Service Charges: Then and Now

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Have you ever wondered about the history of the Uniform System of Accounts for the Lodging Industry (USALI)? Recently an HFTP member contacted the HFTP Americas Research Center to research the history of the treatment of service charges in the uniform system for hotels. This sent me down a path of discovery and I found myself fascinated at the changes throughout the years. For example, the 5th edition of the Uniform System of Accounts for Hotels, printed in 1952, presents information pertaining to “service charges to guests for the purchase of railroad, airplane, steamship or other transportation tickets.”

At the beginning of this blog, I referred to the book as the uniform system for hotels and not the Uniform System of Accounts for the Lodging Industry (USALI). Before 1996, there were two uniform systems: Uniform System of Accounts for Hotels by the Hotel Association of New York City, Inc. and the Uniform System of Accounts and Expense Dictionary for Small Hotels, Motels, and Motor Hotels by the American Hotel & Lodging Educational Institute. In 1996, the two groups joined forces and created the USALI.

Interesting Fact:  According to the Uniform System of Accounts for Hotels, 8th ed., “The Hotel Accountants Association of New York City became the founding chapter of the organization now known as the International Association of Hospitality Accounts” (now HFTP). Therefore, HFTP has had a connection to the uniform systems for hotels back to its inception!

Now to the service charge information… Service charges have been a topic of debate for many years. Do we have to record the entire amount as revenue if we pay a portion to our employees? Are guests required to pay service charges? What are country, state and local laws pertaining to service charges? The USALI 11th edition provided further guidance on how to record service charges. The keywords here are mandatory, automatic and non-discretionary. If any of these words apply, then the charge is most likely a service charge, or surcharge, and the entire amount should be recorded as revenue in the appropriate department.

So, now everyone is on the same page, right? Well, not necessarily. How are service charges treated in countries around the world? Recently, I saw an article explaining that service charges in India are not mandatory and customers can refuse to pay them. That sent me on a search to determine customs around the globe. With assistance from Sunny Xuequing Wang, John Cahill Hospitality Technology Research Assistant at the University of Houston Conrad N. Hilton College, we researched current rules and standards pertaining to service charges in various countries around the world.

  • Brazil: In Brazil, restaurants will typically add a 10 percent service charge to your bill, in which case it is customary to leave an additional 5 percent for good service. If no service charge is added, you should leave 15 percent for good service.
  • Dubai: A service charge, typically referred to as a service fee, can be added in certain special districts in Dubai. These rules typically apply to restaurants attached to hotels or in special zones.
  • France: In France, almost all restaurants will add a 15 percent service charge to the bill.
  • Germany: In Germany, most hotel and restaurant bills include a service charge, and it is now customary to tip up to an additional 10 percent of the total bill if you receive good service.
  • Greece: In Greece, restaurant bills usually include a service charge of 15 to 20 percent, in addition to a “cover charge” for use of the table.
  • Hong Kong: In Hong Kong, it is customary for hotels to add a mandatory service charge, typically 10 percent, to the room’s bill.
  • India: In India, if a restaurant adds a service charge to the bill, consumers can refuse to pay the service charges if they are not satisfied with their dining experience.
  • Italy: In major Italian cities, restaurant bills usually include a 10 to 15 percent service charge. Hotels will usually add a 15 to 20 percent service charge to your bill.
  • Jamaica: In Jamaica, service charges are mandatory charges added to a food and beverage bill. If a restaurant charges a service charge, it must be clearly stated on the menu.
  • Japan: Restaurants and hotels in Japan will usually add a 10 to 20 percent service charge to your bill.
  • Netherlands: The Dutch government requires that all taxes and service charges be included in the published prices of hotels, restaurants, cafes, nightclubs, salons and sightseeing companies. Even taxi fares include taxes and a standard service charges.
  • United States: In the United States, mandatory service charges are typically added to food and beverage, such as banquets or large parties in restaurants. Guests are required to pay the service charges and these charges are subject to tax.
  • United Kingdom: Typically, service charges are not included in restaurant or hotel bills in the United Kingdom. If they are added, service charges should be presented on the menu or communicated to the guest in some other way. Guests are able to refuse to pay all or a portion of service charges if they feel that service was below pair.

If you would like further information on service charges, please contact the HFTP Americas Research Center.

Tanya Venegas, MBA, MHM, CHIA is the executive director at the HFTP Americas Research Center at the Conrad N. Hilton College of Hotel and Restaurant Management at the University of Houston. Contact Tanya via email at or via phone at 713-743-1839.

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