of Nassetta and Smith, is highly valuable to the big hotel brands, even though many are no longer significant owners of assets. Rather, companies often develop assets and then sell them, retaining the management contracts. Nonetheless, the real estate component remains important.

In contrast, hoteliers have valuable expertise running portfolios across regions. Their focus on driving revenue and managing teams of people, complement the strategy and capital markets acumen of the CEO. This approach makes for a great team composed of highly valued members, ensuring solid leadership and fiscal discipline at the top, while never compromising service or excellence in operations.

After all, ultimately, the hotel business is about meeting and exceeding the expectations of customers across a global expanse of properties. Executing that strategy takes hoteliers with great operating and leadership skills to keep customers satisfied, coupled with corporate leaders who keep the company in sound financial health and strategically positioned to pursue global, growth opportunities.

Contributed by William Ferguson, chairman and CEO, Ferguson Partners Ltd., and co-chairman and co-CEO of FPL Advisory Group, Chicago