The Policy Expands - But for Different Reasons

Effective in May (2005) NCL will be changing the way gratuities are collected onboard the fleet, modeled on the program which debuted on Pride of Aloha. In this article they explain for consumers why they are making the change, and Cruise News Daily looks at where this could logically go long-term.

When Norwegian Cruise Lines was deciding on policies for their new child, NCL America, that would operate in the US with an American crew, they were faced with many differences in labor laws operating in the US. After a lot of consideration, they decided that they would make a slight change in the gratuity system from the passengers’ perspective. As they researched what the reaction would be to the change, they came to the conclusion that a similar change fleetwide would solve another problem.

When NCL debuted Freestyle Cruising, it called for a different method of gratuities, since you weren’t being served by the same personnel repeatedly through the cruise, so NCL instituted a flat daily gratuity added to the passenger’s onboard account which passengers could adjust upward, downward or remove simply by contacting the reception desk.

The side benefit, which turned out to be a big one for the line, was that when an adjustment was requested, management got direct, immediate feedback about who was doing a good or bad job and exactly what was causing the passenger to want to make the change. In the traditional gratuity method, if someone didn’t tip or gave only a small one, management never really knew why.

That was in place without change until Pride of Aloha entered service. As we discussed in our review of the ship last week, the labor laws required higher base wages and benefits, so it was decided to modify the gratuity system. (That part of the article is online in a newsfile here on the CND website. ) Basically, the higher crew wage and benefits were at least partially funded out of a service charge which was placed on the onboard account in lieu of the automatic gratuity. (Both are $10 per day.) The crew was told to expect no tips for average service because they are already being paid a good wage for similar jobs in Hawaii. If they go above and beyond average service, passengers are still permitted to so their appreciation for the extra effort with a small extra tip. Because this is now part of the wage and benefit package, NCL decided to make the $10 service charge mandatory and nonnegotiable unlike the automatic gratuity on the other ships.

As part of their research to see if this was going to be a problem for their customers, they looked at how many people ask to have the charge removed from their account and why. They found that 95% of the people never change the charge. Of the 5% who do ask that the amount be changed or removed, they gave three reasons: (a) At the end of the cruise they say the service was not acceptable. (b) They prefer to tip the crew members in cash. (c) They don’t want to tip or they just don’t want to tip that much.

Then they delved into things a little further. For reason (a) about unacceptable service, NCL doesn’t want to know about it at the end of the cruise. They want the feedback up front as soon as a passenger is unhappy so they have an opportunity to correct the problem and the customer will go away with a positive experience. Since the service charge is mandatory, it should, in theory, drive people to the front desk to talk about unacceptable service rather than letting them put up with it and remove the gratuity.

They found something interesting about (b) those who said they preferred to tip in cash. Since for pooling purposes, they track what those people actually give the crew members in cash, they found that usually those who SAID they prefer to tip in cash, actually do not tip AT ALL.

And for those in the third group who just don’t want to tip, they’re not doing their part. In America, people providing service expect to be tipped, and those who prefer not to, according to NCL, are just getting a "free ride."

With those things in mind, NCL decided to go ahead and make the service charge mandatory on the internationally-flagged ships.

Benefits for NCL are that it will bring passengers who are unhappy with the service to the reception desk earlier (since they will be paying for the service, they will probably be more willing to voice their concerns) rather than later, giving NCL a chance to fix their problem, and it will allow NCL to guarantee their employees more regular wages.

The switch to the new service charge will only affect about 5% of NCL’s customers who typically opted to remove the gratuity from their accounts. For some, who found the service lacking, it will improve things because NCL will have a chance to fix whatever it is that is offending them. For others who just don’t want to tip and will be outraged at the prospect of having to pay another $10 per day, well, NCL is probably just shuffling them off to unsuspecting crew members on other lines who will be providing a week’s worth of service only to find they get not monetary appreciation from these people. We get the feeling that the NCL crew members will be smiling (all they way to the bank) as they stand on the deck and wave good-bye.

Everything that NCL said there makes sense, and we can go along with it. But we see two problems with things as they stand.

The first is that NCL doesn’t want to say where this service charge is going. If it were just being passed through into the tip pool as it has been, fine. If the crew is being paid a higher wage, and the service charge is funding that, as in Hawaii, fine. But all that NCL will say, despite repeated requests, is that they don’t want to discuss crew compensation - despite the fact that a couple of weeks ago they were discussing it openly as it related to the changes necessary in Hawaii.

They have said on their website that the crew is paid a salary, and for the normal services they provide, people should feel no obligation to offer a gratuity. They have also removed all wording that calls the service charge a gratuity.

We don’t think for a minute that NCL is pocketing the money and the crew isn’t seeing any of it. But the long-term implication of this change does concern us.

Long ago and far away, passengers used to pay "port taxes" on their cruises, minimal amounts that were taxes collected by the ports of call, usually less than $20. Then those amounts started growing and were subtly renamed "port charges." When asked to explain them, cruise lines would say they included all the charges associated with going into ports (tug fees, docking fees, etc). These eventually ballooned to well over $100. Eventually, for other reasons than the amount, the cruise lines were sued by the State of Florida so that they had to roll these into the "port charges" into the advertised prices and, guess what, the (original) "port taxes" (which could legally be advertised separately) reappeared on top of the new higher prices.

The same thing could start happening here. Without it being defined exactly what the service charge is for, or it being called a gratuity, it could well be forgotten what it originally was. Especially without any prohibition on individually paid gratuities (such as they have at country clubs where higher wages are paid in lieu of gratuities), it could eventually be easily forgotten that the staff has already been paid a "gratuity" (in the form of the service charge) and passengers who choose not to provide anything additional could be viewed as not tipping - much like "port taxes" became "port charges" and "port taxes" were eventually added back on top of the "port charges."

The other problem we can see this leading to is that currently, everything added to your onboard account is at your discretion. If you never buy a thing onboard, you could walk off the ship and have no bill to pay. Most people take that for granted. Now you’re going to have a $10 per person per day charge added onto that bill that you cannot leave the ship without paying.

Who is going to be responsible for getting that across to the passengers? Sure it may be in the brochure, and it may be somewhere in the ticket book, but knowing how uninformed so many cruise passengers are (just look around at the bulletin boards) it’s going to come as a surprise to many people. There are going to be some people, especially those with low limits on their credit cards, who may not be able to handle a surprise $140 (or more for a family) on their onboard account.

And what about the future when that $10 service charge is joined by some other justifiable, but mandatory, charge? This could add up to some serious cash to pay before disembarking.

It makes more sense to us, if NCL is going to have a mandatory charge, that it is charged up front as a separate line item on the invoice at final payment, so if it’s a problem, the passenger can opt out of the cruise then rather than have it be the problem of the crew facing this angry passenger onboard at the end of the cruise.

To those passengers who don’t like the new policy, NCL spokesperson Susan Robison says, "We recognize that, just on principle, not everyone will find this new policy acceptable and we also recognize that some people budget their cruises with the intention of not paying the service charge regardless of their on board experience. That is why we are giving plenty of notice of this adjustment in our policy prior to its implementation across the fleet next summer."

The new policy makes the service charge (in lieu of the basic gratuity) mandatory effective in May.

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