While I do not know exactly how the tips are allocated, I do want to say that I agree that people should stick to the recommended guidelines for tipping and add only add extra in cash if they feel it is warranted.
I prefer to hand the extra directly to the service person I want to overtip, not in an envelope. That way, I believe they can do with it as they please. Assuming no one sees it, they can keep it.
New Year - you were very generous and if it makes you feel good about it then good for you. I understand that sometimes one feels a connection with another soul for whatever reason and there is no need to justify it.
I would prefer that staff people NOT give sob stories to passengers, however, if their sole purpose is to get sympathy tips. That is not proper service. If you ask them personal questions, that is different.
$100 for four people for ONE week is perfectly acceptable. I believe you said 14 days, though.
By the way - I am sure the staff much prefers Euros over dollars in Europe. They are worth more and much easier to spend onshore. i also agree that phone cards are not a good idea. They are hard to use and often not very international. If the ship relocates they become worthless.
I do know that before the days of "auto-tipping" to your shipboard account the percentage of people who stiffed the staff was 25-33% - that is way too high. The cruise lines had to do something.
I am very happy with the account system of tipping - it saves so much time & trouble over stuffing envelopes with cash.
First-time cruiser: the only added charges to your account will be tips and whatever you purchase onboard, including soda and drinks. If you choose to eat in the cruise-included dining room every night you will not spend an extra penny on food. If you consider an added fee restaurant you will know the cost before you commit to dine there. There won't be any "hidden charges" on your cruise.
Room service tips should be just 1-2 dollars for prompt service. If it is very late tell them you are not satisfied with that. A full dinner should be a higher tip, as Mike notes.
One reason why the cruise lines distribute tips to the head housekeeper & room service coordinator is so if they fall down on the job their wages are affected, too.
I get tired of hearing about inexperienced butlers. If there is ANY job where one needs to be competent it is the butler. Not that I usually have one (once in a blue moon) but when I do I don't want one where I have to follow him around and clean up his messes. I think this is the cruise lines' policy of promoting people from housekeeper to butler. Rarely do they hire butlers from the outside world for the job.
In truth, I question why one even needs a butler. Give me a competent steward, good room service and a concierge and there is no need for a butler. This may be just me - but I just find their presence disquieting.
An incompetent butler giving me a sob story would probably not get MY sympathy (this has no bearing on New Year's experience) though, because it is supposed to be a job where technique is the most important attribute. I would tip a butler more money if I hardly noticed his presence than if I found myself listening to his stories and not knowing when to leave the room. Oh well, thats just me I guess.