Hotels loses 15% service charge income

Published November 21, 2019, 12:00 AM

by manilabulletin_admin

By Bernie Cahiles-Magkilat

Investors in hotel projects in the country are having second thoughts following the removal of their share in the huge service charge they collect from all services they provide to guests.

Arthur M. Lopez, president Philippine Hotel Owners Association, explained that with the passage of Republic Act No. 11360 otherwise known as “An Act Providing that Service Charges Collected by Hotels, Restaurants and other Similar establishments be Distributed in Full to al covered Employees Amending for the Purpose Presidential Decree No. 442”, hotel managements are no longer entitled to their 15 percent share in the 10 percent service charge they collect from guests.

Lopez explained that the service charge forms part of a hotel’s overall revenue. He said that a 600-room hotel could earn $2 million annually from its 15-percent share out of the 10 percent service charge collection.

Grudging, hotel operators already signed an agreement with the hotel labor unions to give to regular hotel workers or the unionized labor the entire service charge collection but they insisted that hotel workers will be excluded as previously proposed by the regular hotel workers.

This agreement, he said, was considered in the law’s implementing rules and regulations signed by Labor Secretary Silvestre Bello on Nov. 19, 2019. The IRR under Department Order No. 206 will take effect 15 days after publication in a newspaper of general circulation.

The total hotel industry employs 2 million of which 10 to 15 percent on the average are contractuals, Lopez said. “We were able to negotiate with Department of Labor and Employment and the labor unions to exclude contractuals and prospective certain managerial level hotel staff,” he said.

“If you include all the contractuals, that will dilute the share of the regular employees in a very big way. Sometimes, when you have banquets, you have more contractuals,” he said. This is against a law that bans diminution of salaries, he added.

But the biggest winner in the hotel workers, who can expect additional 15 percent more in their service charge share. The service charge is on top of a hotel worker salary, which is estimated at P30,000 a month for mid-level managers and a low of P18,000. It is also separate from the tips they received from guests.

Since the service charge forms part of a hotel’s revenue, its loss would be seen to impact on their operation. For example, if the revenue is P2 billion annually, the service charge is 10 percent of that amount. So, it could be a big loss to them. Their 15 percent share of total had been used to cover for breakage and pilferage.

“To make up the lost revenues, we need to sell more. In other words, increase occupancy.
We just have to improve our sales. We don’t want to raise rates because that might scare away tourists.” said Lopez.

With the loss in service charge income, hotels have to their productivity. “That gives us a reason to improve productivity, multi-tasking,” he said.

“Investors have second thoughts, but the Philippines has a very good tourism potential. We haven’t even scratched the surface yet, our sunshine industry is tourism,” he said.

The hotel association represents the 250 major hotels in the country.