Service charge: A boon or bane for local hospitality industry?

22 March 2016 08:54 am - 0     - {{hitsCtrl.values.hits}}

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By Chandeepa Wettasinghe
Levying a service charge on hotel and restaurant customers could be contributing to the downfall of the Sri Lankan hospitality industry, which is already suffering due to the businesses unwilling to invest in their employees with proper recognition, training and pay.


“Hotel wages are traditionally a little lower than the other industries as the employees get other benefits like the service charge, uniforms and food,” Tourism Expert Srilal Miththapala told Mirror Business when inquired.


Hotels Association of Sri Lanka (THASL) Chairman Hiran Cooray said that the combination of low pay and the flawed service charge system could be leading to deteriorating service levels.


“It’s an interesting thought process. It could be. I can’t say if it’s a definite yes or no. To really study it, you should take a random sampling from restaurants and the front office. Requires a lot more study before answering but it could be a fact,” he said. 


Wages in customer service positions are lower in hotels across the world, which is criticized, as these lower-end front-line positions are the most responsible for customer satisfaction.

 


Customer satisfaction 
While many countries foster a tip system to bridge the gap, in Sri Lanka, a service charge has been levied by the service providers. 


A problem with the service charge is that the customers have to pay it, whether the service was good or bad, leading to no consumer protection.

It was perhaps of no issue in the past, as the waiters addressed the customer needs well, such as refilling the water goblets proactively without the customer having to ask three or four times, choosing to clear or not clear plates at the required time and choosing when to attend to the customer or not to interrupt their experience.


Perhaps due to a higher employee to guest ratio in the past (4:1 compared to the current 2:1), the employees had less duties and did them better despite the low pay.


The staff even smiled first, without expecting a smile or potential business in return.


Unfortunately, even in some five-star hotels now, the situation has been reversed, despite the claims of hoteliers that Sri Lankan hospitality is the best in the world. The situation is observed to be much better in resorts, boutique and rural hotels.


While this may be a bias, as businesses in the past encouraged their staff to give a premium service to the domestic customers, as that was the market they relied on most during the war, food and beverage revenue from locals still constitute a majority for star-class hotels, especially in Colombo.
The local generation which gave large tips is largely being replaced by the newer generations which don’t tip due to the service charge and only do so when provided with exceptional service or when the service charge isn’t levied.

 


Governance
Further, the system appears to be not governed. When inquired from the Sri Lanka Tourism Development Authority (SLTDA), they said that the Consumer Affairs Authority might be in charge of regulation, while the Consumer Affairs Authority said that the SLTDA was in charge of it.


While most establishments charge a 10 percent rate, some have been seen charging higher or lower.
The main flaw in the service charge is its communist system, where the service charge collected for the month is divided equally among all the members of the staff, regardless of their level of performance.


Further, part-time employees are given half the payable amount and the trainees are not paid at all, despite a possibility that they may be more productive.


“There is a lack of incentive in the service charge. It is automatic and not earned. So there’s no motivation. But the most important thing is that there’s a lack of properly trained staff and there’s high turnover,” Miththapala said.


Perhaps the high turnover is because the hoteliers don’t pay their staff well and the promise of the service charge doesn’t live up to its expectations.


Therefore, most Sri Lankan talent end up migrating to destinations like the Middle East and Australasia, leaving behind a residue of sub-standard employees happy with the level of pay or those not in a circumstance allowing them to leave.


Hotels do by having less staff to cater to the growing customer base, further lowering the service quality in return for the luxury prices and service charges.


Most hoteliers also look to the government to train the personnel, instead of taking up the responsibilities themselves and training according to their needs.


While this leaves a huge service gap for the domestic customers, the foreigners on leisure travel find better value-for-money and the true brand of Sri Lankan hospitality in the growing homestay segment, where all the revenue and profits are distributed equitably, leading to better service.

 

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