Digital Tipping Will Not Solve the Hotel Labor Shortage

The Agrarian Hotel, a 50-room hotel on the central coast of California, late last year added a feature that allows guests to tip housekeepers and other staff digitally.

The hotel is one of several that have added the feature recently. In The Agrarian’s case, it was a way to combat an industry-wide labor shortage by helping staff earn more money.  

“We can’t necessarily compete with the wages that the big hotels locally will be able to offer. We have lost several over the years to greener pastures and making more money at other local larger hotels,” said Sean Dasmann, general manager of the hotel.​​ “A way to give them a raise without it costing us, as the management or ownership, any money is a great selling point right there.” 

The hotel had been using other products from hotel tech startup Canary Technologies, and added the digital tipping feature in November. 

There are signs in the hotel lobby and cards in the rooms that contain a QR code, which opens to a webpage where guests can leave a tip. Guests can tip a department or an individual worker, and then the funds are released to the recipient. If a tip is left to a room number, the staff checks the housekeeping schedule and then disperses the funds to the relevant worker, Dasmann said.

Hotel industry experts have been saying that workers left the industry during the pandemic and have not returned because of low wages, and that reason was highlighted in a recent survey conducted by Canary. 

The Canary survey was presented in conjunction with a sales pitch for its own digital tipping technology, but it did reveal some interesting insights from guests and customers regarding attitudes about hotel wages and tipping. 

The data is based on two surveys conducted in an 11-day timeframe earlier this year via the survey platform Pollfish. The first survey was of 1,000 guests who had stayed in a hotel in the previous 12 months, and the second was of 300 current or former hotel employees.

In the survey, nearly 80 percent of current hotel workers said they would be more likely to stay with their current employer if their tips were increased.

Of guests who had not tipped, more than 70 percent said they would have tipped digitally if that had been available. And nearly 70 percent of guests who had left a tip said they would have left more if digital tipping had been an option — though there is a difference between what guests say they would do in a survey and what they actually do.

Canary stated in the report that its tipping product can increase wages by up to $3 per hour. Another startup, Grazzy, said its digital tipping platform helped Hotel Abri in San Francisco increase wages for 20 percent of housekeeping employees by up to $2 per hour in the first 60 days of use. 

For workers who are seriously considering changing jobs for better pay, it’s hard to imagine they would be deterred by a potential couple of dollars more an hour, not if a competitor can guarantee a higher wage. The bottom line, however, is that the hotel industry needs a cure for the labor shortage issue. Higher wages would be an easy fix, but it’s often not that simple for small hotels, especially during their ongoing financial recovery. 

Digital tipping is not going to solve the problem — and relying on customers to solve the problem is not a great strategy, anyway. But, why not add a tool to help employees earn more where they can, and not to mention, make tipping more convenient for customers if that’s what they want to do?

The level of tipping through the software has not made a considerable difference yet at the Agrarian, but it’s also the off season, so it’s too soon to tell how much of a difference digital tipping will have there in the long-run. While it is more common to tip restaurant workers, it’s likely that guests generally do not think about tipping housekeeping and other hotel staff, Dasmann said, so part of the issue is educating people and making them aware of the option. 

“Just having it there is, I believe, increasing the cash tips that people get as well, because it’s just a reminder now in front of the guests that it’s appropriate to tip,” Dasmann said. “They may not want to do the QR code and do it digitally, but they may throw down a $5 bill or a couple ones on their way out the door.”