How UPI tips the scale against hotel staff

India’s digital payments revolution may have inspired the rest of the world, but it has taken a toll on tipping jars in the country’s top hotels. With guests increasingly preferring not to carry physical cash, staff at these hotels have seen their tip incomes dwindle. And it has impacted their lives as ET found after speaking to employees at some five and seven-star hotels in Delhi, Mumbai, and Bengaluru, though the issue is overlooked.

“We don’t live on tips, but it did help with running the household…maybe have some savings,” said a staff member at a top hotel in Delhi.

Hotel employees said tips used to take care of their transport costs, stationary and everyday school requirements of their children, and more.

“The tips used to help with ‘upar ka kharcha’, especially as there are deductions in our salary. The price of gas cylinders and vegetables has also gone up…there is inflation,” the person cited above said.

A doorman at a top hotel said, “Earlier, I would get 400-500 a week in tips, or 100-200 a day. That doesn’t happen anymore, even when there are many guests.”

The decline in tips started since the Covid-19 pandemic, when going cashless became a habit. “Tips are less now, ever since Corona. People don’t carry cash anymore,” said a housekeeper at a 5-star hotel in Delhi.

Another staff member added, “Earlier, they (guests) would allow you to keep the change. If they had to pay 450 and have a 500 note, you get the 50. But with digital payments, they can pay the exact amount, so there is no change.”So, why not digital tips?

Hotel policies don’t allow employees to share their phone number, UPI (unified payments interface) details or other personal information with guests, and hence they can’t receive tips digitally.

“As an employee and professional, we can’t give our number to the guests for UPI tips. It’s a matter of professionalism,” a waiter at one of the restaurants in a hotel said.

Some hotels and restaurants are putting in systems to enable online tipping.

Tip boxes still in place

At two five-star restaurants in a Delhi hotel that ET visited, customers have the option to tip separately right after their bill payment digitally. The staff said the tip money is credited to the company account and distributed equally among all the waiters.

Also, some guests pay tips informally online. “There have been instances where our regular guests have given UPI tips when they don’t have cash,” a valet at a seven-star hotel in Mumbai said.

A doorman at a prominent five-star hotel near the Bengaluru airport said, “Even if someone is willing to pay on UPI, our bosses discourage it, or some customers are hesitant because they may think their privacy gets compromised as I may get to know their phone number or message them directly on these platforms… Most young people do not carry hard cash these days.”

Nevertheless, tip boxes at these venues are still in place.

At some of the high-end restaurants surveyed in Delhi, cash payments have declined to 10-15% of all payments. Few customers pay tips over and above the service charge or ‘staff contribution’ amount levied at these high-end restaurants, employees said.

Many guests opt to have the service charge removed from their bill altogether while many happy customers tip the waiters separately in cash after their digital bill payment. Regardless, the service charge collected is distributed on performance or department basis every 15-30 days to all staff members, hotel staff said.

UPI-based payments in the country crossed the 10 billion transactions mark in a month for the first time in August – a 67% surge from a year earlier.

The Ministry of Electronics and IT has projected India’s digital economy to account for 20% of the country’s GDP by 2026.

Interestingly, even as online transactions are on the rise, hard cash in circulation has also increased. This is because the smaller denomination transactions via UPI also tend to increase the number of transactions.

A large part of cash transactions also take place in the interiors of the country, experts said.

People prefer cash in cases of certain large value transactions like property or gold, said Madan Sabnavis, chief economist of Bank of Baroda.

Also, people like to hoard currency at home for simple precautionary purposes, alongside cash giving them the benefit of anonymity in transactions, he said.

“If you look at reserve money and see what the total currency under circulation is, it has fallen by around Rs 90,000 crore post March,” Sabnavis told ET.

This decline is not much considering the Reserve Bank of India announced the withdrawal of Rs 2,000 denomination banknotes in May.

“Assuming that based on the RBI’s revelation about those Rs 2,000 notes which have been deposited, around Rs 3 lakh crore was withdrawn by the RBI from the system,” Sabnavis said. “The actual fall is only coming to Rs 90,000 crore, which means Rs 2.1 lakh crore must have been pushed back into the system in terms of fresh currency.”