News/Commentary

Businesses are using a stealth trick to get extra tips; what you should know about ‘gratuity creep’

October 25, 2023 | | Print Article

Tip creep has seen gratuity blur into “revenue grabs” as hospitality services employ different “stealth moves” to pressure consumers into forking over more for the same goods.

Following COVID lockdowns, where many had seen fit to chip in extra to both keep businesses afloat and help them recover after draconian policies had been the ruin of many, “tipflation” has become increasingly less organic.

Where once automatic gratuities had been tacked on for large parties, now restaurants have been taking such liberties across the board.

“It’s presumption,” said 39-year-old vacationer Miranda Jackson to the New York Post. After having lunch with her parents and two children at Five Acres in Rockefeller Center where the surcharge had been added, she lamented “Our service was not very good.”

“It’s almost like it doesn’t incentivize them to have good service. Our food came out at separate times. We waited forever,” she added.

From the restauranteur standpoint, James Mallios, owner of a number of establishments in New York City told the Post, “Almost every restaurant in Miami does an automatic service, and in New York it is still not common, but I think you will see it more and more. It’s a European approach to include service, and at least 50% might leave something small on top of it, the way they would in Europe.”

“When they act upset,” he contended, “it’s really about loss of the power dynamic. They want to be able to determine a person’s wage and this is the only industry where you can do that.”

However, according to a study done by Forbes Advisor, a shift in power dynamic was not listed among top concerns when consumers expressed their feelings towards tipping. Roughly a third described feeling pressured to tip, with 18% said to be made uncomfortable by the practice.

Other top sentiments included being, overwhelmed, embarrassed, guilty or confused.

Mandatory gratuities weren't the only changes in custom that had led consumers to turn over larger sums for their purchases as the Daily Mail reported that an expert in the Square payment system explained that digital prompts were often adjusted to factor post-tax totals rather than pre-tax totals to nudge larger tips.

"Sellers decide whether tips are calculated before or after taxes," a spokesperson for the company said.

"There has also been a lot of tip creep -- being asked to tip for things that haven't historically warranted a tip," Bankrate senior analyst Ted Rossman told the Daily Mail. "I've seen tip requests at self-checkout machines and when booking travel online. These are blatant revenue grabs."

"Digital tipping--a service that allows customers to tip using a point-of-sale system rather than cash--has exacerbated tipping fatigue and overall tipping confusion," the Forbes Advisor report detailed. "And an uptick in digital payments--the total value of digital payments is expected to reach $4.36 trillion this year and continue to grow at an average rate of 11.8% [through] 2027, according to Statista--only adds to the complexity."

By their analysis, 65% of people had said they tip at least 11% more when paying without cash, with 7% tipping as much as 25%.

In some instances, the built-in gratuity can be adjusted by the consumer as the Post indicated, "The charge appears especially common at restaurants in neighborhoods frequented by tourists. The Olive Garden Times Square does a stealth move where receipts have a total with a 'suggested' 18% gratuity added in. A line with an asterisk below notes that customers should 'feel free' to increase or decrease the suggested amount."

As previously reported, that wasn't always the case as a Vietnamese restaurant in California had mandated the 18% service charge for all customers, earning it massive backlash.

Diana, an employee at Rockefeller Center, suggested to the Post rather than bog customers down with tipping guilt or confusion, "Raise the prices. It's just better that way. Otherwise it gets too confusing and it ruins your experience."

For many, the position held that tipping "is out of hand."

Kevin Haggerty
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