Tips are one of the few remaining expense categories where cash often still is king, but digital payment platforms are changing that — and perhaps opening a new, albeit small, area of cost control for corporate travel.
As one sign of interest in these platforms, Grazzy — a company that enables digital tipping at hospitality and service businesses along with disbursements and banking solutions for employees and such services as tax compliance assistance for employers — recently announced it has completed a $4 million funding round, led by Next Coast Ventures and with participation by AZ-VC, InRevenue Capital, Iron Skillet Partners and Tuesday Capital.
Grazzy — a PhocusWire Hot 25 Startup for 2024 — reports a hundred-fold growth in its customer base over the past 18 months, and it plans to use the funding to acquire more customers, develop more features and enable partner integrations, according to founder and CEO Russell Lemmer.
"We’re meeting a seriously understaffed market with a solution that can truly deliver more money, more often to front-line employees," Lemmer said in a statement. "On the Grazzy platform, we’ve moved millions of dollars directly to thousands of worker wallets. And we did that while saving our enterprise customers thousands of dollars a month in recruitment and retention costs."
Grazzy is one of several platforms that hotels are adopting to offer digital tipping opportunities to customers, and other service providers that traditionally have relied on cash tips have been adding digital solutions as well. Airport parking provider The Parking Spot, for example, now provides QR codes in its shuttles with which travelers can digitally tip their drivers.
For whatever reasons — no longer having the excuse of no cash or small bills, or perhaps a different psychological response to entering an amount on a mobile device as opposed to the handing over of actual bills — companies using digital tipping are reporting a surge in tips for their employees. One of Grazzy's customers, Carnation Auto Spa, reported that tips have increased by a factor of five and the total value of tips by a factor of four since implementing the platform, according to its CEO, Drew Shepard, who also is operating partner at investor Iron Skillet.
Specific to hotels, a survey last year of 1,000 hotel guests by Canary Technologies found 70 percent of guests who did not tip hotel staff said they would have tipped if digital tipping was available, and 70 percent of guests who did tip said they would have tipped a larger amount had it been available.
As such, the wider expansion of tipping platforms stands to boost the amount corporate travelers are tipping, though it also could boost visibility into the spend, as they can tip on corporate payment tools rather than cash.
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The growth of such technology, however, to date has not inspired much change in approaches to tipping in corporate travel policy, according to an American Express Global Business Travel spokesperson. The travel management company's consulting team noted a "wide range of approaches" to tipping in corporate policy, with some not mentioning it at all and others setting limits based on region and the services provided.
"Generally, there's an established ceiling of about 20 percent, along with the guidance to spend wisely," according to Amex GBT.
In the U.S. General Services Administration policy, for example, it lists fees and tips for porters, baggage carriers and hotel staff under "incidental expenses." Those along with tips on meals fall under the broader meals and incidental expenses allowance, "so travelers will not be reimbursed separately for those items."
Kelly Ellis, the global practice area lead for BCD Travel consultancy Advito's Engage team, said Advito frequently includes tipping guidance in travel policies. The policy should establish an acceptable range and specify whether tips are fully reimbursable or subject to limits, she said. In addition, tipping guidance in corporate travel policies should be "unambiguous" and allow for some level of traveler discretion, based on services provided.
"We encourage clients to remind their travelers that tipping is a way of showing appreciation for good service," Ellis said. "By providing clear guidance within their corporate travel policy, they are helping employees make informed decisions while ensuring expenses remain reasonable."
*This story originally appeared in Business Travel News, a fellow Northstar Travel Group publication.