Definition of service charge

The term "service charge" can be traced back to the 19th century when it referred to a fee charged by hotels to cover additional services provided beyond standard accommodation, such as laundry and room service. In the United States, the use of service charges gained prevalence in the mid-20th century as a way for restaurants to recover the costs associated with providing tableside service, delivery, and other amenities. The concept of service charges also played a significant role in the UK's hospitality industry during this time. The popularity of all-inclusive holidays led to cruise lines and major hotels adopting the term as a way to exhibit higher class and sophistication. Essentially, service charges provided clients with a smoother experience by taking care of multiple incidental expenses in one place. Today, the use of service charges continues to evolve in response to changing consumer preferences and regulatory challenges. Some establishments have opted to do away with service charges, stating that they are either unfair or that other methods of revenue recovery exist. However, the term remains widely used in the UK to denote charges that cover staff tips, particularly when certain charges are mandatory or when gratuity is not automatically included in the price.