Skift Take

Coming off the release of annual financial reports, we delve into the issue of CEO pay in the travel industry in this week's podcast as several major executives have seen their compensation boom in recent years.

Series: The New Skift Podcast

Editor-in-Chief Sarah Kopit and Head of Research Seth Borko talk travel every week.

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Travel executive pay is a topic we’ve covered extensively at Skift. In this episode of the Skift Travel Podcast, our full-time hosts, Editor-in-Chief Sarah Kopit and Head of Research Seth Borko discuss several issues related to those often large pay packages — including compensation for Airbnb CEO Brian Chesky, whose 10-year pay package could turn into $1 billion or more.

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Sarah Kopit: Welcome back to the Skift Travel Podcast with Seth and Sarah. I am the aforementioned Sarah Kopit, Skift’s editor-in chief, joined as always by Skift’s Head of Research Seth Borko. Say hello, Seth.

Seth Borko: Hey, everybody. Great to see you, Sarah.

Kopit: So today, fresh off the heels of the release of annual financial reports, we are discussing one of my favorite topics — executive compensation. People just love to talk about pay. Get this: in 2022, the Economic Policy Institute estimated that CEOs were paid 344 times as much as a typical worker. In contrast to 1965, when they were paid only 21 times as much.

We’re likely not going to settle any arguments today about so-called late stage capitalism. But we are going to drill down into the most eye-watering figures being thrown around in the travel industry and beyond. And we’re going to discuss how those compensation numbers relate to the performance of the companies in question. So Seth, CEO pay, let’s talk about Brian Chesky.

Brian Chesky’s Pay

Borko: So Brian Chesky, if you don’t know him, the CEO and founder of Airbnb, in many ways revolutionized the travel industry. The company went public in late 2020, and immediately became the second most valuable public travel company in the world. It’s still worth something over $90 billion on the market today. And right before it went public, they gave Brian Chesky a brand new pay package.

And it’s a really interesting one. He was making like $150,000 a year. And they cut his salary to $1 a year. Okay. And in exchange, they gave him about 12 million shares of stock in his soon-to-be public company.

It’s right on the cusp of IPO and the eve of the IPO, they give him this new executive compensation plan. And it’s 12 million shares of the new company or its old company, but now public company. And they’re set to invest in ten equal blocks. So every year, he gets another 1.2 million shares if he can meet these increasingly higher and higher stock price goals. And the company goes public. It goes from like some like $68, $70 — it immediately jumps to like $120, $140 a share, something like that.

Today, it’s like $160 a share. So those 12 million shares are now worth a lot of money. And so all of a sudden, it was always a big pay package. But it’s become something like … we reported it’s something like a potentially be a multibillion dollar pay package if he achieves this today. And if he achieves all these targets, it’s billions of dollars, of course.

Kopit: Yeah. Closer to I think $3 billion is what we reported.

Borko: If he hits every single price target that they’ve set forth for him, it will be like a $3.6 billion pay package over 10 years. So it’s only $460 million a year. So you know, very modest. Right?

Kopit: Yeah. So, I mean, the thing about Brian, though, is that he has said that he is going to, to be fair, like many of the billionaires, although not all — but many of them — they have said they’re going to give a lot of their money to charity. And I think that Chesky had said that he was also going to put some of it into a host endowment fund as well. So I’m going to see Brian next week.

Borko: You should ask him about that.

Kopit: I’m going to ask him about it. If he’s listening right now, he gets a tip off.

Borko: If he is an early listener to the Skift podcast, and he gets a heads up as to how the conversation goes. That’s a good deal for anyone listening.

Kopit: Good CEOs, take note. Yeah. So what do you think about that? I’m curious, what are your thoughts about I guess Brian Chesky’s pay package and how they did it? And I guess the broader question is, should there even be billionaires at all? Taking to the other extreme?

Differences Between the U.S. and Europe

Borko: Well, I think those two things tie into it in the way I think about it. And you can disagree with me. Our listeners can disagree with me. We can get some some hate mail if we need it. But there’s this whole conversation about should billionaires exist? Like every billionaire is a policy failure.

There are these slogans that people like. I don’t know if I necessarily agree with that. What’s interesting about this pay package in particular is that it’s not like they gave him $1 billion of cash. It’s not like he inherited $1 billion from his rich uncle. Yeah, it’s his company. He built it.

And the reason why he’s getting $1 billion is because his company is worth $90 billion. And if he hits his target, his company is gonna be worth $300 billion. Yeah. So this pay package equates to something like 2% or 3% of the total value of the company paid out over 10 years.

So in order for him to become a billionaire with the way that this compensation is structured, he has to make a lot of other people a lot of money as well. So I like that — this is the ultimate skin in the game. Pay compensation: one dollar CEO, $1 salary and only stock compensation. Not all companies do it that way.

Kopit: Yeah, I do consider myself to be a good free market capitalist. But I’m one of those people that I don’t know. You think about how much $1 billion actually is — it’s what, a thousand million?

Borko: Yeah, yeah yeah, yeah. Right.

Kopit: Thousand million, and that’s just 1 billion. Like when we’re talking about billionaires, we’re often talking about a magnitude of billions. Right. But I agree with you on the way that Chesky’s pay package is structured. I want to live in a place where we encourage entrepreneurs and people to become insanely rich by making incredibly innovative and successful companies.

It’s like the American dream, right? But, we’ll talk about it a little later. But there is just something about the inequality between just most people out there going to work trying to put their put their kids through college and trying to buy a house.

And then you’ve got this. So let’s talk about some of the other travel CEOs. I know Skift Research has done a ton of work on this topic. Talk a little bit about what you found about our industry CEOs, Brian Chesky aside.

Compensation Structures Around the World

Borko: I just pulled some some data on CEO compensation. So we track this … we call it the Skift Travel 200. It’s 200 of the largest publicly traded companies. Now, I did throw out. I will admit … I did some analysis. I threw out European and Asian companies because they report differently.

And also quite frankly, this ties into this conversation — the compensation structure in Europe, even for a similarly sized company, is much, much different. But let’s look at just at the U.S. The average travel CEO in the U.S. makes … let’s call it (the) median. Let’s call it $7 million in 2023.

It’s about what the pay was. A lot of that is stock, which is a good thing. The typical S&P 500 CEO … so (for) other large cap U.S. companies, the pay is closer to $15 million on average in 2023. And it’s hard to say … did travel perform worse than S&P? Actually, not that much worse.

So in a sense, these travel CEOs are underpaid at only $7 million. But the other piece of it is that — we can speak frankly and it just goes back to your point about inequality — entry level travel industry jobs can be very, very low pay relative to like … Elon Musk, one of the highest-paid CEOs.

What if he employs a bunch of engineers? Those guys get paid a lot of money. Some of these global hotel chains like Hilton. Chris Nassetta got a massive pay package. The average salary in the hotel industry is like 40, $45,000 a year. So even though travel CEOs, many of them are paid less than other industries, I also think that in some ways there’s more disparity in the travel industry between CEO pay and worker pay.

I don’t have precise numbers in front of me in terms of backing that up. But it’s an interesting thing to think about.

Kopit: Yeah. And the European model … when we think about Europe, there’s a lot more of higher taxes. I don’t know, do I want to use the s-word like … I don’t know if you would call a lot of them socialist governments. Socialism. Yeah.


Borko: Right. That’s where it is.

Kopit: Yeah. Yeah. Exactly. Talking to two Americans here. But yeah …

Borko: Basically communist dystopia over there in Europe, right? I mean.

Kopit: Yeah, I mean, have you seen Finland?

Borko: It’s an interesting thing. I think part of (is) … I’m starting to get a little bit away from the numbers. But I think part of it has to do with stocks, with the equity market. The equity market in the U.S. is a lot bigger. There’s more public companies in the U.S.

And a lot of these … it’s not like they get low salaries. But a lot of these eye-popping compensation numbers, a lot of them do come from the stock value of shares given to the CEO. So the actual cash salaries are far more modest million dollars a year. And then the rest of it is stock. I think that’s part of the difference as well.

Kopit: It’s funny, I was just digging around on social media the other day. Have you seen there was (this) video …. it talked about Europeans in a joking way. The Europeans’ idea of what an American does every day. It’s very funny, but like sometime around 3:30 in the afternoon after eating popcorn for lunch and driving their truck and turning the air conditioning on and polishing their gun, they have an idea that changes the course of human history.

And then they put down their computer and go eat some more popcorn and ride a horse or something like that. But it’s true when you when I talk to my … especially my British friends, they always talk about you Americans. You just have this like … it’s like that very westward ho idea of optimism and ability to fail. And it’s why we have all of these a lot of colossally successful companies.

Borko: It’s true. Well, the joke is that everyone is just a temporarily displaced millionaire in the United States, right? Like, I’m just waiting to be the CEO. But then some people do it, right. That’s the thing … and I guess that comes down inherently to it and equality thing like … I can’t know the exact number. But if you look at every single person who’s ever tried to start a business — the median pay, if you include every single one of those zeros and even negative numbers from all those people who lose their shirts, maybe it’s a bit of a trade.

Then that one person who hits it big, it’s almost like gambling, right? We’re not going to call Airbnb random chance. It was absolutely a major success. But like for the one person who hits it and it’s big.

And I think that’s also, by the way, the difference between a founder, someone like Brian Chesky, versus someone who’s just an executive. Someone who goes to work, who played the corporate game really well and got promoted?

Like a CEO is the startup founder is a very high risk, high reward. There’s a different type of CEO who is like the the corporate lifer who, as you know, just comes into the company.

So let’s jump into the airlines. Now, let’s talk about airline pay. What do you got, Seth?

Airline CEO Pay

Kopit: So let’s jump into the airlines now. Let’s talk about airline pay. What do you got, Seth?

Borko: Yeah, so we do these stories every year, looking at the pay. The one that was most interesting to me this year is Robert Isom. He’s the new CEO of American Airlines. We did a story on it on Skift. And he got paid — a very generous compensation package this year, something like $31 million.

And that is a 550% raise from how much he got paid last year. And he was promoted to CEO in 2020. So he got promoted to CEO. And they said, “Oh, great job. Year one of CEO. Here’s a 500% raise, $31 million at American Airlines, one of the highest paid travel executives.” And what’s interesting about that and in general, is why did he get that huge raise?

And it’s because the government capped CEO — this comes back to this conversation — the government capped CEO pay at the airlines during Covid. If you took CARES Act money, which is the bailout money basically, you couldn’t pay your CEO more than whatever the number one lawyer, whatever the number was. Isom got promoted during that window.

The window expired in 2023, and so they gave him an $11 million catch-up bonus just to say, “Hey, sorry you picked a bad time to get promoted to CEO. Sorry you missed out. Here’s 11 million bucks. You’re not going to get it again. But, you know, enjoy it. God bless.”

It’s a lot of money. Did you get a catch-up bonus anytime you …

Kopit: I didn’t actually. No I didn’t.

Borko: Yeah. So that’s an interesting piece happening there. And it’s upset some airline employees too.

Kopit: Well, yeah. There are strikes going on.

Borko: There are a lot of labor contracts being negotiated in that case. There were some picketing, some strikes. And Robert Isom is not a Brian Chesky. He’s a smart CEO. And I’m not trying to insult him to his face on this podcast or hopefully to its ears if he’s listening. But he’s not a founder.

He’s not a startup founder. He didn’t invent (it). He didn’t found American Airlines. He got promoted CEO, got a lot of money at a time when people are like, “Hold on! That’s a 500% raise.” Big even if you back out that bonus, it’s very big.

Kopit: Yeah. It was kind of interesting though. Like taking some of the airlines and the really, really top CEO compensation off the table. The travel industry kind of has lower CEO salaries than maybe the typical Fortune 500 CEO. We’ve been looking at a lot of the statements that are coming out right now. It’s kind of like pay season for those of us who like to delve into such things.

How Travel CEO Pay Is Calculated

And it’s kind of stark. It’s interesting that we are in an industry that has maybe lower paid CEOs.

Borko: Yeah. Do you even have any guesses? Do you have a reason for why you think that is? I could brainstorm a little bit.

Kopit: When you look at the highest paid CEOs right there, it’s in these kind of like super innovative tech … It’s in a lot of these.

Borko: Micro kind of things.

Kopit: Exactly. It’s like where you’re on the hockey stick of innovation and you’re like riding it up. Where I think the travel industry is a bit — even though we like to talk a lot about the innovation that we do have within the space. And Brian Chesky is a great example of something where there really was that innovation.

He started an industry that didn’t exist before he started it. Right? And so you can say that’s one of the reasons why he has this extraordinarily large pay package in stock in the company that he founded — in the industry that he started. So it’s kind of hard to begrudge that. But for hotels and airlines, these are older industries, more mature industries, I think is how they talk about it.

Borko: By the way, it’s kind of interesting. I was looking at Isom’s pay package for this podcast. So he got that $31 million, got 11 million in catch-up. You know a little bit of play money. The rest of it is well … some of it’s based on long-term stock stuff.

I think that’s part of it, by the way, is that if you get paid a lot in stock and your Google and your stock goes really well, your CEO gets paid a lot. If you’re an airline and you got a business every 10 years, your stock doesn’t tend to do as well. Right. I looked at his performance. So this is an interesting kind of philosophical difference.

Chesky is just stock. I don’t really care how the company does. If the stock does well, you do well. And if we assume if the stock is doing well, that the company’s doing well. Isom and airline CEOs and even I looked at Chris Nassetta as well — the hotel CEOs — they have specific operational targets. So Robert Isom gets paid 60% on net income.

His bonus is 60% net income, 30% actual operations. So they measure on time performance, they measure if the planes take off on time. And if they get to where they’re supposed to go. And he gets paid 10% on DEI initiatives if he succeeds at hidden DEI goals. So Chesky — we’re talking about Chesky … he has none of that.

Isom … his goal is like, if your planes take off on time, then you get paid more. If you recruit more people of color or women, then you get paid more and (the) same thing. It reveals some interesting priorities where the tech startup guys, the priority is stock price. For the airlines the priority is on time performance and the set-up.

He gets paid on RevPAR. So hotel revenue and he gets paid on net unit growth. So he needs to add a lot of Hilton chain hotels. So it’s interesting to see how each of these different companies in these sectors, their CEO pay kind of sets the bar for what they’re going to try and do. So you better believe American is going to be focused on performance.

We’re seeing Hilton, by the way, add a ton of new brands. It’s not a coincidence. That’s what Nassetta gets paid on.

Kopit: Well, this is like across all jobs. How do you incentivize workers? The CEO, after all, is a worker. You get them goals and you compensate them if they hit those goals. So you can look at the CEO pay package and try to figure out what the priorities are for that company. Right?

Borko: Yeah, you can. I think maybe the frustration is when they don’t hit those goals, you feel like the CEOs still get paid though. That’s perhaps a frustration where it’s like …

Kopit: Doesn’t.

Borko: And it’s also the time frame. American Airlines is going to hit its goal this year. They certainly missed their goals in 2020. How do you weigh that? It’s no one’s fault. It was no one’s fault. But still, the flight attendants and the pilots got fired or laid off or furloughed through no one’s fault.

So it’s an interesting … I don’t know.

The Golden Parachute

Kopit: And then there’s the issue of the golden parachute, which …

Borko: Oh, yeah. Did you get paid just to get fired?

Kopit: Yeah. Exactly. So and a lot of money. But to me, the golden parachute makes sense. We’ve got …

Borko: Explain what a golden parachute is for our listeners, Sarah.

Kopit: So, I like to think of it as you’re a CEO of a publicly traded company. You work for the shareholders, right? Sometimes especially if there’s maybe a merger or on the table, somebody wants to buy your company. Guess what? If you sell that company, you’re going to be out of a job most likely. But it might be in the best interest of the shareholders.

So the CEO works for the shareholders and it wants to give the CEO the incentive to maybe do something … that if it’s not necessarily in their personal best interest, but if it’s in the best interest of the shareholders, they want to reward them for taking that action.

And so that’s what’s called the golden parachute, meaning that it’s in a situation where the executive works in the best interest of the company. But not necessarily in their own personal best interests. So when they get fired or let go or go off and retire, they get.

Borko: When they spend time with friends, more time with family to focus, more …

Kopit: Time with their family. They get to leap out of out of the airplane with their golden parachute in their bags of money onto the beach. So I feel like the golden parachute sometimes gets a bad rap in the press because I feel like we want to incentivize those CEOs to really do what’s in the best interest of the shareholders. I think where you get caught up is just the kind of eyewatering.

Borko: Numbers.

Kopit: Numbers that are attached to those …

Borko: Yeah. And I think again it comes back to like the average worker being like, well if I get fired, I don’t get a gold … although you do get a severance. And there are certain scenarios where if you are winding down a division, they do in some cases do actual pay … line workers.

Hey, if you can, we know this division is shutting down. (But) if you can hit these goals, you can get an extra incentive bonus. But I think one person spoils it for everyone. Like a good golden parachute on the top of the competition. That’s like Twitter. Like you want the former CEO of Twitter to be negotiating as hard as possible against Elon Musk, even though Elon’s first order of business is going to be to fire the guy.

Kopit: As he did.

Borko: As he did. Immediately. Yeah, and then sued him. But yes.

Kopit: That’s like a whole month’s worth of podcast just going over over what happened over at Twitter. Unfortunately not in the travel industry.

Borko: And then you get the bad guys, right? You get one person who spoils it for everyone. The other s-word — I don’t know if I’m allowed to curse, but a not-so-nice CEO who gets fired? And then it just feels like he’s walking away with the company’s money. And so, I think the key to all of these things — and I guess maybe even with the billionaire conversation — for me is the specifics matter.

Like they really do in my opinion.

Should Billionaires Exist?

Kopit: Yeah. Well, actually, we did kind of talk about it at the top. But do you think do you think there should be billionaires? Do you think billionaires should be allowed to exist in our society?

Borko: Yeah. I don’t see what the difference between a 999 millionaire and an a billionaire, so to speak. I don’t see an arbitrary cap. Like I think if you make money and you build it the only way, the real way people become visionaries generally speaking is by building businesses.

It’s generally equity. If you can build great businesses that make you lots of money, I don’t see the societal harm in that. I don’t think that necessarily causes harm either. That’s my opinion. Do you agree? I mean, you don’t agree or you do?

Kopit: I mean, I’m kind of with you. It all depends.

Borko: Yeah.

Kopit: But I’m kind of with Europe a little bit like I want to have my cake and eat it too, right. I want to I want to live in a society that encourages innovation and business building and everything that we do so well here in the United States. But at the same time kind of takes care of the little guy a little bit more.

Borko: Well, I don’t necessarily see those things as at odds. I think that a lot of the critique against political pushback against billionaires is that it’s about the inequality. And there’s two pieces to that. And it’s like … well, this person’s here for our audio listeners really high and the another person is really low. And it’s the distance between them.

It’s interesting that we say “Let’s cap salaries and let’s ban billionaires” instead of “Everyone should make at least … You should raise the floor.”

Kopit: Universal income. It’s a false dichotomy.

Borko: That’s what I would say. It’s a false dichotomy. And I also think a lot of it again comes down to equity. At the jump, at the very top, you started with that stat about the changes in pay and how that ratios evolved. Right. And we’ve become more unequal.

I’m curious how much of that is because of how much bigger stock markets we have now versus in the past. And I’m not sure that that’s a bad thing. You know what I mean?

Kopit: Well, there’s also tax policy.

Borko: Surprised we say travel podcast. We meant tax policy.

Kopit: Exactly.

Borko: That’s a huge piece of it. Like why can’t you make as much money as you want. But it’s up to the government to …. yeah we can talk. There’s a huge amount to this in terms of how the government taxes companies, taxes individuals.

Kopit: So listeners, tell us what you think. Send us an email. I’m at [email protected] Seth is at [email protected]. What do you think? Do you think there should be able to be billionaires? Do you think travel CEOs make too much money? Do you think we have bad tax policy? Whatever it is — drop us a line.

Tell us what you think. Any last word, Seth, for this week’s episode?

Borko: I’m very much looking forward to compensation — you know, our bonus policy tied to the performance of this podcast. And hopefully this is the next billion dollar podcast. I think we’re on our way.

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Tags: airbnb, brian chesky, ceo pay, dwell, the skift travel podcast

Photo credit: Editor-in-Chief Sarah Kopit and Head of Research Seth Borko are the hosts of the Skift Travel Podcast. Skift

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