Why The Dreaded Service Charge?

[theoldgit]

I know this subject has been discussed over and over again, and whilst I apologise for raising it again I don't think anybody has been able to answer why some establishments hide some of their charges into the infamous ++.

So somebody wants to open a luxury hotel, they calculate the cost of buying or building the facility, they cost in the operating costs; utilities, depreciation, the cost of servicing the rooms, management and labour costs, disposables and anything else they will need to deliver the service one would expect at such a type of establishment. They then calculate a room rate that given a specific rate of occupancy should deliver a return on the investment and an element of profit. So why add a service charge as an extra, surely all the operating costs should be included in the price of the room?

Likewise with a restaurant, the proprietor has to calculate the cost of delivering the service, the building has to be paid for, the kitchen equipped, tables and chairs purchased, a menu designed and food purchased to service the menu, of course there is also the gas or electric to store and cook the food as well as someone to cook and serve it. Like hotels all the costs of delivering the service have to be calculated and price for the menu items to ensure that the proprietor covers their costs and is able to make a return on the investment. So again surely the costs of providing the service should be costed into the menu price?

This is a genuine question and not a whinge, and I would be grateful if someone from the hotel of restaurant industry could answer my question.

Thinking it through I wonder what would happen if I said at a posh hotel that I didn't want the service element or even ask what it included, doubt if I would do so as I wouldn't know how to handle the blank look.

The same with a restaurant, should I ask if it's to pay for someone to cook the food, if so why the huge mark up, if it's to pay for someone to bring it to my table, maybe I should ask if I could save the 10% and collect the meal from the kitchen. With an, already overpriced bottle of wine, am I really paying somebody 200 Baht to bring it to my table, if so what does the mark up cover?

I don't pay a service charge at KFC or McDonald's, but am still receiving a service, what next, they add 10% for stacking the shelves and packing my bags at Tesco, deduct a 10% service charge when drawing money from a bank, a service charge for filling my car at a gas station, or maybe my friendly neighbourhood policeman adds a service charge when I'm being shaken down at a road block.

As I say it 's not a whinge, and whilst it's not confined to Thailand it's certainly not universal, I would really be grateful if somebody in these service industries would give me the reasoning behind this.

[MSingh]

My honest answer would be the strong possibility that they got all of the other calculations that you mention wrong, so need it to make up the reality of their mistake with + +, & one more + for good measure..

[whybother]

The company can advertise lower prices because many people don't consider the ++.

[Naam]

The company can advertise lower prices because many people don't consider the ++.

we have a winner!

[IanForbes]

You got the banks wrong, or at least I THINK you did. The banks ALWAYS charge an exorbitant fee for EVERYTHING they do. In fact, banks run their entire system on service charges. They charge you to put money INTO your account as well as to take it out. At least the Canadian banks do. They call it a transaction fee. It's an outright rip-off, but what else would you expect from a bank and the crooks that run them? No wonder Butch Cassidy and the Sundance Kid got their jollies from robbing banks.

[menostay]

Service charge on a buffet lunch.....working on explaining that one. Now, in Thailand you must be nice as losing his face might unscrew things and cause the business owner's backside to fall off....can I get back to you???

[PattayaParent]

The company can advertise lower prices because many people don't consider the ++.

we have a winner!

Partly, it's not all service charge in the ++s so they can say that the government taxes and VAT are not their responsibility, they are forced to add them on.

[bkkjames]

The company can advertise lower prices because many people don't consider the ++.

we have a winner!

Partly, it's not all service charge in the ++s so they can say that the government taxes and VAT are not their responsibility, they are forced to add them on.

true, however they could be included into the price as advertised just as easily. 500 baht buffet + 10 SC + 7 VAT = what all in? But because we all expect the ++ now, we would assume the price (that included the ++) didn't.

[yermanee]

I think it is known as profit enhancement !!

Yermanee

[lannarebirth]

My honest answer would be the strong possibility that they got all of the other calculations that you mention wrong, so need it to make up the reality of their mistake with + +, & one more + for good measure..

That sounds very plausible.

[farang000999]

If there wasn't a service charge the price would still be the same. It's a way for them to advertise a lower price. People sound childish when they complain about the prices businesses charge. Nobody forces you to shop anywhere. If you are so sure that you are more business savvy then open your own business with rock bottom prices and put your competitors out of business.

Edited March 22, 2011 by farang000999

[farang000999]

You got the banks wrong, or at least I THINK you did. The banks ALWAYS charge an exorbitant fee for EVERYTHING they do. In fact, banks run their entire system on service charges. They charge you to put money INTO your account as well as to take it out. At least the Canadian banks do. They call it a transaction fee. It's an outright rip-off, but what else would you expect from a bank and the crooks that run them? No wonder Butch Cassidy and the Sundance Kid got their jollies from robbing banks.

Find a different bank. Personally, I have found that the brokerages offer better service than most banks.

[gmac]

The company can advertise lower prices because many people don't consider the ++.

we have a winner!

And several losers as I, and I'm sure I'm not the only one, make a point of not using establishments that exercise this means of falsely advertising lower prices than those actually charged. (While hiding behind the shocked innocent expression "but it said ++ on the menu"!).

[gregb]

People sound childish when they complain about the prices businesses charge. Nobody forces you to shop anywhere.

That's what I always tell the beggars eating out of the trash when that business owner rolls by in his BMW on the way to his private yacht in the bay.

There is absolutely nothing wrong with people finding extortionate charges objectionable and complaining about it. Not everyone has the capital and experience to run a business, but that doesn't make it morally OK for those who do to fleece the less fortunate for everything they own.

Nothing wrong with a business owner being slightly more wealthy than his peers. Small incentives such as this have been shown to work wonders throughout history. There is a limit to this though, and many businessmen go over the top. Bankers are particularly evil in this regard. The world would be better off if we could turn them all into the compost heaps they really are.

Sadly, until business owners decide to stop playing marketing games that hoodwink the general public into thinking that their products are not as expensive as they really are, we will simply need more and more government regulations to try and stop such fraud. Nobody can work in the telecom or finance industries without feeling like they need to take a shower at night when they get home.

Lots of free market capitalists like to claim that regulations are unnecessary and counter productive, but when given freedom in a market like Thailand they immediately proceed to try and cheat, swindle and mislead their customers. Until more business owners are capable of policing themselves and acting like mature stewards of society instead of the filthy, slimy prehensile subcretins they are today, we will out of necessity get more and more regulation.

It is within the business owners capability to change that trend. When they do things like adding surreptitious service fees so they don't have to advertise the true cost, they are saying we don't like freedom. We want more government regulations. I say, give them what they are asking for.

[Ulysses G.]

People sound childish when they complain about the prices businesses charge. Nobody forces you to shop anywhere.

That's what I always tell the beggars eating out of the trash when that business owner rolls by in his BMW on the way to his private yacht in the bay.

Back in the West, most beggars do not want to work and most business owners have to work their tails off and worry about a million things all the time including being put out of business by less expensive competitors.

There are all kinds of checks and balances on your stereotypical but very uncommon scenario and it does not apply to most small businesses.

[livinthailandos]

to be honest I think it became something hotels, spas, and restaurants copied. I noticed when I was here in 2003 you didn't see much of this but over time so many hotels, spas, restaurants charge it, maybe more or less to make more money or just to copy other business, although service charge was put in based on what i've learned but not sure if everyone did, basically to generate revenue but then in turn pay it to the staff so that staff would have

salary + service charge

Vat is something thats been around for a while though. Keep in mind a lot of places I've been to don't hit me with service charge and vat. but if any of you thank thats something you should really try something that even I could not believe A particular brand name hotel in bangkok that I was staying at a few years back really hit me. I went to use their spa and got prices done like this

Massage 90 minutes 1,800 baht +

Service Charge 10% = 180 baht +

Vat 7% = 139 baht +

Using their massage oil they charged me 5% on top of the bill 106 baht total price 2225. Yes this was on the bill I thought ok vat fine, service charge ok, but I get charged for the massage then charged just for using their massage oils for the massage thank god none of the other spas adopted this other wise I had to see what other kinds of charges would have come about

[jimbeam1]

The company can advertise lower prices because many people don't consider the ++.

Very much like not including VAT

jb1

[jimbeam1]

If there wasn't a service charge the price would still be the same. It's a way for them to advertise a lower price. People sound childish when they complain about the prices businesses charge. Nobody forces you to shop anywhere. If you are so sure that you are more business savvy then open your own business with rock bottom prices and put your competitors out of business.

I don't know about anywhere else, but in the Uk service charge is optional. By that I mean if you don't want to pay it there is nothing they can do about it,I am talking about the catering Industry.

This actually happened to me, whilst working in catering. When I presented the bill to a customer, with the added 10% as stated on the menu. Chap called me back, told me to remove the service charge. Luckily the owner was on the premises, so put it to him, he told me to remove the 10% as you can not legally add that charge. The guy left me 15% and said it was for me and not the establishment.

jb1

[IanForbes]

Massage 90 minutes 1,800 baht +

Service Charge 10% = 180 baht +

Vat 7% = 139 baht +

Using their massage oil they charged me 5% on top of the bill 106 baht total price 2225. Yes this was on the bill I thought ok vat fine, service charge ok, but I get charged for the massage then charged just for using their massage oils for the massage thank god none of the other spas adopted this other wise I had to see what other kinds of charges would have come about

2225 baht for a massage? YIKES!

I hope you got to take the masseuse home for the night for that amount. Here in Chiang Mai it's about 400 baht for a one hour full body oil massage... but without "extras". An "extra" would add another 400 baht to the bill.

But, back on topic of service charges, the customer can always learn from the experience and stop using that hotel or restaurant. What little you lose is seldom enough to break the bank. And, as one person pointed out, Brokerage houses are sometimes cheaper than banks. I hate banks with a passion, even though the staff may be pleasant. I just don't like gouging.

[WeeGB]

What is even worse is that some hotels make a service charge, and at the same time cut the wages of their staff! My wife worked as a room maid in a hotel in Pattaya, (the one that looks like a ship), and she never received a full weeks wage. the supervisor always found reasons to dock her pay. Apparently this happened to the majority of the staff on a regular basis. I wouldn't imagine that they offered a discount to their customers because of the supposedly bad service.......these tw_ats are making money hand over fist.

[farang000999]

Sadly, until business owners decide to stop playing marketing games that hoodwink the general public into thinking that their products are not as expensive as they really are, we will simply need more and more government regulations to try and stop such fraud. Nobody can work in the telecom or finance industries without feeling like they need to take a shower at night when they get home.

The more government regulation they have the higher prices for consumers. Take a look at what price inflation looks like in medicine or education or energy in the USA vs something like a chocolate bar. The end result is that costs are passed to the consumer.

You really think there should be a government agency to tackle the problem of ++ and you think that will result in lower prices? trust me, it would not.

[gregb]

Sadly, until business owners decide to stop playing marketing games that hoodwink the general public into thinking that their products are not as expensive as they really are, we will simply need more and more government regulations to try and stop such fraud. Nobody can work in the telecom or finance industries without feeling like they need to take a shower at night when they get home.

The more government regulation they have the higher prices for consumers. Take a look at what price inflation looks like in medicine or education or energy in the USA vs something like a chocolate bar. The end result is that costs are passed to the consumer.

You really think there should be a government agency to tackle the problem of ++ and you think that will result in lower prices? trust me, it would not.

I never implied it would result in lower prices. I implied it would result in less deceit. There is always a price to be paid in additional complexity that comes as a result of the duplicity of shady business owners. The least expensive option is for business owners to police themselves. But their greed generally makes that impossible. So the business owners get less, and the consumer pays more. The difference goes to the inefficient bureaucracy that makes up government.

[Ulysses G.]

One good thing about Chiang Mai, is that a lot of businesses tried adding the service charge a year or two ago, but they lost so much business and got so many complaints that pretty much every Western owned place got rid of it.

[NancyL]

I've always wondered if the "service charge" in those ++ places actually is given to the staff.

[wamberal]

You got the banks wrong, or at least I THINK you did. The banks ALWAYS charge an exorbitant fee for EVERYTHING they do. In fact, banks run their entire system on service charges. They charge you to put money INTO your account as well as to take it out. At least the Canadian banks do. They call it a transaction fee. It's an outright rip-off, but what else would you expect from a bank and the crooks that run them? No wonder Butch Cassidy and the Sundance Kid got their jollies from robbing banks.

It is not your account, it is the bank's account. Like all commercial enterprises, banks are entitled to structure their fees, charges, and so on as they wish, subject to competition and regulatory requirements. They are not charities, and it costs money to provide you with the facilities that you use.

As another poster said, consider putting your banking business with another financial institution. Maybe when you do you will discover that the total costs and benefits (including the most important benefit of financial security) are in favour of your present bank. If not, change. It is not that difficult.

Some Australian banks (eg NAB) offer accounts with low or no fees, depending on the balance you keep in your account. Not sure if these are available to foreign customers. But I would guess that there are low or no fee accounts available from some of the off-shore institutions.

[Ulysses G.]

I've always wondered if the "service charge" in those ++ places actually is given to the staff.

Only in very few of them. Usually it is used to pay their normal salary and the staff receive very few tips as customers think that the service charge is going to them as something extra.

Edited March 23, 2011 by Ulysses G.

[IanForbes]

You got the banks wrong, or at least I THINK you did. The banks ALWAYS charge an exorbitant fee for EVERYTHING they do. In fact, banks run their entire system on service charges. They charge you to put money INTO your account as well as to take it out. At least the Canadian banks do. They call it a transaction fee. It's an outright rip-off, but what else would you expect from a bank and the crooks that run them? No wonder Butch Cassidy and the Sundance Kid got their jollies from robbing banks.

It is not your account, it is the bank's account. Like all commercial enterprises, banks are entitled to structure their fees, charges, and so on as they wish, subject to competition and regulatory requirements. They are not charities, and it costs money to provide you with the facilities that you use.

As another poster said, consider putting your banking business with another financial institution. Maybe when you do you will discover that the total costs and benefits (including the most important benefit of financial security) are in favour of your present bank. If not, change. It is not that difficult.

Some Australian banks (eg NAB) offer accounts with low or no fees, depending on the balance you keep in your account. Not sure if these are available to foreign customers. But I would guess that there are low or no fee accounts available from some of the off-shore institutions.

With virtually ALL businesses in North America a worker is FORCED to have a bank account. Nobody gets paid in cash anymore. That means if you are an average working stiff then you have to choose one of the many various banking firms to have you pay cheque automatically sent electronicly. The banks can then use your money to make money for themselves at very little interest to the owner of the money. But, if the owner of the money wants to use it then he is charged a fee. You don't see much cash floating around like you do in Thailand.

[moe666]

When there is a service charge I never leave a tip. At a restrurat recently this came up and I asked the staff don't you get service charge he says no. please tip. I told him ask your boss for service charge, he says cannot, I say then donot ask me for tip.

[transam]

I've always wondered if the "service charge" in those ++ places actually is given to the staff.

Probably the staff's wages.

[StreetCowboy]

You got the banks wrong, or at least I THINK you did. The banks ALWAYS charge an exorbitant fee for EVERYTHING they do. In fact, banks run their entire system on service charges. They charge you to put money INTO your account as well as to take it out. At least the Canadian banks do. They call it a transaction fee. It's an outright rip-off, but what else would you expect from a bank and the crooks that run them? No wonder Butch Cassidy and the Sundance Kid got their jollies from robbing banks.

You're welcome to keep your money in a shoe box under the bed, if you prefer.

I've always been reasonably pleased with the service I've had from my banks; my biggest gripe is the absence of late-night remittance shops, where I am now; I resent having to do my money-laundering in my lunch hour.

SC