By Larry and Adam Mogelonsky - 4.26.2021
The deployment of cashless payment solutions, a necessary commercial change, has been spurred by the pandemic. Indeed, many businesses have taken the additional step of banning the use of cash altogether. But there’s a problem here as this approach disrupts our service tipping mode. This may result in demoralized staff or lead to costly wage increases.
Hotels are only as good as their service delivery, which ultimately depends on our frontline teams to execute. But for many who depends on tips for their livelihoods (at least here in a North American capacity), how will they be motivated to give some genuine “service with a smile” if their critical tip component of their wage package is eliminated?
This is obviously a concern for the restaurant, but it still affects room attendants, bellhops or many other guest-facing roles. Without the ability for said workers to collect gratuities, they may be less motivated to perform above expectation while on the clock or, worse, they may decide to seek another employer who can provide this largely cash-based perk.
Thinking quite broadly and over the very long-term, as we slowly transition to a cashless society, tipping may become less common to the point where it deters people from entering the industry, thereby restricting the overall labor pool. While punching in a tip percentage into a credit card PED is just as easy as leaving a few extra bills on the table, the issue is that the electronic records make it far easier for the tax department to verify a server’s real earnings – that is, less disposable income resulting in one less reason to start at the bottom of the hospitality rung.
Perhaps you’ve considered this smaller COVID-19 ramification, maybe not. Here are some other thoughts to consider if your hotel decides to go permanently cashless:
- To dispel any pushback about why you no longer accept cash, the most pacifying answer is that it’s part of your new COVID-19 policy as physical money can spread diseases
- Eliminating cash also has the strong benefit of helping reduce fraud because every transaction will require some form of personal verification
- A fully cashless hotel opens you up to a myriad of cybersecurity threats, so it behooves you to audit your systems to identify any gaps where data breaches may occur
- A fully cashless hotel also opens you to more card-not-present transactions where chargebacks can become a huge nuisance, meaning that you should only PCI-compliant payment methods
- Without having the ability to accept cash, you can get rid of that gaudy ATM in the lobby, and come to think of it you can also get rid of the front desk as these first emerged as glorified cash registers, instead opting for a tablet-based, PMS-synced app with roving front desk agents
- Customers arriving at your restaurant must be well-informed that no cash payments are allowed so that you don’t run into any problems when the bill comes, and of course you should set up solutions that allow hotel guests to easily add F&B charges to their folios
- To compensate for the cash gratuity dilemma in the restaurant, add other non-monetary perks to the job to keep your teams motivated
- While disseminating tips via EFT is more time-consuming for your accounting department over just handling out an envelope full of cash at the end of each week, there are quite a few automation platforms that can now be deployed
Larry and Adam Mogelonsky represent one of the world’s most published writing teams in hospitality, with over a decade’s worth of material online. As the partners of Hotel Mogel Consulting Limited, a Toronto-based consulting practice, Larry focuses on asset management, sales and operations while Adam specializes in hotel technology and marketing. Their experience encompasses properties around the world, both branded and independent, and ranging from luxury and boutique to select-service. Their work includes six books “Are You an Ostrich or a Llama?” (2012), “Llamas Rule” (2013), “Hotel Llama” (2015), “The Llama is Inn” (2017), “The Hotel Mogel” (2018) and “More Hotel Mogel” (2020). You can reach Larry at [email protected] or Adam at [email protected] to discuss hotel business challenges or to book speaking engagements.
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