Tipping Makes Restaurants Seem Less Expensive.
Cornell School of Hotel Administration, The Center for Hospitality Research
Monday, 12th February 2007
Why do restaurants rely on tips instead of a flat wage to compensate waiters and waitresses? Why not build the cost of service into menu prices? One explanation involves the way consumers determine how expensive a restaurant is. According to this idea, consumers will perceive restaurants with higher menu prices but no tipping to be more expensive than restaurants with lower menu prices and tipping. A new study from the Cornell Center for Hospitality Research finds that this is exactly what happens.

The study, "The Effects on Perceived Restaurant Expensiveness of Tipping and Its Alternatives," compared the expensiveness ratings of restaurants with tipping, added service charges, and service-inclusive pricing. Of those three practices, the one that seems the most expensive to customers is service-inclusive pricing. Tipping and service charges, on the other hand, seem to take advantage of lower menu prices despite higher add-on service costs. Thus, restaurant customers don't appear to take tips into account when they judge how expensive a restaurant is. The study is available at no charge from www.hotelschool.cornell.edu/chr/research/centerreports.html .

Authors Shuo Wang and Michael Lynn, both of the Cornell School of Hotel Administration, used a computer simulation that allowed participants to make food selections from several restaurants, each of which used tipping, service charges, or service-inclusive pricing. Even after the participants saw their final bill, which included a tip or service charge, they viewed the restaurant with service-inclusive prices as more expensive.

"We concluded that our participants were generally using menu prices—and not the total bill—as their guide for how expensive they viewed our simulated restaurants," said Lynn, an associate professor of marketing. "Thus, it seems to us that only restaurants with price-insensitive customers can adopt service-inclusive pricing without risking the loss of customers."
About The Center for Hospitality Research
A unit of the Cornell School of Hotel Administration, The Center for Hospitality Research (CHR) sponsors research designed to improve practices in the hospitality industry. Under the lead of the Center's 56 corporate affiliates, experienced scholars work closely with business executives to discover new insights into strategic, managerial and operating practices. The Center also publishes the award-winning hospitality journal, the Cornell Hotel and Restaurant Administration Quarterly. To learn more about CHR and its projects, visit www.chr.cornell.edu.

Global Brand Awareness & Marketing Tools at 4Hoteliers.com ...[Click for More]
 Latest News  (Click title to read article)

 Latest Articles  (Click title to read)

 Most Read Articles  (Click title to read)

~ Important Notice ~
Articles appearing on 4Hoteliers contain copyright material. They are meant for your personal use and may not be reproduced or redistributed. While 4Hoteliers makes every effort to ensure accuracy, we can not be held responsible for the content nor the views expressed, which may not necessarily be those of either the original author or 4Hoteliers or its agents.
© Copyright 4Hoteliers 2001-2024 ~ unless stated otherwise, all rights reserved.
You can read more about 4Hoteliers and our company here
Use of this web site is subject to our
terms & conditions of service and privacy policy