Cab Driver Kickbacks to Hotel Doormen Receive Scrutiny

Barbara DeLollis reports on a new Santa Monica, California law outlawing hotel doormen from enforcing kickbacks from cab drivers. Apparently the ‘cut’ is about 10% and is referred to as a ‘cookie’.

My suspicion is that cab drivers pay because regulated taxi fares in many cities are set above market clearing prices. Or at least because on average pickups of passengers from hotels reduce waiting times, so they are more lucrative at the regulated fare (since fares cannot legally vary by location of pickup in most jurisdictions) than trolling for rides. So it’s worth it to them to do so.

Hotels tacitly condone the practice because they see the cab drivers as compensating their doormen, so they pay those employees less. Further, the kickback schemes kelp retain employees, it takes time to cultivate illicit kickbacks from drivers and there would be high switching costs if the doorman was to go to another hotel, they would have to get to know the culture and the other doormen and take time to develop their cab relationships in the new location. Lower wages and better redemption are a benefit to the hotel, and this likely explains why the practice persists rather than management being incentivized to stamp out the practice.

At least that’s my speculation, and would love to hear other guest experiences and also anyone on the hotel management side who can offer supporting or contrary explanations.

Meanwhile, I’ve observed the practice predominantly at better but not the best hotels, presumably the latter take the view that the practice put their staff at odds with guests and hinders customer relatios. Further, the high end customer service focus likely leads to paying a higher wage and better retention in any case. And in the U.S. the tips are also more likely flowing more freely from the guests themselves, hence the allegiance tends more towards the guest than the cab driver.

Here was my cab kickback story at the Fairmont Royal York last year.

Meanwhile, I had a long chat with a cabbie about the property, from his perspective it was way overrated. There was a long line of cabs in front of the hotel, and Steve was out front calling them over. Now, Steve had a thick accent, asked us where we were going and repeated it to the cab driver. Steve got it wrong, fortunately I told the cabbie where we actually wanted to go and that was no problem. The driver explained that Steve enforces a $5 kickback on all airport runs, so he always needs to know where you’re going. If a cabbie doesn’t pay the $5 bribe, Steve advises guests against taking a particular cab because ‘they get into lots of accidents.’ The cab driver said that never happens at the Four Seasosn, they don’t accept bribes there, at the Royal York it’s required.

I find the practice far more offensive in cities where the cab drivers tend to be owner-operators, rather than in places like New York where the regulated and controlled number of taxi cabs force up the price of permission to operate so high that they can only be obtained by larger companies and the drivers themselves are employed by those companies. Perhaps this shouldn’t change the calculus, but schemes that on face appear to redistribute income from those drivers to doormen seems especially troublesome.

And as a passenger, I at least appreciate knowing or assuming that I’m at odds with the doorman rather than the doorman acting as my agent. But that’s not my preferred relationship for sure. Though I’m not a fan of the practice, given the function it plays in compensation and retention I’m not sure that an outright ban will be as strongly pro-consumer as expected, and would prefer greater scrutiny of the practice that causes hotels to take a greater role in becoming aware of and policing it to avoid harming guest interaction. And I further suspect the root cause of the practice isn’t its legality, but the overall scheme of regulating taxi prices, so the ‘solution’ simply piles statute onto statute.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community Milepoint.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. Two years ago, at the Marriott in Stamford, CT a local taxi owner told me that he paid the hotel (who exactly at the hotel I don’t know) to be the exclusive taxi company.

    He parked his cars in a line outside and angrily confronted drivers who were not from his firm.

    I wouldn’t mind regularly, but there were times when the queue was empty, and the doorman would tell me to wait for a taxi (10 minutes or more), but there were drivers parked just off the property, hoping that someone would walk down the street to them. This was always worse when it was raining, which made the slog down the road very frustrating and not at all appreciated.

  2. Many years ago when I worked at Marriott Suites Las Vegas, there was no commission on taxis so bell men could care less which company.

    However, as it’s a convention hotel, the cab line can get long during busy periods so bellman pushed guests towards limos/sedans which are tipped/commissioned.

    Also, I’m sure it’s no surprise, the tour companies paid various commissions to push various shows/tours/etc. The better paying ones tended to be the hotel’s favorites. However, this money went to the hotel and not the employees. The hotel would later distribute a smaller percentage to the employees as a employee appreciation “bonus.”

  3. 2 data points.

    Cabs at Hilton Hawaiian Village are required to pay the hotel $400 a month. Our driver to the airport said he doesn’t wait at the airport after dropping us off, he heads directly back to HHV. He says he makes more money that way. I figured HHV to make about $20K a month from this set-up.

    Stayed at the 4 Points Miami Airport for a cruise. 6 of us. Cab to the port is fixed at $30, no matter how many passengers. I call the bellman, tell him we want to leave in 1 hour and to get a minivan cab. He says no problem, he will call. An hour later, we show up. No cab. And there are no minivan cabs waiting in the queue line. He says all minivan cabs are booked, and to make our cruise, we will need to take a $10 per person shuttle. At that point, a minivan cab pulls up to drop off passengers. We get in and save $30. I disliked the being lied to the most.

  4. “so they are more lucrative … than trolling for rides” — actually, hailing a cab off the street in the L.A. area is surprisingly difficult. I am not sure why this is the case, one theory is that aggressive ticketing by police makes it too risky for cabbies to pick up people in places that wouldn’t bother anyone in other cities (such as next to fire hydrants, or in the lane next to a parked car). Whatever the reason, most businesses in L.A. will tell you to call for a cab, you just don’t see them cruising for fares the way they do in other cities.

  5. Speaking of regulated vs. unregulated fares, one of the more striking examples I have seen was at the Taba border crossing between Israel and Egypt, on the Egyptian side. I’m relating experiences from a trip 12 years ago, I don’t know if things have changed since. The first scam is the 5-pound ride from the border to the bus/taxi station, which is about 100 meters away. Then at the station, prices are set (and very high); as far as I can tell, the fares are set by the cabbies themselves, but they all quote you identical prices and won’t budge. When I told them I was willing to wait for the bus they just laughed at me — the bus was due in 5 hours, whereas the taxis at the head of the line had been waiting for 10 days. The whole station has a campground feel to it, and the line is managed in a very orderly way (and no, they’re not idling).

    Now, if you just step out to the main road, you can catch cabs that are coming back from dropping off a person at the border, and are willing to cut the line in exchange for a substantially lower fare. I don’t know if it’s legal to pick up at the main road, but I saw people catching cabs there. I didn’t try it myself because I was traveling solo and a cab would have been too expensive for me even on the road.

    I ended up not waiting for the bus, but managed to join a small group that split a cab to the closest town (still an exorbitant fare, but the lowest one); there I was able to catch one of the cabs cruising up and down the coast at a more reasonable price (split with two others traveling to the same destination). The second cabbie asked us if we would mind him picking up additional fares on the way, and then stopped at every little town on the road, asking if there were any Egyptians or foreigners looking for a ride (there weren’t). In all the places he stopped there were dozens of Bedouins looking for a ride, so I asked the cabbie (who was a Bedouin himself) why he wasn’t willing to pick them up. His reply: Bedouins ride for free…

  6. i find this to be endlessly annoying, i experienced this for the first time at the pan pacific in seattle. i asked the doorman for a cab to the airport and he called for one and said ok 5 minutes. meanwhile a cab showed up about 5 minutes later, and i was about to get in when he was like oh no, thats not your cab, and waved for the driver to get back into his car and leave, i was like i have to get to the airport and got in, he was clearly pissed, and i didnt realize why until someone told me that they receive kickbacks. truthfully i would have waited, but im not going to let a perfectly good cab drive off when i have somewhere to be, thats ridiculous.

  7. Gary,

    I’m not sure that the practice of kickbacks is any less pernicious in a place like NY where larger companies control more cabs and there are fewer owner-operators. As I understand it, even in NY each cabbie pays a set amount to the company, effectively leasing the cab. If that’s the case, those cabbies feel the brunt of the kickback regime as fully as an owner operator would…

    Interstingly, I wonder if cabbies actually pay kickbacks to doormen in NYC; it’s become increasingly hard to catch a cab in manhattan, particularly (but not exclusively) during rush hour. Given the high demand, I would doubt that doormen would have much luck trying to extract kickbacks, unless a hotel’s guests were large tippers and/or they generated desirable fares (to the airport etc).

  8. @Guest it was not my suggestion that non- owner-operators wouldn’t kick back, my reference to NYC ediallion system had to do with varying levels of moral outrage. Separately in New York there’s definitely kicking back from car services.

  9. I had a somewhat similar, but different experience a few months ago at Disney World. We were leaving the Polynesian Resort after dinner and needed a minivan cab since there were 6 of us.

    The doorman called for one and said it would be about 10 minutes. One pulled up a few minutes later letting some people out. We started to go over and they told us, no, that wasn’t our cab. I asked them if there was any reason we couldn’t take it, and they said that Disney had an exclusive agreement with a different company.

    I didn’t get the impression that they really cared, they made a point to say we were welcome to do whatever we liked, but they couldn’t recommend that we take that brand of cab. It ended up just feeling really weird, but we just got into the cab and left.

  10. I worked as a hotel doorman for seven years at mid to high end hotels until 2007. Kickbacks from taxis, restaurants, events, other services, etc where pretty standard procedure and part of life to the doorman. They allowed us to be better at our jobs and connect people with the right services. I could you into places that you wouldn’t necessary get into yourself. I could ensure you got to your destination without any hiccups or issues. All from a kickback and a maybe tip.

    It is illegal for taxi drivers in the city I worked to pick up customers on the side of the road so business from places such as airports, hotels, and restaurants is highly prized. Competition amongst the taxi companies or individual drivers would set the kickback prices (especially amongst town car drivers). Under no circumstances were prices a dime higher for the customers due to this; all kickback costs were absorbed by the driver/company. Most drivers or companies were willing to pay this kickback as a part of doing business (think of it as an advertising cost or sales commission). We typically earned 10% – 20% per taxi fare but sometimes higher depending upon company and the request.

    At any given time, I typically had one taxi company (typically a smaller company of 8-12 drivers max) and a couple town car/limo drivers I would do business with. All paid kickbacks to me but were companies my guests had excellent experiences with. If there were guest concerns with specific drivers/companies, we would not deal with them in the future. Dealing with an unhappy guest at a hotel is much worse that not making the $10 kickback.

    Does this system also get abused? I wouldn’t be one bit surprised. But in my experience it works. It’s business. My guests were pleased, the drivers were pleased, I was pleased, and the hotel was pleased to have satisfied guests.

  11. @Jason: Suppose it wasn’t the doorman that called a cab for you, but you called one yourself on your cell phone. Would you feel you should wait for “your” cab, or would it be OK to hop into one that just randomly appeared? I generally feel that I should wait for the cab that was called for me (regardless of who makes the call), unless they’re already late.

  12. I am a NYC doorman with over 6 yrs experience and what’s being discussed is 100% true. The “kickbacks” change from property to property but everyone must pay. We however don’t deal with yellow cabs, we reserve a car service for a price designated by us and ask for our comission. Why are there thousands of comission based positions and this one is so overwhelming? When you buy a car, guess what? Part of that sale is an “undesclosed” comission to the sales person, just like a broker of any sort. Travel agents sell you a tour or vacation package and don’t disclose their comission. In conclusion, it is just another position where comission is a large part on the salary.

  13. Hi,
    I am a taxi driver in the city of Santa Monica, so i would like to explain this cookie thing.
    There are lots of hotel doormen who require a 5 dollar bribe otherwise you wouldnt take the ride.
    We complained to our management, hotel managements and the city of santa monica but in vain.
    This practice is illegal and was imported by all these doormen from their countries.
    Thanks

  14. Almost two years later than this article was posted, I saw the kickback take place in San Francisco. I didn’t know why the doorman and taxi driver looked like they were passing off “something”. My curiosity brought me to this site. We were leaving the Marriot Marque on the way to, yes, the airport! I find this practice disgusting.

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