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A disturbing new trend? UK hotels adding a service charge to your room rate

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Anyone who has travelled in Asia or the Middle East will be familiar with the concept of ‘++’ pricing. Any published rate you see for a hotel will come with ‘++’ after the price, meaning that you will also be subject to local taxes and a service charge. These are likely to add at least 20% to the total price.

This sort of pricing is illegal in the UK. Hotel pricing – and indeed airline pricing – must show all compulsory charges as part of the headline rate.

Up to a few years ago, IHG tried to get away with showing ex-VAT pricing for some London hotels on the grounds that ‘all of our guests are business travellers’. (You are allowed to show ex-VAT pricing if your advertising is aimed at the B2B market.) They don’t do this any longer.

Similarly, Trump Turnberry in Scotland had a short-lived compulsory ‘resort fee’ which was not shown in advertised pricing. This was soon stamped out.

A new enemy is now emerging in the UK, however – the ‘optional’ service charge on your room rate.

A reader recently stayed at Rudding Park near Harrogate. When he checked out, he was surprised to see a new ‘optional service charge’ of 3% of his room charge on his bill. This is separate to the service charge added to restaurant and bar bills in the hotel.

Because the charge is ‘optional’, it does not need to disclosed as part of advertised prices. It is shown in small print as part of the Rudding Park booking process.

Generously, the hotel website states that you should still feel free to leave a cash tip as well at check-out if you wish.

When our reader challenged the hotel about this, it said that ‘all the posh hotels in London are doing it’ and specifically referenced the Mandarin Oriental and The Connaught.

What this has to do with a provincial hotel in Harrogate is a different question, but it was correct. It turns out that the Mandarin Oriental in Knightsbridge now says:

“Rates are per night and inclusive of VAT at the prevailing rate and subject to 5% discretionary service charge.“

Over at The Connaught in Mayfair, the £618 rate for a standard room on a random day in November comes with (if you click the letter ‘i’ next to the rate):

“Rates exclude discretionary service charge at 5 percent“

The brand new The NoMad London hotel in Covent Garden has also got in on the act:

“A discretionary 5% accommodation service charge will be added to your bill which is distributed amongst staff.”

To find this line during the booking process, you need to click the link which appears when you are asked to tick “I agree with the Booking Conditions” and scroll a long way through the page which appears. You will not see it otherwise.

The Ned, opposite the Bank of England, has joined in too – unsurprising as partially shares owners with The NoMad. Here you need to try even harder to find information on the charge, since there is no clickable link to take you to the booking conditions – you need to cut and paste a URL into your browser.

I don’t know if these charges are new or not. I have never paid a service charge on my room rate at a UK hotel. I wonder what happens if you book a prepaid rate? Are you given a bill at check-out for purely the optional service charge?

Given that hotels are currently benefitting from the reduced rate of 5% VAT until 31st March 2022, as well as substantially increased room rates due to post-lockdown demand (Four Seasons Hampshire now wants £750+ for a standard room at a weekend vs £350 pre-covid), adding a 3% to 5% service charge on the room rate is taking things too far.

One US hotel CEO has publicly said that he wants guests to start tipping on room rates because otherwise he will have to increase wages. With upward pressure on salaries in the hospitality sector due to a shortage of staff, the UK may be going the same way.

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Comments (250)

This article is closed to new comments. Feel free to ask your question in the HfP forums.

  • David says:
    13 Sep13 September 08:30

    My understanding is that the 5% VAT rate is due to change at the end of this month – to 12.5% (and currently until end March 2022) – so not 5% for this full period as is stated in the article.

  • Steve says:
    13 Sep13 September 08:45

    If a service charge is levied, does that mean they will actually have to start providing a decent service? Thought not…

  • NFH says:
    13 Sep13 September 08:47

    I would like the law to be amended to require the advertised prices to be the total price that the business (restaurant, hotel or anything else) expects to be paid for the service, including any discretionary or optional surcharge. The only purpose of these disingenuous surcharges is to facilitate a misleading indication of price, and to a lesser extent a VAT dodge.

    • IanM says:
      13 Sep13 September 11:11

      That is the law!

      • NFH says:
        14 Sep14 September 08:46

        No, the law does not require advertised prices to include any discretionary or optional service charge. That is why I am suggesting that the law should require advertised prices to be the total price that the business expects to be paid.

  • Andrew says:
    13 Sep13 September 08:50

    Oh it’s easy to refuse a “charity” donation.

    Simply say, “That’s not one of the charities I support”.

  • Pete says:
    13 Sep13 September 08:52

    So how does it work if you have already paid at service charge on your bar bill? Is it double dipping?
    Let’s be fair it’s a money grab by stealth. Wouldn’t mind so much, but the service in some of hotels has never been that good.

  • Dominic says:
    13 Sep13 September 08:58

    Time that the law changed to mandate that service charge *must* go to staff (nobody with a shareholding in the business). Better yet, ban it completely and mandate that your headline price has to include all charges you wish to add.

    Was at a bar near the office recently, whereby you now have to order via a QR code (not at the bar). Pint of beer stealthily tried to add on 75p in service charge.. what for? Walking my beer 10 metres?

    • lumma says:
      13 Sep13 September 09:06

      If you included the usual 12.5% service charge in the price of a meal then it’s estimated that prices would need to rise by around 20% to pay the staff the same amount due to the tax incentives for using such a system (no national insurance contribution/not counted for student loan payments).

      In my experience, in restaurants without service charges where staff are chasing tips, waiters will often prioritise customers perceived to be more likely to give out big tips and ignore those less likely.

      • Bagoly says:
        13 Sep13 September 09:10

        Nothing to stop restaurants paying staff a percentage of bills with fixed prices on them.

        Or are you saying that the service charge is effectively a potential penalty mechanism in the hands of the client to prevent service level falling – that’s an interesting way of looking at it.

      • Dominic says:
        13 Sep13 September 09:26

        The question is whether restaurants would pay their staff 12.5% without a service charge (or, indeed, whether they cut pay by 12.5% when they first added it on).

  • Mikeact says:
    13 Sep13 September 09:07

    I never, ever, carry cash…my phone for everything. Decent meal out this weekend…15% added. My wife carries any cash, as we would rather leave the tip as cash for the server and not be bullied into an unknown 15% whereabouts. And of course, the waitress in this case much preferred cash in hand.

    • Rob says:
      13 Sep13 September 09:12

      Sounds a bit dull Mike – there must be some illegal activity in your life you need cash for?!

      • Mikeact says:
        13 Sep13 September 10:13

        Actually, I’m thinking of trying an experiment this week….forget my wallet all together and just rely on my phone and see what problems I run into ! My driving licence is on the phone..not sure about that one if stopped ! Apart from that I think all my cards are covered….apart from the National Trust and English Heritage and both can easily check their records at the door. And that’s it !

        • John says:
          13 Sep13 September 10:37

          Don’t need to carry DL when driving in the UK.

          NT card is a square code so could be easily carried digitally even if they don’t have a digital version (not sure).

          What happens when your phone is stolen or malfunctions?

          • Mikeact says:
            13 Sep13 September 10:44

            Have to dive into a phone shop for a cheap Android…download the bits I need….hopefully ! (After hitting find/block my phone first.)

          • Char Char says:
            13 Sep13 September 11:32

            NT Scotland let you do a digital version if you haven’t got a Bermuda or NZD card 🙂

          • tony says:
            13 Sep13 September 18:23

            Interesting story in – I think – the FT a few years back where a journo tried this. Tapped onto the bus, phone battery ran out, ticket inspector boarded, whole thing ended up in court and IIRC she lost the case.

      • kitten says:
        13 Sep13 September 11:24

        That’s why his wife keeps hold of the cash

      • Pb says:
        13 Sep13 September 12:01

        For when the system fails/tills go down .

      • Laura says:
        13 Sep13 September 12:09

        I only need cash for a local pub who refuse to take card. And I assume that’s because of illegal activities on their part, not mine..

      • TGLoyalty says:
        13 Sep13 September 16:03

        Even drug dealers have square now

        I jest mine takes bank transfers …

    • MW says:
      13 Sep13 September 11:37

      I have been “digitising” my spend for a while (and certainly since being more serious on the points collection) and the only cash items I cannot get away with are: barber (they went through a phase of taking cards, even Amex but no more…), dry cleaner (not much use during the pandemic) and car wash.

      So basically just the businesses known to ensure they have enough “hard cash” cashflow to cover for other… ahem… activities.

  • Bagoly says:
    13 Sep13 September 09:07

    Price shown up front should be price requested on settlement.
    Putting less in the offer/advert and then increasing it is cheating, and should indeed be illegal.

    If I am presented by such a hotel service charge (preferably with a queue behind me) I will ask for the General Manager (and no doubt get some lower manager)
    “I know we agreed on a rate of £200 per night, but I’m feeling greedy so I’m going to apply a 4% settlement discount”.
    Not least because they probably are doing that to their suppliers!

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