NCLA Changes Gratuity Model

Cruise News Daily recently sailed aboard NCL America's Pride of Aloha in Hawaii on its inaugural 7-day cruise round trip from Honolulu (July 4, 2004). Over the following week, CND subscribers received an extensive four-part review of the ship, the service and the programming. 

Because the ship is US-flagged, it has an American crew, and NCL America must adhere to US and Hawaiian labor laws. That's created several differences in the way the crew members are paid, and necessitated a change in NCL's standard Freestyle gratuity policy. That change seems to have created a lot of confusion about what the policy is and the ramifications of it for the passenger. To be sure we understood it correctly, and we could explain it correctly to our readers, we talked at length with CEO Colin Veitch, onboard management, and individual crew members for their understanding of it. Once it's understood what's behind it, and what's really expected of the passenger, it's easier to understand and accept. 

Because there is so much interest and misinformation about the new resort fee and gratuity program, we have excerpted here from our review for easier reference.

The American crew and operating in Hawaii both bring some differences for NCL and their passengers. Because the crew members are working in the State of Hawaii, they are subject to all state and federal labor laws, and that brings with it a whole web of legalities.

NCL is required to provide different kinds of medical insurance, calculate payroll based on regular and overtime wages and deal with different payroll taxation issues among a zillion other things.

One of those differences required by the payroll issues has necessitated changes in NCL's normal Freestyle gratuities. It has necessitated changes in what NCL calls things, and what they can and cannot say to you, the passenger.

Under the Freestyle program for the rest of the fleet, each passenger automatically has a $10 gratuity charged to his onboard account each day, and he is free to increase or decrease that as he sees fit, or he can give some extra cash to specific crew members who have gone above and beyond in providing service.

Under the requirements of operating completely in Hawaii, the $10 charge still appears on the passenger's onboard account (sometimes called a "service charge" sometimes a "resort fee" as NCL tries to settle on the verbiage), but exactly what it is and what options the passenger has and how it affects the crew members, has changed.

The passenger can no longer adjust it; it is fixed just as it is at most resort hotels that make a similar charge. It no longer is passed directly to the crew members, but rather goes into their overall salary and benefit package along with other legally required things NCL must pay.

NCL says the charge is not a tip but it allows the line to pay the crew members well enough that they don't have to depend on tips for their living income, and they neither expect them for doing their job as prescribed nor does NCL encourage you to give tips for normal service.

NCL CEO Colin Veitch likened it to a country club where the employees are paid better than average, and tipping is prohibited. The difference here is that employees can accept tips on Pride of America.

The ship's hotel director, James Deering, told CND that the starting salary for waiter or cabin steward is $2900 a month based on a 60-hour week (that amount includes overtime) which all crew members are expected to work. He said that considering their food, housing and work clothing (as well as health insurance and other benefits included) are provided for crew members, that makes the salary (and whatever tips they receive) all disposable income, which provides a comfortable living in Hawaii. (Right now, much of the crew is working a 70-hour week, so they are making more than the $2900.)

Veitch said that since more than 95% of the passengers fleetwide never adjust the automatic gratuity, so NCL doesn't see this system being a major concern for passengers on the NCLA ships.

Then we come to the subject of tipping. The crew members are still incentivized by gratuities, but no one is recommending them or expecting them. If someone goes above and beyond what you would normally expect, yes, a few dollars is appropriate, and unlike the system on the other ships, that does go solely to the employee you give it to; it is not pooled.

Asked for examples of above and beyond and what kind of tip would be appropriate, hotel director James Deering, as part of NCLA’s management couldn’t really suggest amounts to tip, but he could give us some examples of the type of service where he thinks a crew member might appreciate an extra gratuity. In the restaurant, he suggested that if someone goes somewhere else to get you something special or entertains your kids or rushes your service to get you out super-quick for the show, that something extra might be appropriate. If your cabin steward provides lots of extras that you really appreciate that make your cruise more special or if you have some very special requests, an extra gratuity at the end of the cruise would be appropriate.

Since he couldn’t suggest a tip, I asked him what he’d leave if someone gave him that kind of service in the restaurant or in his cabin. He said that in the restaurant, he’d probably give the waiter $5 or $10 depending on how much trouble the waiter went to. He said he’d probably leave the cabin steward $20 or a little more depending how much extra was being done. He said that on the other hand when he goes to a hotel, the maid rarely does anything more than make up the room, and therefore he rarely leaves a tip for her. He implied that he’d probably do the same on Pride of Aloha if that’s all the service that was being provided.

Keep in mind though that everyone (crew members) onboard understands that no additional gratuities are suggested or necessary. I felt absolutely no pressure (or begging) to leave anything else, because the crew members understand the system and are actually OK with it.

Yes, this system means that in the end, if you have a few crew members who provide truly outstanding service, you will end up paying more than the $10 a day, but on the other ships where you can adjust the automatic gratuity, you would probably increase it some for similarly good service.

Deering said that eventually, as the crew’s service improves, a waiter or cabin steward who is good at providing those extras (and as the passengers begin to understand when an extra tip is appropriate), waiters will probably be making $4000 to $6000 a month including their tips and overtime.

The bar tenders and waiters are tipped like you do on the other ships, by adding 15% to the total check - but with one difference. The 15% isn't calculated for you. You have to do the math and add it on. If you don't, the waiter doesn't get a tip, and in this case, like on the other ships, he or she is expecting one.

The reason behind this demonstrates the complexities of dealing with domestic labor laws. In Hawaii, if NCL were to automatically add a tip to the bill, as they do on the other ships, it would be considered part of the crew member's base pay, and therefore, when overtime is calculated, the overtime would also be calculated on the tip. Since they all work at least twenty hours of overtime per week, the difference would be considerable.

The only problem I saw with the system is that it does require you to carry some extra cash to tip people when you experience some extra service. There is a way around that, however, that doesn’t get publicized. You can have that gratuity added to your onboard account, but (a) you have to make a trip to the reception desk to do it, and (b) you need to remember the crew member’s full name. I don’t see a problem with the fact that NCL will not allow passengers to remove the service charge from their account, as the service will always probably be worthy of the minimum tip (if you were on another ship), and as Veitch said, less than 5% of the passengers ever change the amount either way.

There is one place on the ship that we should note where passengers do seem to be pressed, at least slightly but overtly, for a tip, however. Several colleagues who purchased spa services reported that at the end of the service, they were presented a bill with a "spa charge" on it in addition to the price of the service. They were also very unashamedly told, that the bill "does not include the gratuity," and it can be added at the bottom. When questioned what the "spa charge" was if it wasn't for the service, they were told that goes to the spa, and if they want the individual to have a gratuity, it needed to be added separately at the bottom. Of course, the people working in the spa are not NCL employees, so NCL can't really step in and adjust their approach to the gratuity subject, but we thought it should be noted that in this concession on the ship, the request is apparently more forward than NCL America would tolerate from their own employees elsewhere on the ship.

One question keeps coming up: Since the service charge is nonadjustable by the passenger, why doesn't NCL just raise the price of the cruise? Colin Veitch also spoke to that during the cruise. He said it's simply a matter of being competitive with other cruises. NCL believes they have to keep their prices competitive with other lines. In Hawaii, with its higher operating costs, there just isn't the profit margin to absorb the $70 fee, and if their lead price is $70 more than the competition, it will hurt sales. We can see some justification for this in that while the $70 isn't really a tip, it is in lieu of one. Other lines will add that $70 onto your bill too. The difference is that with other lines (and the rest of the NCL fleet) it can be deleted, if you ask, but in reality, more than 95% of the people don't delete it, so it's really not as much of an issue as it seems.

Like it or not, the $70 will be on your bill. We don't see NCL changing the policy other than some minor tweaking, such as occurs in all new policies. The crew seems like they are OK with it, and passengers should be too. Just don't forget to go above and beyond when a crew member goes above and beyond.

Shortly after this program took effect on Pride of Aloha, NCL announced they would be modifying their gratuity program fleetwide for different reasons, even though it would appear similar from the consumer perspective. That Cruise News Daily article is in another newsfile here on the CND website.

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