> One US hotel CEO has publicly said that he wants guests to start tipping on room rates because otherwise he will have to increase wages.
Of course he does, tipping cost them nothing.
Tipping is not supposed to be the norm nor is it supposed to cover people's living wages.
I would be happy to tip for people that go above the line of duty but I shouldn't be tipping every worker for doing their job nor should I be guilt-tripped into doing it, especially since I need the money as well.
Don't the shareholders already kinda "tip" the CEO's in a way? A lot of the time they get performance based bonuses or extra incentives from shareholders.
Except they want to get bigger "tips" from shareholders by exploiting their workers and not paying them fairly so that they get better performance.
I wonder how tips factor in to CPI and/or cost of living indices? If the average hotel is $100/night but most people start to tip (in order to pay hotel staff a living wage) would a one night stay go into the basket as $100 or $120?
One of the things I loved about living in Asia (and traveling to Europe) was all-in prices posted everywhere. Made it so much simpler to add up, and was great paying cash due to the even numbers and lack of change.
After moving back to Toronto (and now living in SF), my biggest beef at cafes and restaurants is with the Stripe/Square terminals that force the customer to decide whether to tip or not, requiring the user to interact with the screen. Just let me tap my phone/card and be done with it.
Raise prices 20% or do whatever you have to do so workers can be paid fairly. Don't make the purchasing UX worse by introducing decision fatigue or guilt.
It isn't that simple, this has been tried many times at restaurants in my city. Raising prices 20% and eliminating tipping reduces employee income even though it is nominally revenue neutral because it changes customer spending behavior. Employees don't get paid a 20% service charge for money customers don't spend. The assumption that the customer is not influenced by the structure of the transaction if the final bill would be the same does not hold up empirically. This is not an intuitive outcome, I don't think either restauranteurs or employees expected it when it was first tried, but the result was replicated many times.
Since the market for good employees is competitive, restaurants that replace tipping with a 20% service charge have more difficulty finding and retaining employees. Most of the restaurants that tried this here eventually abandoned it because employees were quite reasonably unhappy about the reduced income.
It is a fascinating example of the structural complexity of even relatively simple economic transactions.
That is not relevant. The statutory minimum wage for jobs with tips where I live is $15 per hour (it is higher without tips). My examples occurred at restaurants where waitstaff expect to make upwards of $40 per hour. They aren't poor in any meaningful sense. The switch from tipping to a service charge anecdotally reduced their income by ~10%, they still made multiples of minimum wage.
If your employer arbitrarily reduced your income by 10% you'd complain too, and in this case the employer wasn't pocketing the difference because the difference was simply lost. It was basically lose/lose for the employer and employee. That's why it isn't popular.
While the average tip percentage may be 20%, the weighted average is >20% because the distribution is not uniform. The people that spend the most money also tend to tip the highest percentage. It is not unusual for financially comfortable regulars to consistently tip 25+%. For people that are cost sensitive and may tip say 15%, a fixed 20% surcharge is effectively a price increase.
This social dynamic of tipping 25+% is an expression of patronage for their favorite restaurants, no different than donating to the local museum. It isn't about the cost of the food per se. That said, this is probably more pronounced in regions that have a strong restaurant-centric culture like the Pacific Northwest.
> Raising prices 20% and eliminating tipping reduces employee income even though it is nominally revenue neutral because it changes customer spending behavior. Employees don't get paid a 20% service charge for money customers don't spend.
This seems right thing to me if customer know beforehand the cost of eating out.
I often receive these advertorials in mail about food festivals etc admonishing customers to be generous with restaurant pop-ups to add at least 20% tip and order extra food and drinks so that restaurants make money. It could be just me this thing pisses me off to stand in line for re-heated food and order extra stuff which I do not want for the privilege of not getting called cheapskate or not having someone spit in my food.
> Most of the restaurants that tried this here eventually abandoned it because employees were quite reasonably unhappy about the reduced income.
Gouging money from customer that they did not plan to spend does not seem ethical to me. I don't get how employee welfare becomes direct customer's responsibility instead of employers'.
Has it really been tried? I know individual restaurants have tried it but I can understand customer confusion when one place includes the amount by default but most don't. I think you'd need to do this across a reasonably large geographic area, such as a complete city, to give it a proper test.
I assume you're referring to the newish $15 minimum wage. A search for "Seattle restaurants no tipping" gets me a number of articles discussing the subject. From reading them it sounds like Seattle is now a mix of restaurants that discourage tips, restaurants that discourage tips but added a service charge, and restaurants that continue to accept tips. There also seem to be places that have raised prices along with these changes in tipping. I'd note that the places that raised prices seemed to raise them to also cover other increased costs besides just labor. It doesn't seem like Seattle has uniformly embrace no tipping in bars and restaurants.
I lived in Seattle through this grand experiment and know several restauranteurs personally.
The no tipping experiment became trendy several years back, with many restauranteurs converting their restaurants including at many of the restaurants I frequent. It was actually quite jarring because so many restaurants made the transition at around the same time. As a consumer, I simply adapted.
However it was quickly reversed because it produced poor results per the telling of both the restauranteurs and employees. At this point, it is experimentally "settled science" in Seattle; you'd be hard-pressed to convince people to try it again given how poorly it went last time.
Every single place in Seattle with a square terminal will turn that thing around in your face and ask for $2 or %20, whichever is higher. Even if the place is takeout only... hell, even all kinds of places that aren't traditionally tipped.
A more simple explanation to the problem is that customers, consciously or not, calculate a socially enforced tip within the price. Even during the time this was changed.
I am not against tipping. I am against mandatory tipping. I know a hairdresser which costs me 17 EUR, and I know one which costs me 26,50 EUR. I tip the 17 EUR one 3 EUR, and the other one 0 EUR. Since COVID-19, the 17 EUR one has mandatory hair washing which is IMO bullshit. Now it costs 19 EUR. They get 1 EUR tip. The 26,50 EUR one does not require the mandatory hair washing which makes my preference for the cheaper one (its a slightly longer travel) less my preference.
Anyway, mandatory tipping is part of the final fee and should be processed as such (including taxes). Simple as that. It isn't my responsibility to care about all kind of service fees.
It depends on the restaurant, but I know plenty of friends who would be screwed by eliminating tipping. On a busy night they could take home 2-3x their base rate in tips.
Bumping up their pay by 50% and eliminating tips would be worse for them.
When I grew up in Germany you had to tell your server to their face when they brought the bill how much you want to tip them. Granted, base price includes reasonable service so tips are smaller but still always seemed unpleasant to me.
Now, living in the US I got used to putting the tip on credit card bill or leaving as cash (rarely any more), which is a bit better since I have more control over the tip amount although I wish servers got better base pay and tips were smaller.
The Square terminal approach actually seems pretty good to me, I feel totally fine leaving a smaller or no tip for counter service or larger for Covid times, etc. Once you get used to the UI it takes 5s to enter custom tip.
It's funny you used Asia as an example when the article literally starts with:
> Anyone who has travelled in Asia or the Middle East will be familiar with the concept of ‘++’ pricing. Any published rate you see for a hotel will come with ‘++’ after the price, meaning that you will also be subject to local taxes and a service charge. These are likely to add at least 20% to the total price.
The problem with allowing stuff like this is that it creates an arms race: If one company can reduce their room rate 5% and shift it to a hidden "charge" then all their competitors MUST do the same to remain competitive. The net result is that nobody is making more than they were before, but customers feel mislead.
So while there a prevailing "regulation is bad" attitude about stuff like this, it really does benefit both the customer AND business if all pricing is listed equivalently up-front. Which is to say: I hope the UK bans this too, and room-rates are again flat (with or without VAT).
We had his happen with airline tickets... everything got unbundled so as to show the lowest price on Travelocity or whoever.
I never understood why there was no backlash at the aggregators for disguising the true price of the product (or offering "comparison" of noncomparable products.
A service that accurately shows comparable, out the door prices is more useful than the one that says "$30 cheaper" only to find out after the fact there's $50 in missing services or hidden costs buried in it.
I wonder if there's anyone that accurately does it now: a flight search that lets you say "show me lowest fare inclusive of a checked bag an inflight meal" or "hotel prices including the various undisclosed fees and taxes."
This has definately made it much less pleasant to search for and compare flights. Now I have to read through all the fine print for various carriers just to know what the final price will be before I buy. I really wish regulators or travels search platforms would step up here and fix it.
I think it's the case in the UE. It doesn't really solve the luggage issue, but that's a bit more difficult because that one is truly optional. I don't think I have paid a different price than what was displayed in the aggregator.
I'm usually in the "regulation is bad" camp but one thing I find myself saying more and more is that you can't have an ideal market if people are allowed to lie about and hide their prices. It's one of the reasons health care isn't a very good market in the US, and it's one of the reasons people don't like this practice.
Essentially companies are getting away with lying about their prices until after a purchase has been made. In an ideal free market, people can't lie just lie about their prices and get away with it because "everyone does it". So enforcing honesty on this particular point at least would be good of you like free markets.
Regulations that improve fairness of competition without any side-effects get my vote even though I generally hold the view that less-regulatory environments are more conducive to innovation and efficiency.
It's pretty infuriating that this is a thing. Even if you think you might be able to get your users to notice if you went against this grain, you are still asking the product leaders to give up a significant chunk of revenue for a probably very long time. It would take major commitment from the top to pull this off and would not work as some quarterly site improvement project by a rank and file engineer or product manager.
For the moment, let's ignore the discussion about opt-out vs. opt-in... If the fee is truly discretionary, then you should be able to go to the front desk and ask them to remove the charge, and they should do so without a fuss.
Has anyone tried this? My suspicion is that you either can't actually do this, or that the staff have been instructed to make this difficult. In that case, it would obvious that the fee isn't actually optional, and the regulators should be having a field day.
> My suspicion is that you either can't actually do this, or that the staff have been instructed to make this difficult.
No I imagine they're extremely polite when you try to remove it - that way that get the charge from most people, and the few who actually care about 5% this way or that way will remove it and if you're polite to them you can try to avoid angering them while still getting it from the people who don't care.
I've done it occasionally in UK restaurants where the service clearly did not meet the level expected for the overall charge. It's certainly not a regular occurrence but equally it doesn't keep me up at night (it's optional, we don't have a warped view of tipping here and I wouldn't dream of withholding it unless the experience was undeniably poor)
UK hotels are already 50% more expensive than normal due to the post-covid domestic travel boom, on top of being more expensive than most other European countries to begin with. I won't use them unless I absolutely have to.
in 2019 I met a young eastern European hotel worker who proudly showed me his British passport while telling me how he'd merely recorded six years of entry and exit documents for obtaining nationality despite having spent almost all his adult life in his home country in prison. I discovered this is tip of the iceberg for the failure of visa application and immigration systems in the UK, and I am thinking that post covid rehiring processes of laid off and furloughed staff is exposing significant numbers of unemployables.
edit : because obtaining furlough funds and other assistance is only possible in relation to individuals who have recourse to public funds and new UK nationals don't have automatic recourse to public funds and this will trigger a new hiring process and background check, as I understand it.
You can apply for naturalisation one year after you are granted indefinite leave to remain. If they had a passport in 2019, this person must have applied for ILR before the EU Settlement Scheme, which started in 2019. So in order to prove they lived in the UK, they must have sent kilograms of payslips (2-3 per year), reference letters, various proofs of address (2-3 per year) and a list of all travels abroad (to prove you haven’t been outside of the UK for more that 6 months), which you can’t do if you are in prison abroad. It took me 2-3 weeks to collect all the documentation, and I never changed address and I only worked for blue chip companies. My partner could not apply for ILR before the settlement scheme because half the companies she worked for went out of business and couldn’t provide reference letters.
He may have been very lucky with his case worker, but this is definitely not the “tip of the iceberg” of anything.
You don’t need to be a British citizen to claim benefits or furlough money or public funds. An ILR or having worked for X months should suffice (assuming you can live in the UK on 150£ per week).
I find that hard to believe. In France, you need to show tax returns, a diploma, a work certificate from your employer, etc. to prove you've been in the country and contributing to it somehow. Either the UK bureaucracy is that much worse than the French one, or something smells.
I would actually rather pay an optional fee like this baked into my bill than have to leave 5 to 20 bucks cash a day on the night stand for maid service. I hate the USA tipping culture that allow businesses to get thier clients to directly pay their staff. In NYC my wife once made me pay the guy "helping me out of my taxi" $20 bucks
Hey, tips are tax-free. I think this is mostly the reason why businesses encourage tipping. I think it's a collective failure of the electorate and the government that you end up in such a situation.
Sure, as per the tax guidelines, tips are not tax free. I'm well aware of this. But business owners that may ask their customers for tips most definitely see this as a way to bargain with would-be employees that their miserably low wage will not be that bad as it's just a supplement to the mad stacks you will be making from tips. And they are not on the hook to pay this tax, the employees are. And if the tip is paid in cash, at least here in the UK, it's very hard for the tax authorities to actually determine that you are not paying the tax you should be paying. The materiality for anyone above the income tax threshold is way above what a normal tip would be and nobody's going to do multiple sting operations to test if a waiter is actually not paying tax.
I believe there are employer side taxes in both the US and UK, right? Even if tips would be reported and taxed as income buy the worker, they would still be cheaper because the customer paid no tax.
Where do you get this idea? In the US there is a line on the income tax form that explicitly asks for how much you earned in tips, and that is explicitly counted into your wages for income tax purposes.
My stae also has a line on my taxes for me to declare and pay sales tax on anything I bought out of state that year. How many people do you think accurately fill that line out?
Credit tips are cashed out at the end of the day, generally speaking, so that the "credit tips" are offset by unreported "food cash payment" that sits in your pocket all night. (I believe it also relies on the business underreporting sales, but... Cash. Also likely hiring the wait staff under the table)
Tips are counted as pay, buddy. Legally if hourly rate + tips falls under minimum wage, the employer has to cover the difference. Either way, tips are income and thus taxed as such. No idea why you could ever expect that it's tax free.
I will. And I will make sure I remember to add not only that charge, but extra faf in getting it removed, if I ever need to compare the price of that establishment with another in the future.
Assuming I don't find out about the extra charge ahead of time of course. I once chose between two endurance running events a week apart (i.e. not enough recovery time between to be able to safely do both) on the basis that the one I nearly picked tried to charge a “payment processing fee” at the last checkout stage that wasn't quoted anywhere else. I checked the other event, no hidden fee, they got my business. The only problem with this comes when everyone is doing it, when it becomes a race to the bottom like the budget airlines which I don't generally even consider dealing with these days.
> You just have to deal with the staff judging you,
I doubt the staff will judge me. They are not stupid, they know the business is trying to con me into thinking something is cheaper than it is. They know what it is like to be on the receiving end of a con.
The business (i.e. its management) may judge me. Fair's fair: I'll be judging them too as soon as I notice the attempted hidden charge.
> and a mandatory interrogation from a manager about why.
If it feels anything like an interrogation, said management will feel less comfortable than I. Of course, if they ask politely they'll have the situation explained politely. And in any case the time taken will be added to that “faf” consideration when deciding if I ever do business with the firm again.
I think something that should be blatantly illegal is hidden fees. When I go to buy a car or rent a room and I end up paying 20-80% more because there are a bunch of hidden fees that is just too much. I could understand offering addons, but stuff that is required as part of the sale is just plain unethical. It's bald faced false advertising.
The Mafia and other crooks must love the tipping culture (which seemed to be true according to what I heard in E392/E393 of Jordan Harbinger Show [1]) as it allows them both special treatment, easy way of using black money, and a way to avoid taxes. Wouldn't surprise me if they're deep proponents of it.
Its also a race to the bottom: how much BS can I get away with squeezing the customer. "They do it, too" is just an equivalent of "they are getting away with it, too".
You get this kind of crap when there's no regulations or when they are not actively enforced.
I understood from the article that only some high-end hotels are doing this. I mean as long as it's optional why pay it? Even if I could afford to spend £500/night for a hotel, why pay some additional optional charge? If they can charge me that much money for a room, they can afford to pay their staff.
Of course he does, tipping cost them nothing.
Tipping is not supposed to be the norm nor is it supposed to cover people's living wages.
I would be happy to tip for people that go above the line of duty but I shouldn't be tipping every worker for doing their job nor should I be guilt-tripped into doing it, especially since I need the money as well.