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Does tipping really improve service?

In a recent discussion with a colleague who oversees a resort where gratuities are automatically added to the bill, we debated the impact of tipping on the guest experience and staff performance.

We came to the consensus that most people tip within a narrow range, typically 15% to 22%, regardless of an employee’s level of attentiveness. With that being the case, we have to ask: Does the tipping system affect service?

With the current rise in wages, due to either market conditions or mandated minimum wage increases, and the growing pay gap between the front of house tipped staff and the rest of the organization/back of house staff, the issue is becoming increasingly more significant. It is likely that in the near future, in an effort to even out the playing field among employees, more properties will eliminate direct gratuities in favor of a service charge that will be divided among all team members.

The challenge that restaurateurs and hoteliers face is that, if your establishment is the only one making the switch, top-performing wait staff will leave for a position where they get to keep their tips. In order for the transition from tipping to service charges to succeed, it has to become an industry norm.

While there are staff members who go above and beyond, many industry leaders feel that tipping motivates staff to upsell the customer to increase their tips more than it motivates them to increase the level of service.

In fact, in several studies, it was found that tipping is only loosely connected to service quality. Cornell Hospitality Professor Michael Lynn wrote a much-cited review paper titled “Restaurant Tipping and Service Quality: A Tenuous Relationship.” In his paper he writes, “The connection between service quality and tip sizes is tenuous at best, as shown by an analysis of 14 studies that examined the relationship between service and tips… While the studies taken together found that, indeed, tips increased with the perceived quality of service, the relationship was weak enough to raise doubts about the use of tips to motivate servers, measure server performance, or identify dissatisfied customers.” It seems tipping is not as strong of a motivator as many of us believe.

On two recent trips, I stayed at resorts where instead of tipping, a service charge was added as a percentage of the final bill at check-out. I found that, in both cases, the service levels were as good, if not better, than at most resorts I have stayed at where the gratuities are at the guests’ discretion. Both properties have minimal staff turnover and loyal team members due to long-term, tenured senior management. Both resorts also invest heavily in staff training and ensure that front-line management’s presence is felt throughout the properties, contributing to the quality of service.

From my experience, I think service levels have more to do with training and management engagement and less to do with the actual tipping policies. With the current wage pressures, in the next few years the industry will be forced to reevaluate how teams are compensated and invest in front-line guest contact training. In the meantime, we may see more and more properties move to pooled tips.

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