I was cleaning up my desk when I came across the picture at the bottom of this blog entry. The picture is of a professional sports team’s bar tab after they won the league’s championship. The service fee was 20% of their bar tab. Twenty percent doesn’t seem like something worth blogging about, but this team ended up paying $25,000 service fee for 2 hours of just drinking and not eating a single bite of food. Professional sports teams do crazy things after winning championships so having a giant bar tab is not unusual. What was unusual was the team in addition to drinking lots of beer and whiskey, drank one bottle of very rare champagne that cost $100,000. The waitress didn’t open the bottle or serve it, that was done by the players themselves. However, by having one single bottle of champagne the players’ tip jumped from a $5,000 service fee to a $25,000 service fee. The huge increase led me to wonder, “Is there a limit to how much a person or group should tip?”
Another giant tip occurred in January. Shane Smith, chief executive of the Vice Media group, spent $300,000 for a dinner at the Bellagio’s Prime Steakhouse in Las Vegas during the International CES trade show in January. All restaurants in the Bellagio Hotel have a uniform tipping policy, where “All parties of twelve (12) or more and/or private dining events are subject to a 20% service fee, 8.1% sales tax and group booking fee (based on group size).” The 20% service fee means a tip of over $50,000 for the lucky waiter/waitress who served Mr. Smith and his party their meal.
Tipping is not a universal phenomena. Tips are expected in the USA and Canada in bars, restaurants and from taxi cab drivers. However, in many countries, like Japan and England, tipping is often not expected. In these and many other countries waiters, waitresses and other service workers are paid higher wages and businesses simply include these wages when figuring out the price of a meal, drink or ride. In North America a person often has a lot of discretion when trying to figure out the right amount to tip. Usually people tip between 15% and 20% of the bill. The interesting question is should there be an upper limit?
The word TIPS is an acronym for To Insure Prompt Service. Giving a tip was designed to speed up waiters. Money is clearly an incentive to work faster. However, is there some maximum amount of money where waiters and waitresses will not or cannot work any faster or act any friendlier? If I was a waiter I would like the largest tip possible, but is there some point at which more money is ineffective?
The bar tab was rung up by the Boston Bruins hockey team after they won the Stanley Cup Championship in 2011. The Stanley Cup is the ultimate prize in North American hockey so the team was very excited. After winning the Cup they went to celebrate at a night club in Connecticut. The team was very happy and so was Danielle their waitress who hit the tip jackpot (you can see her name on the top of the bill). What did they drink that cost so much? They ordered a 30 liter bottle of Armand de Brignac, also called the Midas.
The team got a good deal on the wine. They “only” paid $100,000. That same year two people in Las Vegas paid $120,000 (plus a tip) for the same size and type of Champagne. If you want to save money, the bottle can be ordered over the Internet for “only” $60,000. Using the Internet means you do not have to pay a penny in tips (click here for the current price). Be careful pouring though since the bottle weighs about 100 pounds when full.
The ultimate question though is very simple. Is it fair that Danielle earned an extra $20,000 just because she brought out one very expensive bottle of champagne? In a similar vein should we place limits on CEO salaries? Both Danielle and many CEOs got/get ample compensation before large amounts are tacked on as an extra bonus. What do you think, is there a limit at which CEO pay and tips should be capped?