Tipping in restaurants has always been the norm in the U.S. It was not until recently that more restaurants adopted a no-tipping policy. Will there be even more no-tipping restaurants in the future?

The 2017 American Express Restaurant Trade Survey may give us some clues. Every year, American Express surveys about 500 restaurateurs and 1,000 restaurant consumers, aiming to reveal the facts and highlight the emerging trends in the industry. Then, what did the 2017 report tell us about the restaurant industry?

Fewer restaurants adopt a no-tipping policy in 2017 than in 2016

• In 2016, 18 percent of restaurateurs had already adopted a no-tipping policy, and another 29 percent indicated that they would adopt a no-tipping policy soon. In 2017, only 29 percent admitted they have adopted or would consider adopting such a policy.
• In 2016, 27 percent stated they would not follow the no-tipping trend, but this number has increased to 55 percent in 2017.
• Among those no-tipping restaurants being surveyed in 2017, 79 percent plan to increase wages of their wait staff, in an average of 66 percent.

The tipping behaviors among consumers

• In general, most consumers (63 percent) would like to continue the option of tipping in restaurants; millennials (18 percent), as compared to Gen-Xers (eight percent) and the baby boomers (six percent), are more likely to prefer restaurants to add a service charge as a replacement of the traditional option of tipping.
• More consumers add tips to their credit card payments (59 percent) than those who prefer to pay tips separately in cash (39 percent).
• Millennials (46 percent) are significantly more likely to leave tips on their credit cards than the other two groups (36 percent respectively).

Besides this no-tipping trend, the 2017 report also reveals some interesting findings that complement our previous discussions about restaurant operations. For example:

More restaurants are adopting new technologies in operations

• About one-fourth (24 percent) offer customers the ability to order ahead using a mobile app or on the restaurant’s website for pickup; another 42 percent plan to adopt or considering adopting such technology.
• Most restaurateurs (65 percent) planned to invest in technology in the next 12 months, probably because they also see machines are becoming more capable of performing service jobs in the near future. Yet, they only plan to invest $4,200 on average.
• Currently, 7 percent have used automatic customer service technology (e.g., digital kiosks or table-side ordering).
• Additionally, 26 percent plan to or are considering adopting such technology in the future.
• 40 percent of the restaurants would not adopt such technology.

Service trends suggested by consumers

• In responding to the automatic service trend mentioned above, 75 percent of consumers prefer restaurants with traditional wait staff rather than machines.
• Millennials (39 percent) are more likely to prefer digital service than the other two generations (28 percent for Gen X and 12 percent for the baby boomers).
• Most consumers (51 percent) prefer dining out over takeout/pickup services (29 percent), a delivery service (12 percent), or meal prep service (8 percent), indicating that there is still time for supermarkets to become a real competitor for restaurants.
• Almost half (43 percent) have ordered takeout/pickup or delivery using a mobile app or website at least once in April 2017.
• Most consumers (61 percent) are aware of online restaurant ordering and delivery services, including GrubHub (39 percent) and UberEATS (23 percent).
• Generally speaking, the majority of customers (57 percent) do not like sharing tables with other patrons who are not in their party. Yet, over half of Millennials (53 percent) are fine with the idea of sharing tables.
• Over half (56 percent) of consumers believe it is important for restaurants to use local ingredients.

Green initiatives taken by restaurants

• Over 40 percent of restaurants currently use locally sourced ingredients, and another 39 percent plan to or are considering doing so.
• Half of the restaurateurs (48 percent) recognized food waste as a significant impact to their restaurants’ profitability.
• Over 60 percent evaluate inventory, 59 percent train staff to reduce food waste, and 53 percent monitor the portion sizes.
• Nearly four-in-10 (38 percent) of restaurants re-purpose ingredients or offer special menu items with leftovers to reduce food waste.
• Similar to what is suggested in our earlier discussion that consumers are only willing to make minimal efforts to eat in a green restaurant, 49 percent customers are unlikely to order a meal from a restaurant made from salvaged food; only 27 percent are willing to order a meal made from leftover ingredients that might have otherwise been discarded.

Online reviews and social media

Managers are striving to promote good reviews about their business while minimizing the negative impact of the bad reviews.

In particular, businesses are highly recommended to adopt different strategies when responding to online reviews according to their product types. The 2017 report also highlights the following in regards to online reviews and social media:

• Only 31 percent of consumers have written a positive review or a positive social media post about their restaurant experience.
• Almost half (47 percent) of consumers will post other aspects than their dining experience on social media, including check-ins (14 percent) and photos of the food/drink (16 percent).
• Close to three-quarters of millennials (72 percent) post their restaurant experience on social media.
• Most restaurateurs (83 percent) believe social media have a positive impact on their business.
• Another 63 percent believe social media posts and review websites can significantly influence "decisions related to their restaurant’s presentation of food items." It becomes critical for restaurateurs to strategically promote the usefulness of certain selected reviews because online reviews with higher helpfulness votes will have a bigger impact on consumers’ decisions than those with lower or none helpfulness votes.

Outlook and the challenges facing the restaurant industry

Despite of the increasing concern of the restaurant business, the restaurateurs being surveyed by American Experience felt very optimistic of the business’ outlook.

• Not only 54 percent reported higher revenues than a year before, but 72 percent also expect a continued growth in 2017.
• As the labor costs continue to rise, 76 percent plan to increase prices.
• Over 80 percent plan to hire new staff (presumably because of high turnovers in the industry).
• On a similar (but somewhat contradicting) note, 17 percent believe their staff size will decrease due to automatic services; these restaurants have replaced or plan to replace about 19 percent of their staff because of automatic services. (Read tips on how not to get replaced by machines at work.)

Once again, I can see technology is really a double-edged sword. While it can help increase productivity, the advance of technology also eliminates more job opportunities. For customers, technology can help speed up the service, but at the same time, it might also have brought down consumers’ dining experience.

What do you think of technology? Is it good for bad for people working in the restaurant industry? Besides technology, what other emerging trends do you see from the 2017 report?

Acknowledgement

This discussion is written based on a courtesy copy of the "2017 American Experience Restaurant Trade Survey Fact Sheet."