San Diego restaurants giving money to hotel concierges?

When a San Diego hotel concierge recommends a restaurant, he or she may be getting a fat kickback. “It’s an extortion ring. Like the Mafia. Restaurants are bribing concierges in hotels. It’s a bidding war,” says one downtown restaurant owner, who says he could be destroyed if his name got out. “On a given night, some restaurants are full and others are half-full. The full ones are paying the concierges.”

In some cases, the concierges are paid in cash tucked into envelopes, delivered clandestinely. It’s folly to think the Internal Revenue Service is told about this income. The kickback on a meal reservation is often a minimum of $5 per person. For a party of ten, the concierge may demand and get 10 percent of the gross.

Earlier this year, the city attorney’s office investigated the practice. The investigator, Dan Andrews, refuses to discuss the matter, so it’s not known if the new city attorney, Jan Goldsmith, will pursue it. However, I was able to get a copy of a letter to hotels mailed by then–city attorney Mike Aguirre in March. “Concierges at your hotel may be in violation of Business and Professions Code section 17200,” said the letter. Such violations “may occur where a concierge makes referrals to a restaurant or business without disclosing to the hotel patron that gratuities, gifts or other items of value have been provided by the restaurant or business for the referral.” The letter told the hotels to cease and desist the activity.

“The concierges are destroying the downtown restaurant market,” says Aguirre. “It’s not fair to clients [of both restaurants and hotels]. One of the things I had intended to do was to bring an action. I sent letters to get concierges to knock it off. But I understand it is getting worse rather than better.”

Upon learning of the letter, the San Diego County Hotel–Motel Association “recommended to our members that concierges not engage in that practice; if they do, they should disclose it,” says Namara Mercer, executive director. “Many of our general managers had conversations with staff and said to stop it.” (Not many intelligently managed hotels would post a sign confessing, “Warning: Our concierges get under-the-table payments for making recommendations.”)

Ed Rose, concierge at the Hotel del Coronado, is incoming president of the San Diego Concierge Association. Upon hearing of the letter, “We advised each hotel to check with their legal representatives. It’s not a matter involving everybody. In the association bylaws we are not supposed to receive cash or money for a service, although we accept free dinners. I’m cool with that. That is the way most of us are able to find out about the restaurants.”

Says Rose, “I have heard rumors of [cash in envelopes], but that is an individual issue. We know it is out there. We discourage the practice.” He says that concierges make $10 to $12 an hour in salary. “It’s not the highest paying of industries.” Hotel managers say that concierges can make $13 to $15 an hour with fringe benefits and, including tips, can make $50,000 a year.

I interviewed San Diegans in the restaurant and hotel industries. They said they were aware of kickbacks but claimed they themselves did not participate. One defended the practice.

“I know it goes on. It happens in a lot of places. The real shame is that the concierge’s job is to fulfill hotel guests’ requests,” says David Cohn, whose Cohn Restaurant Group has 12 eateries, 5 downtown. Still, Cohn believes that “a small percentage” of concierges engage in the practice. “We’ve never been approached directly by a concierge — ‘If you guys give us 10 percent, we will send more reservations.’ ”

Jimmy Parker, executive director of the Gaslamp Quarter Association, says he has been hearing about the kickbacks since the 1970s, when he was a busboy in Fashion Valley. “I hear complaints about it,” he says, but the complainants don’t get specific about restaurants engaged in the practice. “I hear about direct payments but can’t prove it.” Restaurants fete concierges — giving them complimentary meals — and have guided tours, but that is legitimate familiarization, he says.

Howard Hian of Hian Hotel Sales Affiliates is tolerant: “If you get an airline ticket and pay a travel agent a commission, is that a bribe?” he asks. “Some taxis have exclusives with hotels. Ask how they got them. Car rentals have exclusives with hotels. Ask how they got them.” Getting paid for sending a hotel customer to a restaurant is essentially getting a commission, says Hian, “but if the restaurant is no good, it is a different story.” And he has questions about whether cash in envelopes is being reported for tax purposes.

Hian has questions about people staying in fancy hotels but having to ask a concierge for a restaurant recommendation. “A traveler is staying at a $250-a-night hotel and asks a front-desk person where there is a nice place to eat,” he says. “There is a little disconnect there.”

“I know [giving kickbacks to concierges] happens,” says Mike Morton, chief executive of the Brigantine Family of Restaurants, which has 14 restaurants in the county. “We don’t do it. It’s a Pandora’s box. If you put cash in an envelope, pay X number of dollars per guest, how do you stop? If you pay one concierge, what do you say to the next one? It can spiral out of control.” Besides, it’s unethical, he believes.

“It definitely is pervasive, and we have to work hard to keep it out of our workplace,” says Jack Giacomini, whose company runs two Mission Valley hotels. “Our strict policy is that none of our employees will take any kind of commission or referral or kickback. But it is hard to enforce and does happen under the table.” A hotel has nothing to gain and lots to lose: “Cabdrivers are notorious for kickbacking to bellmen and so forth. But what happens when guests walk up and say, ‘What cab should I take?’ and the kid says, ‘Don’t take ABC, take XYZ,’ and there is an accident? Who gets sued? Not the kid but the hotel, because we are the deep pocket.” The same can happen with a restaurant. “The kid says go to XYZ Restaurant, the guest gets food poisoning, and all of a sudden we are named in a lawsuit.”

Robert Rauch, who owns two hotels in the Del Mar area and teaches hospitality at San Diego State, says, “It is probably pervasive in full-service hotels, downtown in particular, and possibly at the resorts.” He doesn’t think the practice is necessarily illegal — “not different from a server who gets a cash tip.” He says, “The problem is that when a guest goes to a concierge, he should feel comfortable he is getting objective recommendations. So I do not allow my team members to recommend any business based on a commission. I can monitor it generally, but I can’t monitor every possible transaction.”