How we increased service charge in our resort and made our colleagues richer
Service charge is a big thing in the Maldives, successful high-end resorts it can be actually higher than then someone’s base salary. Resorts are required by law to charge a fixed percent of service charge on all sales and distribute it each month among all contracted employees. Service charge is not part of the salary but received on top of that. This goes to each and every worker, including gardeners, house keeping attendants, waiters, managers and directors.
Take a look at the top 10 resorts with the highest service charge in January 2019
Velaa Private Island is one of the most expensive and exclusive resorts in the Maldives and since the island is small, their employee count is a lot less compared to large ones like Ayada Maldives for instance - which means higher service charge because of large sums distributed among a relatively small amount of people.
How we have increased service charge in our resort
In our resort, the 2018 service charge was around an average of $500 per month during 2017 which grew to an average of $680 during 2018. In 2019 it is just below $800 per month on average.
How did this happen, how did we increase it? It’s simple. Service charge is a byproduct of revenue which has two major components: room revenue and revenue from services delivered on the island. Understanding this the answer is self explanatory: we have improved revenue by attracting guests who can pay more for rooms and spend more on services.
Improving our direct and retail sales from 17% to 31% have had a huge impact on this. Direct and retail channels have by far the highest ADR (average daily rate) and people who book directly are typically not penny-pinchers.
Meanwhile our guest mix had been changed drastically. From cheap Chinese and Russian business we moved on to attract guests from the United Stats, Western Europe and the United Kingdom. These countries spend the most during their holidays and for these guest money is usually not an issue.
The correct implementation of these initiatives have resulted in a 60% revenue increase that generated a similar increase in service charge.
Impact on salaries and employee satisfaction
Employee satisfaction obviously increased with the improved service charge. Workers at the resort today are earning approximately $3,600 (USD) more every year just because of the above - which means around $9,000 per annum payouts on top of the salary as service charge. This is exceptional in the Maldives and we are working on improving it further.