Faculty & Research
Tipping and Its Alternatives: A Comparison of Tipping, Service Charges, and Service-Inclusive Pricing
Vol 6 No 5
By: Michael Lynn Ph.D.
Executive Summary: Hospitality executives and managers can compensate employees through voluntary tipping, service charges, or service-inclusive pricing. Rather than take a default position or simply follow local practices, managers should carefully weigh the pros and cons of each policy and should knowingly choose the approach that best suits their circumstances. This Center for Hospitality Research Report is design to facilitate such thoughtful decisions about how to compensate employees. It outlines the business issues surrounding tipping and its alternatives, summarizes what we know about those issues, and identifies questions in need of further research. The principal benefits to hospitality firms of voluntary tipping are that it lowers nominal prices, increases profits through price discrimination, motivates up-selling and service, and lowers FICA tax payments. However, tipping also motivates discrimination in service delivery, gives servers surplus income that could go the firms' bottom line, increases the risk of income-tax audits, and opens firms up to adverse-impact lawsuits. The alternatives to tipping (i.e., service charges and service-inclusive pricing) have their own sets of costs and benefits. Ultimately, no one policy is always necessarily the best. Therefore, the report presents the pros and cons of each policy with respect to nine different considerations.
Your Comments Please
If this CHR Report made a positive impact on your management approach or business operations, we welcome your commentary. We would like to post your comments on our website. Please submit your comments to js372@sha.cornell.edu and rohit.verma@cornell.edu.
Download The Report
To view the whole report, please click on the link below
- Tipping and Its Alternatives: A Comparison of Tipping, Service Charges, and Service-Inclusive Pricing By: Michael Lynn Ph.D.
| If you have trouble downloading a pdf, and are able to install software on your computer, try upgrading to the latest version of Adobe Acrobat Reader to see if that allows you to read it. |
Comments
Service or Servitude?
I have been in the hospitality industry for over 32 years, starting as a waiter, ending up owning my own restaurant and eventually became Resort GM and now own-operate www.vanuatu-hotels.vu a Book On Line accommodation portal.
From day one I was opposed to people tipping me, it created a humiliating master/servant relationship. Consequently when I was eventually in a position to influence my customers behavior, I ensured that my staff were well trained and remunerated for their work. My patrons were informed not to embarrass my staff by tipping them, as they were trained professionals, but if they wanted to show their appreciation for exceptional service, they could fill out our Guest Feedback form for this purpose, and the staff member in question would be nominated for recognition (with substantial prize) at the annual hotels' awards night, or if they wanted to give money it could be given as a contribution to the staff Xmas party.
I have always taken great pride in being part of the service industry but the tipping culture has always cheapened the industry. Our industry core mantle is service. We should recognize service as the profession it is, like the delivery of any other professional service we pay for in our daily lives. Would any dignified profession you can think of ask for a tip? The service expected and provided by a staff member in a restaurant lives under the same roof as the service expected from your electrician or doctor that provides his service at a set fee. The only difference is the amount.
Why should one be reduced to accepting loose change in someone's pocket or placed in a confrontational situation in order to be paid? We are talking about a service industry are we not? Hospitality staff should be properly trained and remunerated by the employer (reflected and carried in the price of the meal, drink etc.) and not placed at the mercy of the customer’s whims. How can a self respecting employer do that to his staff? Just as importantly how can the service profession ever hope to acquire any respect? That's if it has any left after Gordon Ramsey's display of obscene management.
The American way of working for tips (the only country that I am aware that does this) is bizarre and reduces service to servitude. American food and beverage businesses that practice this should remember that it’s up to them to catch up, the majority of the civilized world pays its staff properly.
Regards,
John Nicholls
Owner / Operator
www.vanuatu-hotels.vu
Other Reports or Articles You May Find of Interest
- Race Differences in Tipping: Questions and Answers for the Restaurant Industry, by Michael Lynn, Ph.D.
- Dining Duration and Customer Satisfaction, by By Breffni Noone, Ph.D. and Sheryl E. Kimes, Ph.D.
- Perceived Fairness of Restaurant Waitlist-management Policies, by Kelly A. McGuire and Sheryl E. Kimes, Ph.D.
About Michael Lynn Ph.D.
Dr. Michael Lynn is a professor of consumer behavior and marketing at the Cornell University School of Hotel Administration. He received his Ph.D. in Social Psychology from the Ohio State University in 1987, and has taught in the marketing departments of business and hospitality schools since 1988. Dr. Lynn paid his way through school by waiting tables and bartending. This experience sparked his interest in service gratuities (tipping), a topic on which he has over 35 published academic papers. His other research focuses on consumer status and uniqueness seeking. Dr. Lynn is the past editor of the Cornell Hospitality Quarterly, and is currently on the editorial board of the Journal of Academy Marketing Science, which gave him an outstanding reviewer award in 2006.
