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Yet Another Thought on Auto Tips

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Just to drag out the tip discussions even more, here’s a point I’ve never seen anyone make regarding tips.  This applies to most US cruise lines but I’m putting it here because I primarily cruise on Carnival and I see there is another tip discussion going on now.  When I say Carnival below I mean any line that charges separately for tips.

 

People think that the cruise price would be the same whether the tips are included in the cruise price or separated out as it currently is on Carnival.  This is not true.  It would be cheaper if it was included in the cruise price.  Here’s the explanation:

 

Carnival knows how much the average customer tips.  They keep track of every penny spent and study it thoroughly.  In our hypothetical example let’s say that on average 80% of passengers pay full tips through Carnival and the rest pay nothing.  I think 80% is high but this is just an example. That means that Carnival has to charge more to those who actually pay tips to make up for those who don’t pay tips.  Since Carnival charges $13.95 per day, and Carnival knows that only 80% of people pay tips, that means that they really only need an average of 80% of $13.95 or $11.16 per day from each and every passenger.  So on a seven day cruise the 80% of passengers that are tip payers are paying an extra $2.79 x 7 = $19.53 more than they should while the 20% of scofflaws are paying $11.16 x 7 = $78.12 less than they should and $13.95 X 7 = $97.65 less than tip payers.  Therefore Carnival is having us subsidize the cheapskates.  So whether or not someone tips does affect me.  That’s my point.  $20 a week isn’t going to kill me but it’s the principle.  Carnival cares less about it’s good customers than it does about getting bad customers knowing that the first group will help pay for the second group.  Below I’ve just added some thoughts on this subject.  You can skip it and go on with your day as my point has been made.

 

For those of you hanging around, why do cruise lines separate “tips” from the cruise fare?  To make the price look artificially low.  Same reason they don’t include port fees and taxes.  Why did Congress pass a law several years ago requiring airline ticket prices to include taxes but didn’t do the same for hotels, cruises and rental cars?  I don't know but don’t get me started on “resort” fees.  Carnival knows a lot of people don’t read the fine print and get caught later.  They also know that if people pull tips it’s already priced into the tips that the good passengers pay.

 

I think 80% was a generous estimate of the percentage of passengers that pay full tips.  First of all about 20% of people just don’t care about anyone else.  Maybe I’m high on this estimate, maybe I’m low.  It’s about what I’ve observed.  Add in the folks who will find any reason to be victimized or insulted and pull tips.  Then you have the cheapskates.  On top of that add in the Brits and Aussies, not that it’s their fault, it’s just not in their culture to tip.  I’ve read posts from them where they are not going to tip and they don’t realize that it’s not really a tip, it’s salary that carnival calls a tip.  Why do you think Carnival doesn’t do the “tips” scam in Australia?  And then you have the people who fully intend to pay tips but run up a huge bill and then have to pull tips to pay the tab since they only have cash or a debit card.  So in reality I think 70% is probably a closer number which means we’re subsidizing closer to $30 each over 7 days. 

 

My thoughts on tips:  What Carnival calls auto tips should be in the base fare and true tips should be at the option of the passenger.  However, since “tips” are not in the base fare then everyone should pay them and they should not be removed. Then add something at the end of the trip, in person, if you feel they deserve it.  If you remove tips because of one person then you are removing tips from several people.  If you have a problem with someone, don’t pull tips, mention them in the survey you get and be specific.  If you have problems with many people, it’s probably not them.

 

Now feel free to discuss amongst yourselves.  Play nicely though.

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My basic thought on Tipping is if it's a mandatory fee then it's no longer tipping.

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I dont think you should be able to take off the gratuities. They should be built into the fare just like the port taxes as a separate fee and paid before you go. When you go to a all inclusive resort and stay the week they do not let you remove the charges.   

And thats basically what a cruise is too.

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I think somebody does not understand taxes very well. Business taxation is a prime example of trickle down effect,. If tipping is changed to a mandatory it is no long considered a gratuity and becomes a taxable portion of the fare, that means passengers will have to pay higher governmental fees when booking.

Secondly in many of the countries the hotel service crew members are from salary, hourly, or contractual set pay is taxed sometimes at a very high rate (50%) yet gratuities or tips gained need not be reported as income. So that means much higher wages would be needed to be paid to the crew under contract to equal their previous pay that included non-taxable tips, making for higher base fares to provide the increased pay.

FInally since discretionary gratuities even when charge on an automated program are considered a transitional collection of funds by an employer on behalf of an employee and are not considered profit or payment to that company., Once  they become mandatory this instead becomes part of the corporates reportable profits and taxable by the state and country (the USA) that the business has a physical presence in (Florida and whatever the particular ship's home port is). SO again another bump up in the overall charge to cruise.

As for your supposition that cruise lines do the automated gratuities as a way to appear artificially low on their booking adverts, have you booked a hotel or resort in the USA lately. Most lodgings have between a 7-19% resort fee that is not disclosed until you nearly finalize the reservation, some even tack on surcharges for local municipal compliances like a energy conservation fee (3-8%). This is a one of the reasons why AirBnB  can undercut many established hotels, being a private home they are exempt from having to report the "rent" (up to a certain amount) annually as anything other that secondary income. 

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I'll come back to this thread.  I haven't had my first cup of coffee yet.

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I think hoping Carnival will add tips to the base fare is wishful thinking.  Carnival is one of the cheaper cruise lines- a lot of people are first time cruisers or are looking for the lowest price (I'm included in the lowest price part so I'm not looking down on anyone or anything).  If Carnival adds tips to the base cruise price, and other cruise lines don't, Carnival can no longer advertise the $30 a day per person cruises.  So I think in this case, Carnival will be a follower, not a leader, and add tips to the base fare when other cruise lines do.

 

If that ever happens, I'm fine not calling them tips anymore- because they are no longer optional.  Call them a service charge, call them mandatory gratuities, the name is a moot point to me.  I don't think Carnival calls them "tips," now; many of us do.  

 

But, I'm betting adding tips to the base fare would change how Carnival/crew is taxed.  I don't claim to know all the details, but making an "optional" charge mandatory, would change something, and probably not in the cruise line's/crew's favor.

 

Ultimately, I wish tips would just be harder to remove, so it isn't done just as a matter of convenience or because kids shouldn't have to tip or you'd rather spend the money on drinks and excursions. 

 

 I know a lot of these threads tend to turn into a discussion on tipping culture and why employers don't just pay employees a better wage rather than relying on tipping.  And honestly, I wish this would happen and tipping could honestly be for exemplary service- for those who really do go above and beyond or do something special.  But, whether on land or on sea, I don't feel right tipping significantly less just to make that point- as valid as it is, I don't want to shortchange the employees to show I think tipping culture should change. 

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The OP thinks that carnival will lower it's tipping rate if gratuities are folded into the cruise fare?  Fat chance of them or any other corporation turning down extra revenue.

 

They would just use the add on revenue from charging everyone the tip scale to raise executive salaries and give stockholders a higher dividend.

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I think 80% is very low. I'd bet it's well in to the 90%+ of passengers who pay tips.

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1 hour ago, maryred said:

I think somebody does not understand taxes very well. Business taxation is a prime example of trickle down effect,. If tipping is changed to a mandatory it is no long considered a gratuity and becomes a taxable portion of the fare, that means passengers will have to pay higher governmental fees when booking.

Secondly in many of the countries the hotel service crew members are from salary, hourly, or contractual set pay is taxed sometimes at a very high rate (50%) yet gratuities or tips gained need not be reported as income. So that means much higher wages would be needed to be paid to the crew under contract to equal their previous pay that included non-taxable tips, making for higher base fares to provide the increased pay.

FInally since discretionary gratuities even when charge on an automated program are considered a transitional collection of funds by an employer on behalf of an employee and are not considered profit or payment to that company., Once  they become mandatory this instead becomes part of the corporates reportable profits and taxable by the state and country (the USA) that the business has a physical presence in (Florida and whatever the particular ship's home port is). SO again another bump up in the overall charge to cruise.

As for your supposition that cruise lines do the automated gratuities as a way to appear artificially low on their booking adverts, have you booked a hotel or resort in the USA lately. Most lodgings have between a 7-19% resort fee that is not disclosed until you nearly finalize the reservation, some even tack on surcharges for local municipal compliances like a energy conservation fee (3-8%). This is a one of the reasons why AirBnB  can undercut many established hotels, being a private home they are exempt from having to report the "rent" (up to a certain amount) annually as anything other that secondary income. 

 

THIS!   

You are correct this is the main reason "tips" are handled this way for cruises.

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12 hours ago, T2C said:

My basic thought on Tipping is if it's a mandatory fee then it's no longer tipping.

 

I  agree with T2C 100%.

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Posted (edited)

I agree with the OP that the way they format it is to be able to advertise at a lower cost, however since they classify it as a gratuity that does create a degree of voluntary payment to the equation. I don't know legally if they can force you to tip, so that may be the reason they make it somewhat less difficult to remove. I never have removed any portion of my gratuities and never will unless I have an exceptionally bad overall service. We always prepay them and view it as part of the overall cost like taxes and fees.  

Edited by TEXSUN46

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I think extra VIFP points should be given for pre-paying tips.

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6 hours ago, maryred said:

I think somebody does not understand taxes very well. Business taxation is a prime example of trickle down effect,. If tipping is changed to a mandatory it is no long considered a gratuity and becomes a taxable portion of the fare, that means passengers will have to pay higher governmental fees when booking.....

You seen to know much more about taxes than I do, but on the periphery I would say this is all a scam then. If Carnival is running a tax scam with this gratuity/tip/service fee - I and I am sure others want in. I am worried about their bottom line - I worry about my bottom line. If they are running a legal scam then it is perfectly legit for someone to adjust their fees to see to their financial gain. This hurts the employees but if Carnival sees them as expendable than how should we look at them. 

I will turn the logic around for a second - Carnival doesn't care if what you do about the gratuities because it doesn't hurt their bottom line. The don't have to pay anything extra in taxes or report anything from the fees. This is why the continue to allow people to remove the fees.

The last question I have is these ships are not registered to the USA so are they even subject to the tax laws. Is this any different from all the other off shore money American companies have that they have not paid taxes on. If so than the argument of how they list it makes no sense.

 

5 hours ago, BNBR said:

I think 80% is very low. I'd bet it's well in to the 90%+ of passengers who pay tips.

If you are correct and I don't have inside information to say you are not than this thread and all he others on this topic are a waste of time. I think the OP was fair to say he believes the number is about 70% but chose 80%. Cruise Critic is a small sample of the over all cruising population - I would love to see what happens on some of the larger social forms when this topic is discussed more freely.

 

 

 

 

All in all it seems like this system is staying and people will continue to do what they like. 

 

 

 

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9 minutes ago, toober said:

I think extra VIFP points should be given for pre-paying tips.

what about for suites?? 

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Just now, Stick93 said:

You seen to know much more about taxes than I do, but on the periphery I would say this is all a scam then. If Carnival is running a tax scam with this gratuity/tip/service fee - I and I am sure others want in. I am worried about their bottom line - I worry about my bottom line. If they are running a legal scam then it is perfectly legit for someone to adjust their fees to see to their financial gain. This hurts the employees but if Carnival sees them as expendable than how should we look at them. 

I will turn the logic around for a second - Carnival doesn't care if what you do about the gratuities because it doesn't hurt their bottom line. The don't have to pay anything extra in taxes or report anything from the fees. This is why the continue to allow people to remove the fees.

The last question I have is these ships are not registered to the USA so are they even subject to the tax laws. Is this any different from all the other off shore money American companies have that they have not paid taxes on. If so than the argument of how they list it makes no sense.

 

If you are correct and I don't have inside information to say you are not than this thread and all he others on this topic are a waste of time. I think the OP was fair to say he believes the number is about 70% but chose 80%. Cruise Critic is a small sample of the over all cruising population - I would love to see what happens on some of the larger social forms when this topic is discussed more freely.

 

 

 

 

All in all it seems like this system is staying and people will continue to do what they like. 

 

 

 

 

On a ship with 4,000 guests, you think 1,000+ guests are going to guest services and removing gratuity? I find it unlikely any meaningful percentage of cruisers in an American market are removing tips. 

 

And if Carnival is running a tax scam with tips, you are obviously in on it since you are paying a lower base fare and no taxes on gratuity. 

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10 hours ago, maryred said:

I think somebody does not understand taxes very well. Agreed. Business taxation is a prime example of trickle down effect,. If tipping is changed to a mandatory it is no long considered a gratuity and becomes a taxable portion of the fare, that means passengers will have to pay higher governmental fees when booking. Actually no.  The fees are not based on the fare.  They are done per capita.  Go to Carnival's website.  You will see that taxes and fees are the same whether you get an inside, ocean view or balcony.

Secondly in many of the countries the hotel service crew members are from salary, hourly, or contractual set pay is taxed sometimes at a very high rate (50%) yet gratuities or tips gained need not be reported as income. So that means much higher wages would be needed to be paid to the crew under contract to equal their previous pay that included non-taxable tips, making for higher base fares to provide the increased pay.  Only 2 countries require expats to pay income tax, one of them being the US.  Most countries do not require income taxes from expats.  On Carnival the only employees that will have withholding taken out of their pay are from the US.  There may be other fairly low seafarer/mariner tax rates but generally only for those that sail at some point within their own country.

FInally since discretionary gratuities even when charge on an automated program are considered a transitional collection of funds by an employer on behalf of an employee and are not considered profit or payment to that company., Once  they become mandatory this instead becomes part of the corporates reportable profits and taxable by the state and country (the USA) that the business has a physical presence in (Florida and whatever the particular ship's home port is). SO again another bump up in the overall charge to cruise.  Yes it becomes a taxable portion of the fare but when it is paid to the crew it becomes an expense which negates the fare increase for a net profit to Carnival of zero.  So no tax increase.  Also, the only income tax Carnival pays to the US is for Alaska hotel and train tours.  Carnival Corp is incorporated in Panama and Carnival plc is incorporated in the UK.  Yes it is headquartered in Miami but where it is incorporated is what matters.  No state income tax since there are no earnings in the states.  They do pay sales taxes and other de minimis taxes and fees to the states though.  Also Carnival income was taxed at a whopping 1.7% in 2018.  Not much to worry about even if the prior premise was correct.  Google their annual statement.

As for your supposition that cruise lines do the automated gratuities as a way to appear artificially low on their booking adverts, have you booked a hotel or resort in the USA lately. Most lodgings have between a 7-19% resort fee that is not disclosed until you nearly finalize the reservation, some even tack on surcharges for local municipal compliances like a energy conservation fee (3-8%). This was mentioned in paragraph 4 of the opening post. The supposition applies to cruises, hotels, rental cars, car dealerships, etc.. And This is a one of the reasons why AirBnB  can undercut many established hotels, being a private home they are exempt from having to report the "rent" (up to a certain amount) annually as anything other that secondary income. 

 

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Tips should be earned if they are paid automatically service will go down. Why should employees work harder when they get the tips anyway?

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21 minutes ago, Micah's Grandad said:

Tips should be earned if they are paid automatically service will go down. Why should employees work harder when they get the tips anyway?

 

I doubt service would go down. The number one way the majority of employees are rated on Carnival ships is based on the survey results.  An employee without consistently favorable survey results would not last with Carnival very long. So employees would likely still work just as hard even if “tips” were guaranteed. 

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1 hour ago, PhillyFan33579 said:

 

I doubt service would go down. The number one way the majority of employees are rated on Carnival ships is based on the survey results.  An employee without consistently favorable survey results would not last with Carnival very long. So employees would likely still work just as hard even if “tips” were guaranteed. 

The smarter employees would do as you say but would think many would coast

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12 hours ago, evandbob said:

The OP thinks that carnival will lower it's tipping rate if gratuities are folded into the cruise fare?  Fat chance of them or any other corporation turning down extra revenue.

 

They would just use the add on revenue from charging everyone the tip scale to raise executive salaries and give stockholders a higher dividend.

This.

Exactly this. 

 

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I am so over these tip threads. These people work hard, they don’t get to see their families months at a time. You can’t convince anyone to tip, so that percentage will always find a reason not to tip. They don’t tip at home the reasonable tip, so why expect them to do it now.

I prepay my gratuities and give extra to bartenders, stewards, and all those who make my vacation wonderful. Both my children worked in the service industry, so I know how tough a job it is to deal with so many people. Just donate to help these workers and their families. What is another couple dollars on a trip. Throw change in a jar while you anxiously wait for your cruise. 

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7 hours ago, fla97 said:

I am so over these tip threads. These people work hard, they don’t get to see their families months at a time. You can’t convince anyone to tip, so that percentage will always find a reason not to tip. They don’t tip at home the reasonable tip, so why expect them to do it now.

I prepay my gratuities and give extra to bartenders, stewards, and all those who make my vacation wonderful. Both my children worked in the service industry, so I know how tough a job it is to deal with so many people. Just donate to help these workers and their families. What is another couple dollars on a trip. Throw change in a jar while you anxiously wait for your cruise. 

I agree with you we always pay are tips and then some. In my mind there is no reason anyone should remove those gratuities. 

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"WAY BACK WHEN" when they started doing it for  "our" convenience, I bought into it, knowing I could adjust it.  We were getting daily room service and a complete served 8 course or less meal, but a waiter and an assistant waiter.

But suddenly I noticed they were no longer doing it for my convenience.   And service was being cut back,   And then meals were either being swapped out for self serve, or even alternative dining where we where suddenly require to tip again.

And then suddenly, the choice of sit down service was eliminated in some instances.  And then the lies began .  People in the supper club/steakhouse were suddenly telling "us" the tip was not included in the fee.  The once include tip at the captains table suddenly wasn't.

In any case, I took that "for my convenience" back into my control.   I tip as I choose.   And I NEVER worry about what others tip.  It's none of my business.

Oh, and when they started adding tips to beverage charges, we were told how to adjust or even remove them.  Or even add to them, knowing one method went to the pool, and another method went to the actual server.

I still do that.   And anyone can.   Simply cross out the added tip, and replace with your hand written one and re-total.   You will find the retail charge on your sail and sign account.

REMEMBER:  NO ONE CAN FORCE YOU TO TIP

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