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Gratuities & Service Charges

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A Bit Of History

Back in the 1980's and 1990's, Gratuities were at the discretion of each ship passenger. However, the cruise ship staff would help with suggestions of who and how much each person on the ship that served you should be tipped. Usually on the next to last day of the cruise they would invite all passengers into the main theater and hand out marked "tip envelopes" to one passenger from each cabin. I don't remember all the different people they had envelopes for but they would include ship staff members such as you cabin steward, your dining room waiter, your maitre d, your wine steward if applicable, and maybe others. You would be given suggestions of what a standard tip should be for each person with an additional suggestion that you should increase the tip amount for anyone that provided extra or more personal service, or if you had more than two people in your cabin, or otherwise required more attention than the average passenger. I don't remember if a tip amount was automatically included when you ordered bar beverages or if you were just encouraged to leave a tip in cash or write it in on the "tip" line on the charge slip. So that was the old days.

Eliminating The Gratuities Hassle

At some point cruise lines decided to eliminate the complex process of teaching passengers who and how to tip on ships and to eliminate the entire process of handing out envelopes and requiring passengers to hunt down all the staff that had served them to hand out the envelopes. Instead, the cruise line would just automatically add a standard daily "service charge" to the bill of every passenger on the ship which would be in place of the inconvenient procedure of passengers having to place cash in envelopes and give them out to all the people that served them.

Theoretically this would also have other benefits. It would make the amount of gratuities collected from all the passengers more predictable. Under the old envelope system, some passengers would give more and some less, and some even none at all. It also made it possible to spread the gratuities to the multitudes of ship staff that worked behind the scenes that passengers might never interact with at all, such as those doing the cooking, the dish washing, the cleaners beyond the cabin stewards, etc. Since gratuities are supposed to be optional, most ships allow passengers to go to the service desk at the end of the cruise and increase, decrease, or totally eliminate the automatic service charge if they felt the service they received deserved more of a gratuity, less of a gratuity, or no gratuity at all. The number of passengers that actually go to the service desk to alter the automatic standard gratuity amount is very small so this has minimal impact on the total amount of service charges collected by the cruise line.

Some people still preferred the old system of giving envelopes of cash directly to the ship staff that served them. Those people will go to the service desk and have them completely remove all service charges and request envelopes to hand out to the staff themselves. The service desk will provide envelopes for this purpose. The only problem with this philosophy is that all the behind the scenes staff who have provided services to the passengers without ever being seen get cheated out of their share of the gratuities. Actually, it is not exactly quite that simplistic. By those passengers removing their entire service charges, the total amount of service charges collected by the cruise line will be reduced by that amount and ALL service staff that share in the total collected service charges will receive less. Service staff that receive tip envelopes directly from passengers will probably be more than compensated for their lower share of the combined service charges while those staff that do not directly receive tip envelopes will be more impacted by the lower combined service charges. For me the bottom line is that it is not fair to all the people who work so hard behind the scenes serving you to reduce or eliminate the automatic service charges applied by the cruise line.

What About Tipping Your Bar Server?

At some point cruise lines started automatically adding a "Service Charge" when you order drinks from the bar. I don't know how much this started out to be, but today most cruise lines automatically add an 18% service charge to each bar order! That is quite a service charge. Though it is most common to leave between a 15% and 20% tip in restaurants, at least in America, a common bar tip is only 50 cents to $1 per drink. I can understand the 15% to 20% tip at restaurants as your server usually has to provide a good amount of service for you from bringing you menus, taking your order, bringing your food, bringing the bill, taking your payment and return your receipt to your table. Most likely it will take even more trips to your table to refill beverages and handle additional food orders such as desert, refilling bread, etc. It may even include having to bus the table if they don't have bus boys. And if they do have bus boys, then they probably share their tip with them. So I can see that 15% to 20% tip is in order. But a bar tender will usually take one minute or less to prepare your drink, even if a complex mixed drink. If you order a glass of wine, bottle of beer, or something straight or on the rocks, it probably won't take more than 20 seconds. 50 cents to $1 for 20 seconds of work sounds like plenty to me. When an automatic service charge of 18% is added to that, you are talking about anywhere from a $1.80 tip for a $10 drink to a $3.60 tip for a $20 drink (Drinks are quite overpriced on most cruise ships). $1.80 to $3.60 is quite a big tip for 20 seconds of work.

But a big question is: Does the bartender or server get all or even any of the 18% service charge? I don't know but they should. When the cruise line charges $10 for a drink that would only cost $5 in any land based bar and probably contains less than $1 worth of alcohol at the cruise ship's wholesale cost, that 9 plus dollars of profit on a $10 drink should be enough for the cruise line. All of the automatic service charge should go to the bartender or server as their tip. Certainly at least 50 cents to $1 of every service charge should go to the bartender or server as their tip. As a passenger, that should be the end of it and you should not have to worry about any additional tip to the bartender or server. The cruise line has already charged you way more than enough to cover the cost of a very generous tip to the bartender or server.

Unfortunately, it doesn't end there. To add insult to injury, there will be a line on the bill that the bartender or server presents to you that will usually say "TIP" with a blank amount for you to fill in before you get to the line that says "TOTAL". At least on some ships that line will be labeled "ADDITIONAL TIP" recognizing that a "basic tip" is already included with the Service Charge. But some just say "TIP" which seems to imply that the Service Charge is not a tip and if you leave the "TIP" line blank, then you are some sort of cheapskate not leaving any tip for your server.

If you purchase any "Drinks Package" or even if you get a FREE "Drinks Package" as a cruise benefit, you still don't get to escape the automatic standard Service Charges. You will be charged 18% of the value of the "Drinks Package" even if you get the "Drinks Package" for free! My wife and I have been on cruises where the 18% Service Charge on a FREE "Drinks Package" has exceeded what we normally pay for drinks on the ship at retail value including Service Charges and tips! So for us, even a FREE "Drinks Package" will cost us more than just paying for all our drinks full price. We aren't exactly light drinkers either. We usually split a bottle of wine each day plus will have one or two additional spirits each in the evening, and we try to attend all the wine and spirits tasting events. The cost of all that still rarely adds up to more than just the Service Charge on the value of the FREE "Drinks Package".

The Worst Of Both Gratuity Methods?

As I mentioned above, most cruise lines not only automatically add an 18% Service Charge to each drink you order, but they also expect you to add a tip in addition to that! But this "double tipping" unfortunately has grown beyond that...

I mentioned above that most cruise lines now automatically add in an automatic Service Charge per person per day to eliminate the hassle of each passenger needing to individually tip everyone that served them with envelopes of cash. As of 2019, this will usually range somewhere between $15 to $24 per day depending on the cruise line and your cabin type. More expensive cabins are generally charged a higher service charge than less expensive cabins, i.e., suites are charged a higher service charge than balcony cabins which are charged a higher service charge than inside cabins, etc.

But, somehow the practice of presenting envelopes of cash to your cabin steward, your waiters, etc., at the end of the cruise has crept back into practice. This is in addition to the automatic service charges added on top of your cruise fare. Keep in mind that in a cabin with two people this can easily cost more than $290 for each 7 days of cruising. So instead of the automatic service charge eliminating having to individually tip cruise staff, it has just been added to the tip amounts that used to be given to each staff person.

Thus, those that give individual envelopes of cash to ship staff are now double tipping, giving both by the old envelope method and by the new automatic service charge method. This is why some people think they are justified to go to the service desk at the end of the cruise to eliminate the automatic service charge. They just don't want to be double tipping and they want to make sure those they know served them well get a good tip. Personally I think if they don't want to double tip, they should just leave in the automatic service charge and not give out envelopes of cash. Of the two methods I think that is the more fair.

My Bottom Line Opinion

My opinion and tipping practice went through 3 phases since the time cruise lines started adding in the automatic daily service charges:

Phase 1:

First I liked the idea that cruise lines went to automatically adding the daily service charge both to the cruise fare and to the bar charges. The amount they added definitely was higher than what we would tip manually, I was happy that we did not have to bother figuring things out. No longer was there a gathering in the theater to explain to passenger how hard everyone worked and how you should tip everyone that served you. No longer was the handing out of envelopes along with the suggestions of how much you should tip each of the people that served you, along with encouragement to add more if they provided additional or exceptional service. No longer was there the effort to track down each person to hand each the correct envelope. The higher tip amount seemed worth it to no longer have to worry about any tipping on the cruise. When the automatic tipping was first introduced, there was no mention or encouragement of doing additional tipping. After all, the cruise lines were introducing this "automatic" service charges as a convenient replacement of having to even thinking about who, when, or how much to tip. I thought it was a good move on the part of the cruise lines.

Phase 2:

Then, double tipping started to creep in. I think it may have started with the people who didn't like the new automatic service charge system. They preferred to give the staff who served them their tips directly with envelopes of cash so that those servers would know how grateful they were and could see how much they got tipped. Some of these people probably went to the service desk and eliminated the automatic service charge. But I'm sure many others recognized they would be cheating the service staff behind the scenes by eliminating the automatic service charge. So they didn't have the service desk take it off. Instead, they left the automatic service charge on AND they gave envelopes to individual staff members. Hence the start of double tipping!

Once some passengers started doing this, the word began to spread. Naturally some people would feel cheap if they also didn't show appreciation to their servers by giving them envelopes of cash. So here we are now with both the new system and the old system and double tipping becoming more common. It is not yet anywhere near a universal practice, but I think it is becoming more common.

So, in my Phase 2 I was resentful that the cruise line was trying to guilt me into double tipping everyone and I refused to do so. I would just write "$0" for the bar "TIP" or "ADDITIONAL TIP" and would not give cash in envelopes to anyone. I felt I was already paying more in Service Charges / Gratuity than I ever paid under the old tipping system.

Phase 3

Finally, I started to relent. Naturally over the length of a cruise, especially some of the longer cruises, you see the save service people over and over again. They warm up to you and often go out of the way for you. I really felt I had to leave a "TIP" or "ADDITIONAL TIP" whenever they brought a drink to me in addition to the automatic 18% Service Charge. Since my wife and I usually order drinks at the same time, I'd leave at least a $2 "ADDITIONAL TIP" for the 2 drinks. We did run into one server in the Piano Bar who was on two of our cruises that treated us special and I'd always leave her at least a $5 additional tip every time she brought us drinks.

We've also gotten into the habit of tipping our cabin steward. I'll often give our cabin steward $20 right up front on the first day of the cruise. From past experience I have found that a pre-tip does usually extract better service from an otherwise average server. By the way, the word TIP did not originate as an abbreviation of "To Insure Promptness" as many believe. Though it often has that effect when paid in advance, that is not the origin of the word. If you are interested in where the word "tip" came from, I'll leave that as homework for you. Just look it up using any of the word origin resources on the web. At the end of the cruise I'd provide another tip to our cabin steward ranging anywhere from $20 to $100 or more depending on his / her level of service and the length of the cruise. (I have one upcoming cruise that is almost 4 months long. I have no idea what amount of tip I'll leave on that cruise but it will definitely be large assuming we get decent service).

I've resigned myself to accepting that the "automatic service charge" is not a replacement for gratuities at all but was just a sneaky way for cruise lines to increase the cost of the cruise without including that increase in the prices they advertise. If you just think of the automatic service charge as part of the basic cruise price, then you won't feel like you are being ripped off double paying all the gratuities. Just think of the automatic service charge as part of the basic price of the cruise.

Actually, some cruise lines are starting to think along this line also. These cruise lines are thinking of just raising their prices by the amount of the automatic service charge and eliminate having it listed as a separate line item. (See: - The Daily Gratuity Change All Cruise Lines Need To Make). This will mean that cruise lines will have to start quoting and advertising higher cruise prices. But, cruising has gotten so popular that I don't think this will reduce their amount of bookings. Also, most experienced cruisers know that automatic service charges are going to be added in and aren't fooled by the lower advertised price. They know they are going to have to consider the total price of the cruise, including the added service charge, when they are cruise shopping. A benefit to the cruise line is it eliminates the ability of passengers to request the removal of the "optional" additional service charge. Initial thoughts by the cruise lines are that they will advertise cruise prices as "all gratuities included". However, if you ask an agent if you can remove the gratuities from these new cruise prices, the new answer will be that there is no separate cost for the gratuities so there is no separate cost than can be removed. Also, I'm sure there will be some notice once you are on board the cruise ship that additional gratuities are allowed and you are welcome to provide them to any staff that you feel deserve additional appreciation. In this way the cruise lines will get to eat their cake and get to keep it too. They will still get the additional revenue of what used to be the automatic service charge, only now don't have to give any refunds. This gives them enough, and even more, to pay everyone an amount to compensate what used to be distributed out of the automatic service charges, including to the hidden service people that passengers don't ever see. Plus, passengers can still give cash tips directly to some of the staff without feeling they are being double charged for gratuities.

The bar might still be a problem as I don't think at this time cruise ships can raise the basic price of drinks by 18%. The base price of drinks on cruise ships is already ridiculously high compared to bars on land. But maybe they can raise the price of some drinks. I think some people will start getting upset if simple drinks start rising a lot over $10 and more fancy drinks over $20. Instead, cruise lines will probably keep the drinks prices as is and continue to automatically add an 18% service charge with a blank line for an "ADDITIONAL TIP" or "TIP" on each bar bill.

We'll just have to wait and see if eliminating the automatic service charge while just raising the overall cruise price starts to become common across all cruise lines. I think there are already a few high end cruise lines that do it this way. Right now cruise lines will sometimes offer temporary sales incentives of "No Automatic Daily Service Charges". If they go to this new policy of never any automatic service charges, they will just have to promote a lower sale price as a temporary purchase incentive.

Summary & Suggestions

My suggestion is that when you are figuring out the basic cost of your cruise, that you just add the total automatic service charge to the advertised price of the cruise plus any addition taxes and port fees. That is actual basic cost of your cruise not counting any additional shore excursions and other optional onboard purchases. Sometimes you might find a promotion where the cruise line eliminates charging you the automatic service charge. That is nice when you can get it. Just consider the lower price as a nice sale price that you were able to take advantage of.

Personally I don't think it is fair to go to the Service Desk at the end of the cruise and ask them to eliminate the automatic service charge. I think that is cheating all of the staff out of an expected share of the gratuity, especially the behind the scenes staff. Even if you personally hand staff envelopes of cash, it does not make up for the reduction in gratuities shared by the behind the scenes staff. If you want to give envelopes of cash to some of your servers in addition to the automatically charged service fee, I don't have a problem with that. If you do get a promotional price with "No Service Charges" don't worry that you are not paying your fair share of the gratuities to behind the scene staff. Supposedly the cruise line is putting in your share of the automatic service charges. At least that is what they are implying and I would stick with that. I am not going to assume they are cheating their staff out of their gratuities to give you a lower price. I'd rather not be that cynical.

Side Notes:

Your Time Dining / Anytime Dining

How to tip my waiters when I have "Anytime Dining" or "Your Time Dining" as it is called on other cruise lines, has me a bit baffled. This is where you can eat dinner whenever you want during any hours the dining room is open. When you arrive in the dining room you let them know what type of seating arrangement you would like. For example, you can ask to sit at a table just for two people or you can ask them to sit with a group. They will seat you somewhere in the dining room that satisfies your request. This means you are likely to have different waiters every evening. So how do you give an extra tip to your waiter and other dining service staff at the end of the cruise if you've had different staff every night?

Some people have found a solution that works for them. They just ask for the same waiter every time they come to the dining room. The Dining Room Receptionist is usually happy to honor this request and place you with the same waiter every evening. However, this solution usually does not work for us. My wife and I usually just like to sit with each other and not be placed at a table with strangers. Despite how much I love to write, I'm definitely an introvert by nature. Sitting with new people and trying to make small talk is definitely an emotional chore for me. I can do it when I find myself in such circumstances, but it is definitely not a stress free experience for me. I rather be relaxing when enjoying a meal on the ship than trying to interact with new people. My wife isn't exactly an introvert, but she too would rather just relax, enjoy the meal and each other's company than making small talk with new people. So, we prefer to sit at a table with just the 2 of us during dinner. The best chance of finding a nice quiet table for the two of us is to just let the Dining Room Receptionist seat us at any available table for 2 in the Dining Room. In this way we also get to see what it is like sitting in different parts of the Dining Room. But as a result, we rarely ever have the same waiter on a cruise.

I came up with a sort of a solution. We usually order some sort of extra-cost beverage during the meal. Sometimes it will be a glass or bottle of wine, sometimes an Espresso Coffee, and sometimes some other spirit on rare occasions. I'll add a very generous tip when the bill comes, often more than the cost of the beverages themselves. I figure this makes up for not being able to provide one larger tip on the last day of the cruise. The only thing I have to be aware of is if it is a cruise that has separate wine servers from the waiters. I certainly don't want to just tip the wine server and leave the waiter out of the picture.

The Math of Automatic Service Charges

One day I just started wondering how the total amount of funds collected from all the Automatic Service Charges compares to the base salaries of all the people that share in the collected funds. It seemed like it should not be too difficult to get an approximate answer since all the numbers are published.

As an example I'll use the Carnival Panorama. This is a brand new cruise ship that is probably typical of the new cruise ships being built and put into service by many cruise line companies today. The absolute number of passengers and crew a ship can carry is not that important as everything is in ratios. A smaller cruise ship will have less passengers, but will also have less crew that share the total automatic service charges acquired. The Carnival Panorama holds up to 4008 passengers with a crew of 1450. On a 7 Day Mexican Riviera Cruise, Carnival charges each passenger in a balcony $20.98 per day. Passengers in an Inside Cabin or Window Cabin will be charged less per day. Passengers in a Mini-Suite or Suite will be charged more per day. So it is going to average out. Let's just estimate the average automatic daily service charge as $20 per person per day. So, $20 per day times a 7 day cruise times 4008 passengers comes to $561,120 for the total amount collected in automatic service charges for a typical 7 day cruise.

If we divide that $561,120 by the 1450 crew members, that comes to about $387 per crew member. But, not every crew member gets a share of the automatic service charges. Gratuities do not go to the captain or any of the other officers or engineering crew on the ship. Gratuities also don't go to any of the administrative staff on the ship. They also don't go to any of the entertainers on the ship. I've been told, though don't know it to be true, that the bar tenders and bar servers also don't share in the automatic service charges as they get their gratuities out of the automatic 18% service charge added to every drink. So the amount available to go to each crew member that does share in the gratuities out of the automatic service charges has to be at least $400 per crew member.

But that is just the amount of gratuity available to each crew member for just one week on the ship. Let us assume that each crew member only works 48 weeks per year and make a wild statement that each crew member is off from work for 4 weeks each year without pay. His share of the automatic service charges would be $400 per week times 48 weeks or $19,200 per year. This figure is suspiciously close to the median annual earnings for 2018 for cruise ship workers: Carnival Corporation: $16,622, Royal Caribbean Cruises: $19,396, and Norwegian Cruise Line Holdings: $20,101. Those are the figures provided by the cruise lines themselves to the US Securities And Exchanges Commission (SEC) and those figures INCLUDE the gratuities received by crew members. You can see that from my calculations the "automatic service charges" appear to pretty much cover the entire take home salary of crew members! However, these figures do not include the gratuities directly paid to crew members in cash by passengers.

To be fair, the cruise lines claim that additional benefits make crew pay on par with similar land based salaries including room and meals, transportation to and from the ship and medical care which are provided to their crew members without charge. Also, crew members come from all over the world, many from third world countries where average pay is far below what these same people would be earning at a land based job in their own country. Crew coming from most of these third world countries consider themselves very lucky to have landed a job on a cruise ship. As tough as the working hours and conditions and as low as the pay might be on a cruise ship, the jobs on the cruise ships are usually far better and pay far higher than what they could have obtained with their skills on a job in their home country. There is often a lot of competition to land a job on a cruise ship for people that live in these third world countries.

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