Maybe I’m naive, but I always assumed that hotel service charges went entirely to, you know, the people providing service? But apparently not?
In this post:
St. Regis Deer Valley takes cut on service charge
On the last evening of our stay at the St. Regis Deer Valley (yes, that lovely hotel), we ordered room service dinner, as we wanted to go to bed early. When the food was delivered, I was presented with the check, as you’d expect.
There was a $5 delivery charge, and there was also a 25% service charge. Okay, the delivery charge is pretty standard in the US, while the service charge is definitely on the high side. You know the kicker, though? The employee who presented me with the check informed me that only 10% of the 25% charge goes to employees, and the rest goes to the hotel. I’m sorry… what?!?
I assumed I wasn’t hearing correctly, so I called the private dining number on the phone. I explained to the representative that I had just placed an order and wanted to make sure I was tipping appropriately, so I wanted to make sure that the entire service charge does in fact go to employees. He told me that of the 25%, 18% goes to employees, while 7% goes to the hotel.
Okay, so I’m not sure which of those numbers is true, but one thing seems to be for sure — not only does the hotel pocket the delivery charge, but it also pockets somewhere between 7% and 15% of the 25% service charge.
I mean, think of the absurdity of this. I’m basically made to feel cheap if I’m “only” paying a $5 charge plus a 25% service charge on my room service order. I guess I can’t blame the hotel for trying to take some more money from its employees… it must be hard to make money when you’re only charging $4,000 per night for a base room!
By the way, you’ll also probably notice that the sales tax applies to both the delivery charge and service charge. As it turns out, that’s actually a law in Utah, which is one of the only places with such a law. Yes, you pay taxes on mandatory service charges.
Is it common for hotels to take a cut on service charges?
I had always assumed that hotel service charges — whether a percent of room rate or a percent of food and beverage spending — went directly to employees. So now I’m curious — is the St. Regis Deer Valley the exception rather than the norm by taking a significant cut of the service charge, or is this how the hotel industry operates?
I’m probably one of the less anti-tipping people out there, in the sense that I understand that this is just how service works in the United States, and I want to make sure frontline employees are well taken care of, because they work really hard.
But for me, this crosses the line. If I’m being charged a delivery charge plus a 25% service charge, that better cover gratuity, and employees better be taken care of. But instead, they’re apparently not even getting 20% of the amount there.
Bottom line
I had always assumed that hotel service charges exclusively went to employees, since they’re the ones providing the service. But at least at the St. Regis Deer Valley, the room service staff told me that they only get a percentage of the 25% service charge, and that’s not even factoring in the delivery charge (which goes to the hotel).
Is this a common hotel industry practice?
I have started loudly asking, whenever prompted at a screen for a tip, "Do you get the money, or does the boss steal the tips?" I make sure everyone around me can hear the question. And you probably won't be surprised to hear how often the person I'm asking looks away and there's an embarrassed mumble and sidelong glances from the supervisor.
If you want to tip, give it directly to the person who...
I have started loudly asking, whenever prompted at a screen for a tip, "Do you get the money, or does the boss steal the tips?" I make sure everyone around me can hear the question. And you probably won't be surprised to hear how often the person I'm asking looks away and there's an embarrassed mumble and sidelong glances from the supervisor.
If you want to tip, give it directly to the person who served you in cash. And for heaven's sake, stop tipping for non-tipped services. Ordering something at a counter isn't a tipped service.
This is actually a no brainer that has been going on the industry....well...forever. A tip/gratuity is not a service charge and unless there is a law in place or a union contract, always assume that the property is keeping most if not all of every service charge you see.
Another biggie on this one is the meeting room service charge. Every branded property down to the smallest Hampton or Fairfield has some type of...
This is actually a no brainer that has been going on the industry....well...forever. A tip/gratuity is not a service charge and unless there is a law in place or a union contract, always assume that the property is keeping most if not all of every service charge you see.
Another biggie on this one is the meeting room service charge. Every branded property down to the smallest Hampton or Fairfield has some type of meeting room. If you're having a function in that room, you'll be hit with a service charge of somewhere between 20-30 percent of the room rental charge. Does that go to the staff that set up or cleaned up when you're done? Nope. It's just general hotel revenue that at best helps out the sales manager and their quarterly/annual bonus.
Tip in cash when you can. Although more and more the ‘option’ to remove the room charge tip is disappearing and as you say it’s a ‘mandatory’ service charge. Grr
This is a "tax" on a "tax". I hope that somebody else noticed that the service charge includes the delivery charge in its calculation.
Here's something that may even be worse: in my state of Colorado, if you add a tip on a screen like at Panera Bread, 100% of it goes to the general fund of the establishment. You think you are giving to employees, but there is no requirement for the establishment to give any of it to them.
It varies in other countries too but I am only aware for some in Asia.
In Singapore, there is a service charge (SC) on top of hotel rates but Zero goes to the employees. A yearly bonus is expected usually post-Chinese New Year so perhaps comes from the SC collected.
In Philippines, (more or less) 15-25% of the SC goes to cover breakages and pilferage while 75-85% of the SC gets distributed to employees. That...
It varies in other countries too but I am only aware for some in Asia.
In Singapore, there is a service charge (SC) on top of hotel rates but Zero goes to the employees. A yearly bonus is expected usually post-Chinese New Year so perhaps comes from the SC collected.
In Philippines, (more or less) 15-25% of the SC goes to cover breakages and pilferage while 75-85% of the SC gets distributed to employees. That same 85% is made part of the salary which would be taxed so employees would get even less.
In Thailand, from what hotelier friends inform me, 10% SC gets billed to the guest, while the distribution to the employees vary between 2-7%, as it entirely depends on the owner/establishment.
To all the people that suggest you should ask where the service charge goes, and then add extra tip of it doesn't go to the personnel. NO. You are making it worse. Any form of tipping is nothing more than the business passing on their cost to you. If noone tipped, they would quickly have to pay real proper wages like in Europe for example. Do we do this anywhere else? Do you ask the...
To all the people that suggest you should ask where the service charge goes, and then add extra tip of it doesn't go to the personnel. NO. You are making it worse. Any form of tipping is nothing more than the business passing on their cost to you. If noone tipped, they would quickly have to pay real proper wages like in Europe for example. Do we do this anywhere else? Do you ask the flight attendant how much money they make, and if it's low you pay them out of your own pocket? How about an electrician, or a plumber, a teacher or a fireman, an engineer or whatever job there is. Stop this insanity. You aren't helping people, you make everything worse. It's the same reason I never give cash to homeless people, but only offer them food. 9/10 decline the food offer, Just saying.
Ben, I’m as shocked as you to learn about this greedy, abhorrent policy. I normally tip, but don’t when I see a service charge included. I’m going to have to re-think my approach. Thanks for bringing awareness to this issue.
That's why we all have to at least go anti tipping 85% of the time. We need to stop these corporate behavior before it gets worse.
Yes, this is common. Only a “tip/gratuity” goes to the employee (100%). Now, 25% is a bit absurd. 17% is what we use where I work and tax is added as well. The hotel does keep part of that 17%, but the majority (85%) goes to the staff. Ex: $10 service charge the staff gets $8.50. Source 20+ years in the hotel industry.
I would also add that at a lot of international destinations I’ve been to even if you add a tip on the tip line of the receipt it often goes to the hotels pocket and not the employee. Current example: I’m at the Ramada by Wyndham Port Vila, nice points redemption, and I wrote a tip in. The server said “I’m going to scratch this out because it doesn’t come to us, the hotel keeps it.” This happens pretty often so maybe ask in that situation also.
This article makes me look forward even more to my upcoming ski trip to the largest ski area in Austria where my accommodation in a family run, boutique hotel will cost me 170 Euros per night including breakfast and a 5 course evening meal.
I was recently at the Rosewood Bangkok and had a massage at the spa and after my bill arrived there was a 10% service fee which I presumed to be for the masseuse, but luckily I asked to confirm and to my dismay was informed that the entire 10% service fee goes to the hotel and none of it to the employee.. for such a luxury hotel and expensive spa it felt like such an...
I was recently at the Rosewood Bangkok and had a massage at the spa and after my bill arrived there was a 10% service fee which I presumed to be for the masseuse, but luckily I asked to confirm and to my dismay was informed that the entire 10% service fee goes to the hotel and none of it to the employee.. for such a luxury hotel and expensive spa it felt like such an exploitative and disgusting practice. I added in the tip but the rest of my stay there felt tainted by it.
If your paying $200 for a massage, why does the hotel need 10% more of your $$$$ vs giving it as a tip to staff???
This post makes me look forward to my next trip to Asia even more. Instead of room service, I would use grab to order a bunch of crap, guy in the hotel lobby accepts the orders and brings it to my hotel room. Faster and better than the hotel room service and it doesn’t cost me a dime.
Grab in East Asia — like Bolt/foodora/wolt/ubereats/deliveroo/ elsewhere — has become my go-to for food to avoid both the high hotel food prices for questionable quality and with questionable service practices.
I guess everyone here is too broke to pay $100 for room service. $26 for a burger and $6 for a soda isn't unheard of for room service in a luxury hotel. Hell, I think i've seen more expensive burgers in hotels in Europe. I guess no one here even dare goes to fine dining, or spending $500 for dinner.
You can even spend million $$ for dinner. Why show it off? Are you going to stay full for the next week because you spend $500 for dinner?
Dang Ben. You have money to flush down the toilet by paying $100 for 2 sodas, a burger and a tuna salad or about $400 for Yellow Fever shot without blinking an eye. Don't you always ask for the total bill before you place an order for food or a service?
I assume that you take it in stride because it is tax deductible. People often tell me the main reason they bought a...
Dang Ben. You have money to flush down the toilet by paying $100 for 2 sodas, a burger and a tuna salad or about $400 for Yellow Fever shot without blinking an eye. Don't you always ask for the total bill before you place an order for food or a service?
I assume that you take it in stride because it is tax deductible. People often tell me the main reason they bought a house because it is a tax write off. I counter that I bought a house when I know I can manage the costs of house ownership, such as mortgage, taxes, insurance, repairs and maintenance. I sure hope you plan to own your residence free and clear the sooner the better when your earning power is now strong and steady. The average cost of raising a child until age 18 in US is estimated above $200K, depends on the lifestyle that you provide for your child.
I suspect that a very tiny fraction of people ask for the bill's total prior to confirming that they wish to place the order. You see the total bill only as the food is being delivered to you.
I would hardly call that "flushing money down the toilet". That is pretty much the price I would expect at a resort like this. Being nickel and dimed is annoying and Ben is merely pointing it out. Absurd fees like this (coupled with his 'less than exceptional' experience there) make one want to scrutinize things more closely. I would be equally as irked to learn about the skewed dissemination of the "service charge".
The vast majority of service charges do not go to employees. Washington state has a law where the breakdown of where service charges go must be published next to the charge, and I've yet to see a restaurant or hotel that actually gives any significant percentage of it to the employees giving the service. This is how it works across most of the US.
This is very common, and very annoying because it can be hard to figure out if you're actually tipping enough. I sometimes ask if the service charge is a gratuity, though I don't always get a straightforward answer.
This is easily fixed. When in America, just go around shedding $5 bills at the rate of one per 15 seconds, dropping them to the floor as you walk, to make sure you are adequately tipping anyone and everyone who might be serving you.
First off, a delivery fee for room service? But it is room service... The receipt even says room service rather than the restaurant, so clearly they have some amount of distinction between them.
Secondly, it is disgustingly unprofessional for an employee at an alleged luxury hotel to beg for money. While I realise there will always be an expectation of tipping in the US, at a hotel that pretends to be in the luxury...
First off, a delivery fee for room service? But it is room service... The receipt even says room service rather than the restaurant, so clearly they have some amount of distinction between them.
Secondly, it is disgustingly unprofessional for an employee at an alleged luxury hotel to beg for money. While I realise there will always be an expectation of tipping in the US, at a hotel that pretends to be in the luxury category should be paying their employees well enough that they don't need to beg for handouts. Maybe this is just my ignorant foreigner attitude, but I find that so inappropriate and off-putting.
it is not an ignorant foreigner attitude. it is the prevailing attitude among Americans over the age of 35.
the younger generation is much more comfortable with begging. just how new age egalitarian attitudes work.
@Grey
You are not ignorant but it is just the disgusting practice in the US nowadays.
My boss took our team to the Rosewood hotel Silicon Valley last year for lunch. When the bill came I looked at it and they had the nerve to add a 5% "living wage surcharge". The Rosewood is in Menlo Park which is about 30 miles south of San Francisco. San Francisco allows its restaurants to charge a...
@Grey
You are not ignorant but it is just the disgusting practice in the US nowadays.
My boss took our team to the Rosewood hotel Silicon Valley last year for lunch. When the bill came I looked at it and they had the nerve to add a 5% "living wage surcharge". The Rosewood is in Menlo Park which is about 30 miles south of San Francisco. San Francisco allows its restaurants to charge a "mandatory healthcare cost" which some charges as high as 6%. There is no such law in Menlo Park so the Rosewood just flat out telling its customers that they don't pay their employees enough and ask for handouts on their behalf!
During the pandemic I was pretty generous even tipping over 25% when I pick up food, but not now, it is strictly 18% before tax unless it is restaurants that I go back all the time and that they really deserves higher tips.
That’s why I don’t go out for lunch or dinner in the US unless it is a business trip. All these disgusting fees you mentioned are becoming the norm so let the stupids pay them but not me. They won’t see my money.
This is correct, as far as the law concerns. Any "service charge" goes to the establishment, and it's their discretion on how much they pass along to the employee as gratuity. Any dollar amount written by the guest on the check has to go to the employee, either individually or as pooled tip. This is not limited to hotels but restaurants as well.
correct, so the proper (if stupidly uniquely American) thing to do is ask on delivery how much of the service charge is passed along as a gratuity and then write in a dollar amount that makes the total employee gratuity equal to 20% or what you intend to give.
There are 50 states so about 50 laws. Some states require that the service charge goes to the employees, some even require that it only goes to non management employees, others make no requirements at all.
I always try to tip in cash (if I can remember to get cash ahead of time). No games by their employer and the person doesn't need to give part of it to government.
we all need to give part of our income to the government. it is the law, and it is essential for society to operate. i look down on anybody who shirks their lawful responsibilities.
I work hard and pay my taxes. If I hand cash to a service worker as a tip I expect it to go into their pocket and have them speak of it to no one. In all probability they already pay far more in taxes, proportionally, than their employer does. I'm not worried about a $10 or $20 cash tip going unreported while the hotel is sending that $2000/night to the Cayman islands or Ireland to keep from paying taxes on it.
We give too much of our earned $$$ to the government to waste it!! LOOk at line items they fund!! Tracking mosquitos in africa....etc
The flip side is that if your server isn't a tax cheat, he or she has to do a lot more record keeping thanks to people like you. Also, I'd imagine that most people who rely on tipping for a substantial portion of their income are in the ~40% of US households that pay no individual income tax. All they have to do is file an accurate tax return, and you're making it harder to do that.
I wrote before and will again. Last time I spent money on leisure trip in the US was more than 10 years ago. I can’t avoid business trips but my employer pays for those. My money goes to Europe every year. No stupid fees, no tips, no overcharges, amazing customer service and the quality of what you eat and get is miles superior. US lost its touch.
Europe is great but you are overselling. tips do exist in the EU, just not to the same extent. customer service is good compared to the US but subpar compared to somewhere like Japan.
Where did you see someone flipping a stupid screen and asking if you want to leave a 28% tip for getting a coffee in Europe?
This is totally true. America is for work. And it's fantastic for that. But it's really not for vacation. Earn money in the US so you can enjoy Europe!
Being doing this for the last 10 years. No regrets at all.
hotel services and member benefits from the likes of Marriott, Hilton, hyatt etc are awful in the states. I refuse to stay at their establishments unless choices are very sparse.
The service charge is the service charge. If the employer is cheating the employee out of their compensation, it’s not my responsibility to make up the difference.
And it’s tacky for somebody at a St Regis to beg a customer for an additional tip.
I almost always ask when presenting with a “service charge” if the amount goes to the employee. As many have mentioned, in some states and jurisdictions, it is law that the service charge goes to the employee - This is one of the cases where hotel labor unions have actually been helpful to employees
Depending on state law -- either as a matter of specific statute or just ordinary deceptive business practices law -- this can be illegal. E.g., Massachusetts has gone after establishments for not providing the full service charge to employees. https://clubandresortbusiness.com/club-found-in-violation-of-massachusetts-tips-act-as-settlement-for-second-case-is-approved/ D.C. has also threatened businesses into providing more clarity on it. https://dcist.com/story/23/03/10/dc-restaurants-service-charges-violations-attorney-general-warning/
Depending on state law -- either as a matter of specific statute or just ordinary deceptive business practices law -- this can be illegal. E.g., Massachusetts has gone after establishments for not providing the full service charge to employees. https://clubandresortbusiness.com/club-found-in-violation-of-massachusetts-tips-act-as-settlement-for-second-case-is-approved/ D.C. has also threatened businesses into providing more clarity on it. https://dcist.com/story/23/03/10/dc-restaurants-service-charges-violations-attorney-general-warning/
An example of why it makes sense to never order room service & charge it to your room unless you’re in a Casino & want the points for perk status. I understand the article’s point, but geez. The minibar Pringles must have been $25. Haha
A business having its own mandatory charges for its service or product should have the mandatory charge be considered the cost of the sale and thus subject to sales tax. Glad to have Utah see this kind of service charge scam for what it is.
And that the hotels charge a service charge and then encourage additional tipping for the service is just a sign of how greedy and cheap hotel owners/operators are.
If people...
A business having its own mandatory charges for its service or product should have the mandatory charge be considered the cost of the sale and thus subject to sales tax. Glad to have Utah see this kind of service charge scam for what it is.
And that the hotels charge a service charge and then encourage additional tipping for the service is just a sign of how greedy and cheap hotel owners/operators are.
If people stopped tipping for service billed with a service charge, then the hotels and employees would each get their due sooner than later.
Agreed. In UK you can ask for the service charge to be removed if you'd rather tip in cash yourself. Likewise if there's a service charge included, no-one expects an additional tip on top (you're welcome to add more for exceptional service if you choose to).
$100 for a cheeseburger, a salad and 2 sodas? Damn, I hope that was some remarkable cuisine. I’m disappointed there was no picture of the food included in the post.
The crazy tipping/service charge culture in the US is just a play on pricing psychology. If you do the math, the menu price of your order was $68, but you ended up paying $98.42 before tipping. Would you still order the burger if you know the true cost is >$40?
Been like this for years in relation to room service. The percentage varies. I assume hotels have always justified it as to the added expense of delivery (you think the delivery charge would cover that) and the fact that room service delivery personnel tend to be very entry level positions and they can get away with it as such.
I'll add, the same holds true for banquet and event gratuity charges. The hotel takes a percentage of that as well. Booking large dinner events you would be shocked at how much of the gratuity from these goes back to the hotels. Not to mention the insane upcharge of dinners, A/V etc. Events are a money machine for hotel properties.
My understanding is that under union rules that is not the case in New York, where servers at events can make six figure incomes.
Rules on whether "service charges" must go to staff vary by state, so YMMV. Also, it's not unusual at all for there to be sales tax on mandatory fees. Otherwise, every restaurant would charge $1 with various kitchen and service fees making up the difference. Most often, genuine tip-like service charges will be voluntary even if they are "automatically added to your bill" (frankly, I prefer to have them removed so I can tip what...
Rules on whether "service charges" must go to staff vary by state, so YMMV. Also, it's not unusual at all for there to be sales tax on mandatory fees. Otherwise, every restaurant would charge $1 with various kitchen and service fees making up the difference. Most often, genuine tip-like service charges will be voluntary even if they are "automatically added to your bill" (frankly, I prefer to have them removed so I can tip what I wish without trying to figure out what might already be going to staff). The very fact that this is a mandatory charge should tell you that it is going straight into the pockets of the hotel and not the staff.
People in the US need to start taking a stand against tipping.
The fact that someone giving you the bill that already includes a disgusting 25% scam 'service' charge starts telling you the 'only' get 10% (10% for bringing it upstairs lol - plus thats something that youre already being charged for in the room service charge), what, are they hoping you slip them some extra cash on top?
Its more surprising that any of it goes to the staff, I thought it was just another scam fee charge like resort fees that just went to the hotel for paying its staff.
Maybe I'm naive but I just assumed all those fees went to the hotel with the employees getting nothing unless you hand them a cash tip.
Always tip the staff that gave you great service directly with cash. Never card tip or rely on service charges. This has been going on years not just with hotels, but at restaurants, cafes, etc etc
My understanding is that under union rules that is not the case in New York, where servers at events can make six figure incomes.⁹
Tell me you've never worked in a tipped profession without telling me you've never worked in a tipped profession.
Tell me you are american without telling me you are american.
Tell me you’re a non-American that will b1+ch and complain every time a a “dumb American” doesn’t conform to every custom in [insert whatever country], but will be the first to complain and not comply with any American custom or norm.
Those in the service industry know you Europeans are well aware of the tipping culture, and you’re knowingly choosing not to when you tip your $0.77 change on a $60 bar order.
You kind of went off the deep end, Charles.
Also, I'm fairly certain most Americans think tipping culture here is out of control.
Lol - how did I go off the deep end? Because I pointed out the entitlement and hypocrisy of non-Americans when traveling? How dare I?!
And, in some cases, tipping culture is out of control, sure. But not where most non-Americans complain the most (restaurants and bars, etc.). I absolutely love being able to get some semblance of service in America, and I’ll gladly pay 20% for that. Instead of in Europe, where 10-12% is...
Lol - how did I go off the deep end? Because I pointed out the entitlement and hypocrisy of non-Americans when traveling? How dare I?!
And, in some cases, tipping culture is out of control, sure. But not where most non-Americans complain the most (restaurants and bars, etc.). I absolutely love being able to get some semblance of service in America, and I’ll gladly pay 20% for that. Instead of in Europe, where 10-12% is automatically added and the workers act like I’m asking for too much just by walking in the door of their establishment.
Another issue here is that the delivery person is probably not considered a tipped employee and paid a much lower minimum wage. Accordingly the main reason for such high tipping percentages in the US would not really apply here.
"By the way, you’ll also probably notice that the sales tax applies to both the delivery charge and service charge."
I actually do not find this to be remarkable. Otherwise hotels could avoid taxation by building expenses into phony baloney service charges at the expense of substantive goods. Similarly, in Virginia, sales tax is applied to shipping and handling charges to avoid having merchants concentrate sales in an inflated shipping and handling bucket.
It's just a "Resort Fee" for food - any excuse to pad the bill.
Yep, that's pretty disgusting of the hotel. In the UK they've passed a law recently that all service charges / tips must go to staff - though not sure if this means the direct staff member, or shared around to all staff as this is often the practice here.
This has to violate some kind of labour code… it’s a Pandora’s Box because how many other hotels do this, and not just in the U.S.?
California, Hawaii, and Nevada all require hotels to disclose service charges upfront, and to distribute them fully to staff. Colorado may not have such laws, and these things are at the discretion of hotel management
FYI it's Utah, but same concern with Colorado