At the very least, our way of doing things in Las Vegas is a mutation of the American norm. In general we are bigger and more extravagant with our endeavors, suited for a transient population free from the requisite of an education, and here it’s not so much what you know or even whom you know, but who remembers you that counts. This is common knowledge. Las Vegas is unique, in both its genetic and cultural makeup.
The fact is evident in our economy. Born as a subsidiary to the casinos, the town developed over its first 100 years a vibrant service industry, composed, in large part, of cash-based businesses: bars, taxicabs, strip clubs, lounges, ultra-lounges, nightclubs, mega-clubs, illicit and legitimate massage parlors and residential bordellos, among others.
“The service base of the Las Vegas economy was fully developed before credit cards,” says Keith Schwer, director of the Center for Business and Economic Research at UNLV. “The gambling component of the economy brought sufficient numbers of people who would write fraudulent checks, so that banks and others would not accept them as readily as cash. And, generally speaking, people were always hesitant to accept an out-of-town check. As a result, cash was the historical basis for buying services in Las Vegas.”
And then, according to Schwer: “Tipping evolved naturally as part of the cash and service orientation of the Las Vegas economy.”
Did it ever. Like many characteristics common to American city life, tipping became magnified here. So much so that the practice has become an integral part of the anatomy of the economic system of Las Vegas.
Tips arose in commerce as an unexpected gift provided by the wealthy. Now they are the diametric opposite—an expected source of income for numerous occupations, anticipated from everyone. Above all in Las Vegas, where tipping is more than anticipated: It is required.
The practice of tipping is a rather recent phenomenon in America, having caught on in earnest during the last part of the 19th century. Back then, however, it was disparaged by editorialists and other social commentators, and most professionals, including waiters and bartenders, would not deign to accept tips, a symbolic gesture of inferiority and subservience. Until, that is, tips became a vital source of income for those in the service industry—and none more so, says Schwer, than Las Vegas’.
That change was an adaptation fomented in the casinos. Anthony Curtis, an expert gambler and publisher of the all-encompassing Las Vegas Advisor website and newsletter, explains it in this way: “The casinos showed that you can set employee wages fairly low and have the patron pick up the employee’s income. Now, it’s become part of the Vegas firmament.”
According to Eric Felten, a Wall Street Journal columnist who has read and written in-depth about the culture of tipping, the reality now is that most people who rely on tips are happy to do so. “They get paid in cash,” says Felten, “and I’m told there might even be a few among them who forget to report every last penny to the IRS.”
Intellectuals had warned against the problematic consequences they foresaw when tipping first arrived on America’s docks from the old country and without any preambles. “One of the most vigorous early opponents of tipping was a guy named William Rufus Scott,” Felten says of the author of the 1916 manifesto The Itching Palm. “Among his complaints is that people hustling tips are often engaged in a kind of extortion that would have made the Barbary pirates blush.” And further, he adds:
“The stories of how the [Vegas] nightclub guys work the lines for payoffs would have been a primo example for Scott.”
It was the natural progression. As the culture of tipping—unregulated person-to-person transactions—ingrained itself into the anatomy of Las Vegas’ economic system, it took on a life of its own. On the giving end, says Curtis, patrons strived to be big shots, or to warrant their big-shot status, and tipped large. The way Frank Sinatra did. The legend of Sinatra’s stealthy and lucrative “green handshakes,” either given or directed by him, has been so expounded in this town that its veracity is now secondary to the lore itself; because anywhere Sinatra went, he was remembered, and he never failed to receive preferential treatment.
On the receiving end, Curtis says, people in the service industry began employing both subtle and strong-arm tactics to harvest more tips. To no one’s surprise, either, as the laws of both capitalism and human nature (if they are to be extricated) predict that people will seek to maximize their income whenever possible.
“Locals are supposed to understand the culture here,” says Curtis. “Take care of me, and I’ll take care of you.”
In this way, despite all its forebodings, tipping has become part and parcel of Las Vegas’ unique makeup. And now that it has spread prolific and powerful enough to start shaping its environment, the practice has become more than inescapable. It now, too, is irrevocable.
NIGHTCLUBS
The nightclubs highlight this. Adam Rolff, a representative for Hennessy liquors who frequents the scene four nights a week to entertain clients and survey new deals, says: “The nightlife industry has that old-school mystique.”
A large part of that, he says, comes from tipping.
“No matter who you are, if you want good service and extra attention, you gotta tip.”
Good service and extra attention, however, retain different meanings in Las Vegas than they do anywhere else in the nation. Here, it is more than a punctual waitress or a bartender with conversational charm. Good service and extra attention translate to skipping the eternal lines outside a club’s front door, obtaining the precious commodity of a table inside the club, having models brought to your table, having personal security, even having an escort to the bathroom.
A night out might commence with a green handshake for the doorman at the club, just to get inside. “In Sinatra’s days, it used to be a $20 bill, maybe a $50,” says Paul Poteat, a nightlife scenester since 1998. “Now, it’s three digits. A group of guys can expect to pay $100 to $200.”
If they want a table, which requires bottle service, they will have to take care of the VIP host, he says, on top of the standard $325 to $575 for the bottles. On busy weekends, like New Year’s Eve, prices might multiply by 10.
The receipt, however, will already include the 20- to 30-percent tip for the cocktail waitress. But because it is not she who brings the contracted bottles to the table, but rather a bus boy, an additional tip might be elicited.
Poteat says he has seen security guards offer their personal services to party-goers at a table, and that gesture typically warrants a $20.
Moreover, he says he wouldn’t doubt it if a woman said she had to pay a tip to use the ladies room, as was reported by the Las Vegas Sun earlier this month in an article documenting one family’s experience at club LAX inside the Luxor.
According to Rolff, in the same way restaurants charge an automatic gratuity for large parties, Vegas clubs charge an automatic gratuity on even a party of one.
“Sure,” says Poteat, an entrepreneur who, among other things, entertains celebrity clients at nightclubs as an independent VIP host, and designed websites for nightclub owner Pure Management Group. “Someone coming in, without connections, can expect to tip anywhere from $200 to $500 in a night if they want good service.”
That, of course, does not include tips rendered at the restaurant and bar, and perhaps a taxi or valet, prior to the party. “The industry is not just nightclubs anymore,” Poteat says. “It’s bars, restaurants and pools, too.”
He doesn’t forecast the prices dropping anytime soon.
“Everyone wants to be a big dog in Vegas,” he says. “It used to be that 15 percent was standard for tips. Then it was 20 percent. And now it’s more like 25 or 30 percent.”
Rolff attributes this to Vegas’ white-hot popularity. “Everyone’s looking at Las Vegas,” he says. “We’ve become the pinnacle of nightlife.”
Which has created a situation in which the demand for partying in Las Vegas is so far out of proportion to the supply that the people in the industry can employ, as Curtis says, both subtle and strong-arm tactics to maximize their income through cash tips.
Or, at least, that’s what some of the current legal troubles facing various Las Vegas clubs would suggest.
On March 24, Joshua Parks, a firefighter from San Francisco, will finally have his day in court. He alleges that on March 29, 2004, while in town for a wedding party, he sustained life-threatening injuries at the hands of doormen from the Rumjungle nightclub, inside the Mandalay Bay Hotel and Casino.
Parks contends in his civil lawsuit that doormen Orlando Johnson and Nathan Vargas tried “to hustle him for a tip” when he tried to reenter the club after stepping outside. He refused, he states, and ended up with a complex fracture of his femur bone, a severe concussion and multiple contusions.
“The plaintiff speculates that if Parks hadn’t been asked for a tip, the incident may have been prevented,” court documents from the case state.
Parks is going after Rumjungle, too. Parks’ lawyer, Don Campbell, says that management should have been aware of the “tipping issue.”
Rumjungle’s lawyers deny all the accusations in Parks’ lawsuit, and say there is no “tipping issue.”
“The policies and procedures for tipping,” states part-owner of Rumjungle Neil Faggen in a deposition for the case, “are memorialized in the employee handbook. They are memorialized as the years go by by the managers communicating those policies through pre-shift meetings. It’s a well-known policy.”
Moreover, he says: “No manager or supervisor or employee is permitted to accept tips on the way into the restaurant. It has always been in effect, and people have always been terminated for violating that policy.”
One year after the incident with Parks, Vargas was fired from Rumjungle for collecting “excessive tips” and not reporting the extra income to the IRS, according to what Vargas himself told Campbell in a deposition. Campbell, of course, says that corroborates his client’s story.
Whether or not Campbell’s argument holds water, the practice of tipping in nightclubs appears in at least three other pending lawsuits in Clark County District Court. All of those name, as defendants, clubs from the Pure Management Group—the same nightclub industry leader that had its offices raided by the IRS last month as part of an ongoing investigation.
TAXIS
The problem for businesses that deal with large sums of cash tips is that they are perpetually on the radar of the IRS, according to Greta Hicks, a certified public accountant and former IRS manager.
“The IRS assumes that businesses that receive more cash have more opportunity to pocket that cash,” she says.
Yet, the IRS has limited resources, and so must direct them with selectivity. Steve Miller, a former Las Vegas city councilman and freelance columnist who owns land leased to topless club Club Paradise, can’t think of any other reason the IRS hasn’t yet cracked down on the taxicab and transport-vehicle industry.
The problem, says Miller, is the swing and graveyard-shift drivers who take unreported tips from strip clubs, massage parlors and illicit brothels for every individual customer they deliver. According to Miller, who has been studying the problem since 2003 and who says he fields constant calls from honest strip-club owners hurt by the competitive disadvantage, drivers are paid anywhere between $50 and $150 per head.
Miller says this translates to more than $100,000 in cash payoffs distributed among participating taxis each night, and none of it is reported.
While Miller admits that he does not yet have evidence solid enough to stand the test of the courts, the truth is that the illegal practice has been so overt and brazen the past eight years that there is sufficient evidence for the court of public opinion.
In 2001, a reporter from Channel 3 immersed herself in the world of taxis and documented several cases in which her driver diverted her desired route to a destination that offered the driver a tip. Soon thereafter, Pete Eliades, owner of the Olympic Garden gentlemen’s club and the Yellow Cab Company, hired a private eye to investigate the situation and soon found out that his own taxis were diverting customers from his own gentlemen’s club. On April 10, 2002, Eliades filed a lawsuit against his nearby competitor the Palomino Club. In essence, Eliades claimed—with documentation—that numerous taxicab drivers with permits from the Nevada Taxi Authority were diverting customers who expressed wishes to go to Olympic Garden to the Palomino, where the drivers would receive the price of the cover charge for each customer delivered. The two parties eventually settled out of court.
In 2005, strip-club owners confederated in a Wild West showdown with the taxi drivers, who, the owners said, were extorting them for thousands of dollars every night. It was highly publicized. The cab drivers, in turn, said they could not endure without the tips, because the doormen at hotels were bypassing taxis to load tourists into limousines, the drivers of which would share their payoffs with the doormen.
This led to, as reported by the news media, a huge taxicab demonstration in December 2005, in which taxi drivers blocked the Strip with the solidarity of their fleet.
The taxis won. The Clark County Commission voted against regulating the practice, with Commissioner Lynette Boggs-McDonald stating for the record: “I don’t think we, as a county, can regulate this.”
Miller sees it as another victory for the old way of business.
“The taxicab owners don’t want to pay a living wage with benefits,” he says. “So if their drivers can make money elsewhere …”
In the end, the transporters—with their 3,000-plus vehicles and 7,400 drivers, accounting for more than 2 million trips per month—are too critical to the survival of Las Vegas’ economy to disturb. Miller says he can personally attest that the IRS has been made aware of the dubious tipping practice.
“It’s illegal everywhere else,” says Miller. “Why is it not regulated here?”
CASINOS
When Las Vegas giant Steve Wynn altered the tipping scheme at his namesake casino on September 1, 2006, it rattled the Strip down to its core. His dealers, who Wynn spokespeople say make about $100,000 a year, had to begin sharing their tip pool with game supervisors, and dealers throughout Las Vegas’ major casinos feared the internal system that had sustained a healthy Vegas for this long was going to be overthrown.
On the day Wynn’s alteration was announced, Review-Journal columnist John L. Smith wrote: “What are the Vegas rules? They’re the unwritten laws of the casino racket. They’re the way things have always, or almost always, been done on the casino floor.”
It’s true. Dealers haven’t received a noteworthy base-pay raise in more than two decades, bringing home about $15,000 in fixed wages a year. Their livelihood depends on their ability to garner—and keep—tips. For this reason, Curtis says: “Tips have been a very touchy subject throughout the decades.”
Yet, what people could not see at the time, but are only starting to realize now, is that Wynn was not revolutionizing the model at all: He was merely making a minor adaptation in accordance with his environment. That is, because his dealers had achieved unprecedented earnings—which was more Steve Wynn’s work than anyone else’s, make no mistake about it—the disparity between dealer income and supervisor income had struck a precarious imbalance: With an income $40,000 less than the lower position, the supervisor job offered no incentive, and thus depleted the staff of motivation to advance in the company.
The way it is aligned now, with supervisors sharing in on the tips—as they do in strip clubs and nightclubs (as if the teacher learned something from the students)—supervisors earn about $95,000, say Wynn spokespeople, and dealers make $90,000.
If the anatomy of the economic system of Las Vegas has not merely endured this long, but even prevailed, then it does not seem probable that the IRS will stir dramatic changes with its investigation into Pure Management Group. The IRS conducted a similar raid in 2005 on the Crazy Horse Too strip club, where dancers were reported to bring in anywhere from $500 to $4,000 a night (after giving the management its customary 15-percent cut), and bouncers would be found guilty of roughhousing customers to extort more money, and in the end only the club’s leaders were punished with jail time and fines for tax evasion, conspiracy to defraud the United States government and racketeering. Neither the strip-club industry nor its peer cash-based businesses suffered any repercussions.
Nor does it appear that any government agency or any casino mogul will change it. Because it has been so long and deeply established now, that to change it would be to change Las Vegas, its inherent body and character.
“The cocktail waitress would stop being a cocktail waitress, the dealer would no longer be a dealer,” says Curtis. The most frequently asked question on his Las Vegas Advisor website revolves around tipping. “Tipping is a part of our nature.”
Joshua Longobardy is a Weekly staff writer.
Illustration by Johnny Ryan