Is the Service Charge hotels charge the same as a Gratuity or Tip?

Many hotels and catering venues include a “service charge” on top of their base prices (which came up in this post last year). Typical service charge amounts range from 18% to 22% tacked on to the base price for food and beverage charges. I have even seen rates as high as 25%. It is easy to assume, since these percentages are similar to what you would pay as a gratuity if you were to eat out at a nice restaurant, that the service charge is the equivalent of a gratuity. This would be a mistake.

In spite of how it may appear, the Service Charge that hotels tack onto the bill is not a gratuity – not even close. In fact, a hotel's own documents often explicitly state the two are not that same (though usually in the fine print). Service charges exist to help cover the indirect costs of supporting your food and beverage functions, such as cleaning, last-minute staffing additions, and replacement for broken or otherwise non-reusable serving items (plates, glasses, etc.). And, while the percentages venues use are in line with what you would add your dinner bill in a restaurant as a tip, the money collected from service charges very rarely, if ever, goes directly to anyone who actually worked your event.

A true gratuity, on the other hand, would go directly to venue staff and you determine who receives how much. In a future post, we'll look at ways to do this after the event has concluded.

~ Karl Baur, CMP • Project Director, RDL enterprises