Case Study Tips and Credit Cards

Please read and solve the following case regarding the percentages that Credit Card companies charge the hotel for tips.

Please refer to page 356 "Tips for employees".

A noticeable squeeze on profits has brought the man-agement team to a brainstorming session. Noting the large amount of credit-card business that the hotel is doing, the controller suggests that each tip charged to a credit card be reduced by 3.7% when paid to the employee. It was explained that 3.7% is the average discount fee the hotel is paying to credit-card com-panies. The controller also suggests an additional 1.1% be subtracted, representing the percentage of card charges that prove uncollectible. The controller finished making her argument by adding "we could then round the total to 5%. So, a $10 tip would net

the hotel $0.50 and pay the employee $9.50."

Questions

1. What comments would you make if you were the food and beverage manager?
2. What comments would you make if you were the rooms division manager?