Like most hospitality businesses, hotels struggle to recruit and retain service employees in today’s tight labor market, brought on by The Great Resignation, which McKinsey & Company is now calling The Great Renegotiation. But digital tipping has arrived and is here to help. Let me explain.
With 1 million hospitality workers quitting in November 2021 (Bureau of Labor Statistics), no wonder 87% of the hotels in a recent American Hotel & Lodging Association survey indicated they are experiencing a staffing shortage, 36% severely so. And 43% rank housekeeping as their biggest challenge.
Low pay is the number one reason people left their job in 2021; according to a Pew Research Center study.
To bring the workers back, many hotels are increasing their hourly wages, making it difficult for any one hotel to stand out beyond the rest. As Susan Buckley, vice president of food and beverage for Ace Hotel / Atelier Ace, said, “Competition is fierce; you could lose half your staff to a hotel down the street for $1 more an hour.”
And not to be ignored, respected operations consultant Del Ross, in a recent interview, said he believes hotels are headed for a crisis given the current inflated labor costs, which will eventually overrun the revenge travel revenues when all the service jobs are filled.
The Cashless Economy
Compounding the challenge of providing attractive take-home pay to win back employees is society’s push for a cashless economy. Many service employees depended on cash tips to make ends meet each month, but those are disappearing.
In The Global Payments Report 2021, Worldpay (from FIS) found that the use of cash in the U.S. declined by over 20% from 2018 to 2020. Even as the pandemic recedes, the decline of cash is projected to accelerate—cash will account for less than 10% of point-of-sale transactions in the U.S. by 2024.
With the rise of digital wallet technology like Apple Pay and Google Pay, we believe a digital payment revolution is spreading. Gratuity must be a part of it to help hotels recruit and retain service employees.
The data backs our thinking:
-Digital wallets will account for over a third of global in-store transaction volume by 2024 – (The Global Payments Report 2021).
-90% (approx) of U.S. retailers and even some public transit systems accept contactless payments, up from 3% in 2014 – (Visa),
-5% of global transactions in 2020 were Apple Pay and is on target to be 1 in 10 of every transaction on the planet by 2025 (Quartz).
Some hotels are starting to catch on to the digital revolution. “In the digital age, almost everyone has expectations due to what they experienced outside the hotel industry, and we need to ensure that we provide a similar experience to our guests when they come to our property,” says Sanjay Sharma, head of IT, Jumeirah Hotels & Resorts.
What is Digital Tipping
Digital or cashless tipping is here, and none too soon, given the aforementioned challenges.
Like its cash predecessor, digital tipping should be easy and fast. Guests wanting to tip for excellent service find their way to your custom-branded tipping webpage via a link in a text or email or the ubiquitous QR code (Quick Response code).
The meteoric rise of the QR code during the pandemic has provided a frictionless means to connect the physical world to the digital. Or cashless tippers with the means to tip with their smartphones. In 2021, 75.8 million smartphone users made use of QR codes. That number is projected to hit 99.5 million by 2025 (Statista Research).
When your guests receive excellent service and want to reward that employee, it’s as simple as scanning a QR code. Their browser opens to your custom webpage, where they enter a tip amount and can pay with Apple Pay, Google Pay, or a credit card.
And while that is vastly different from cash tipping, here’s where it gets really interesting.
Digital tipping provides an array of possibilities for how employees receive their tips. Many hotels wait and disburse tips along with an employee’s paycheck, usually every two weeks. Today’s technology allows for immediate disbursement, daily or weekly, depending on reconciliation and desired timing. And with 61% of Gen Zers wanting to be paid daily, according to a report from The Center for Generational Kinetics, your hotel can now stand out amongst the competition with daily payouts.
And one of digital tipping’s big bonuses we should not ignore is no more risky and expensive bank runs. Hotels used to cashing out tips at the end of the day no longer have to take up an employee’s time to go to their bank with wads of cash to deposit, hoping it all makes it into their account and they’re not accosted.
Recall Dell Ross’s warning to hotels that labor costs will eventually catch up to revenues. Digital tipping can add as much as $1 more an hour to housekeeper wages. We believe that number will increase as guests become more familiar with digital tipping.
As Reid Spice, COO of Sierra Meadows, said about digital tipping, “…adding another dollar (to housekeeper wages) that actually doesn’t cost me anything is a big win.”
Valuable Guest Feedback
There’s more to digital tipping than financial transactions. According to guest experience Adele Gutman, historically 1-2% of your guests leave a review. Once guests submit their tips on our platform, they can rate their experience and leave a comment. You don’t get that opportunity with cash tipping.
Now your hotel is receiving valuable guest feedback to help with “creativity, innovation, and problem-solving,” said Adele in a recent Soundbites Podcast interview, “feedback is important regardless of how it comes in.”
Not only does digital tipping create an opportunity for cashless guests to tip and your employee to receive the tip almost immediately and provide valuable guest feedback, but the tipping data at your fingertips is incredibly useful.
Digital Tipping and Feedback Analysis
Buku and operations expert Brandon Reed have identified 24 key digital tipping metrics to help hotels analyze the effectiveness of their tipping ecosystem. From Tips per ADR to Tips per Group Code, Average Daily Tip Amount to Average Post-Stay Tip, these metrics help you analyze employee performance, guest experience, and overall strength of your digital tips offering. The stronger your tip platform works, the more tips it provides, and the more money finds its way into your employees’ pockets.
With a combined 50 years of service to hotels and the people who operate them, the buku team brings a rare level of experience necessary to fully capitalize on the enterprise-level digital tipping solution needed for service employees in the unique and complex world of large hotels, resorts, and multi-property groups.
Nothing raises productivity and return on technology investment like well-integrated systems. By taking advantage of our open API, one of buku’s top priorities is providing integrations with the industry’s most valued systems on the market.
The integration process has begun with Amadeus HotSOS, and we’re in talks with others, like PurpleCloud, Lassie, and HAPI.
Finally, Visa has chosen buku as one of its digital tipping enablers and solution providing partners for their hospitality clients.
buku’s point of view is that a digital payment revolution is spreading amidst a growing cashless society. While hotels continue to struggle to recruit and retain employees serving cashless guests, digital tipping puts more money in the pockets of those who need it most while also providing valuable guest feedback.
It’s clear after evaluating the data points and opinions above digital tipping has so much to offer hotels right now, during this challenging time recruiting and retaining top talent.
If “struggling with the labor shortage” describes your hotel’s recruiting and retention efforts, let digital tipping add more to service employee take-home pay without impacting your hourly wage rate while you gain valuable guest feedback. It’s a win for your guest, employees, and managers.
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