Stock Analysis

We Think Hyatt Hotels Corporation's (NYSE:H) CEO Compensation Package Needs To Be Put Under A Microscope

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The results at Hyatt Hotels Corporation (NYSE:H) have been quite disappointing recently and CEO Mark Hoplamazian bears some responsibility for this. Shareholders can take the chance to hold the board and management accountable for the unsatisfactory performance at the next AGM on 19 May 2021. It would also be an opportunity for shareholders to influence management through voting on company resolutions such as executive remuneration, which could impact the firm significantly. We present the case why we think CEO compensation is out of sync with company performance.

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Comparing Hyatt Hotels Corporation's CEO Compensation With the industry

At the time of writing, our data shows that Hyatt Hotels Corporation has a market capitalization of US$7.7b, and reported total annual CEO compensation of US$13m for the year to December 2020. Notably, that's a decrease of 12% over the year before. While we always look at total compensation first, our analysis shows that the salary component is less, at US$318k.

On examining similar-sized companies in the industry with market capitalizations between US$4.0b and US$12b, we discovered that the median CEO total compensation of that group was US$6.5m. This suggests that Mark Hoplamazian is paid more than the median for the industry. Furthermore, Mark Hoplamazian directly owns US$29m worth of shares in the company, implying that they are deeply invested in the company's success.

Component20202019Proportion (2020)
Salary US$318k US$1.2m 2%
Other US$13m US$13m 98%
Total CompensationUS$13m US$15m100%

Speaking on an industry level, nearly 23% of total compensation represents salary, while the remainder of 77% is other remuneration. A high-salary is usually a no-brainer when it comes to attracting the best executives, but Hyatt Hotels paid Mark Hoplamazian a nominal salary to the CEO over the past 12 months, instead focusing on non-salary compensation. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

NYSE:H CEO Compensation May 13th 2021

A Look at Hyatt Hotels Corporation's Growth Numbers

Over the last three years, Hyatt Hotels Corporation has shrunk its earnings per share by 78% per year. In the last year, its revenue is down 79%.

The decline in EPS is a bit concerning. And the fact that revenue is down year on year arguably paints an ugly picture. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has Hyatt Hotels Corporation Been A Good Investment?

Since shareholders would have lost about 5.6% over three years, some Hyatt Hotels Corporation investors would surely be feeling negative emotions. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

Hyatt Hotels prefers rewarding its CEO through non-salary benefits. Given that shareholders haven't seen any positive returns on their investment, not to mention the lack of earnings growth, this may suggest that few of them would be willing to award the CEO with a pay rise. At the upcoming AGM, they can question the management's plans and strategies to turn performance around and reassess their investment thesis in regards to the company.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. In our study, we found 2 warning signs for Hyatt Hotels you should be aware of, and 1 of them is significant.

Important note: Hyatt Hotels is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.

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