Instant Tip Payouts Could Help Hotel Industry Woo Workers in 2024

Instant Tip Payouts Could Help Hotel Industry Woo Workers

The next time you check into a hotel, don’t be surprised if you can’t find personnel to greet you, help with your luggage, or put chocolate mints on your pillow.

Hotel owners across the United States said they are having a tough time staffing their facilities — a challenge they’ve been dealing with since the early days of the pandemic, The Wall Street Journal reported Tuesday (Feb. 27).

This year, though, the industry is upping the ante. Collectively, hotel owners plan to spend more than $120 billion in wages — 20% more than it paid in 2019 — in hopes of wooing new workers, the report said.

But the industry isn’t planning on shouldering the additional costs alone. As one hotel owner told the WSJ, “Consumers are going to have to pay more.”

If employers in the leisure and hospitality industry want to attract new workers — workers who often depend on gratuities to supplement their wages — they may want to rethink not only how much they pay their employees, but how they pay them.

According to the PYMNTS Intelligence study “Generation Instant: Hospitality and Tips,” 85% of workers who receive instant tips digitally said they are highly satisfied with the real-time methodology.

The study was based in part on survey data collected from more than 2,600 consumers. It found, on average, hospitality workers earn about $10,000 in tips each year. Nearly 60% of respondents said those tips are paid in cash. Forty-eight percent were given the option to get their gratuities delivered via an instant digital payment. Forty-four percent, meanwhile, were not given a choice at all.

Yet, nearly 79% of hospitality workers said they would select instant tip payments if given the choice. And, when offered that option, more than 82% took it.

Choosing instant payments

The lack of digital instant payment options impacts hospitality workers in ways that extend beyond how much cash they have on hand. Both employees and employers must track cash tips for tax-reporting purposes. Cash tips also require workers to make trips to their financial institutions or to check-cashing establishments — which usually charge fees for their services.

By opting for instant tip payouts that are digital, workers can bypass these hassles and fees, instead accessing their wages immediately.

This likely explains why 8 out of 10 hospitality workers said yes to digital gratuities. Employers not offering such an option not only miss out on an opportunity to more efficiently manage and track tips — they also miss out on an opportunity to enhance employee satisfaction.

As Jordan Boesch, CEO of cloud-based restaurant software service 7shifts told PYMNTS Intelligence last year, bigger paychecks alone may not be enough to keep employees happy.

“Boosting employee retention is as much about the culture of the restaurant as it is about how workers are compensated,” he said. “Estimating that U.S. restaurant workers make over 70% of their wages in tips, getting employees paid instantly and to their own bank account has shown to have a consistently positive impact on reducing turnover.”