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.