The Thorny Question of Automatic Service Charges

Abstract

A study of 51 four-and five-star resorts in the U.S. found that about half added an automatic service charge to their guests' bills, in lieu of tips. The resorts that do so, however, generally use the modified American plan. Moreover, those properties may serve more leisure travelers than do, for instance, convention hotels. For resorts that host a lot of groups, levying an automatic service charge may be risky, because half of the 100 meeting planners in this study indicated that their clients dislike automatic charges. Some 60 percent of pleasure consumers indicated that they do not wish to pay automatic service charges. Guests suggested a service fee of no more than 15 percent, if one must be levied at all. While the respondents did not favor such a policy, they might accept one if it is fair and known in advance.