Wyndham and Choice Hotels sued over their loyalty program

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This is a reminder for all loyalty professionals not to take things for granted. Sara K. Clarke recently reported in Orlando Sentinel that the Wyndham and Choice Hotels are being sued over their loyalty program.

Source: “Hoteliers sue over loyalty program” By Sara K. Clarke, Orlando Sentinel, January 11, 2011

Franchisees have filed class-action lawsuits against two major hotel brands, saying the companies are illegally taking loyalty fees for guests who, in some cases, don’t even know they’ve been enrolled in frequent-stay programs.

The suits, filed in U.S. District Court in Orlando last month, allege that Lawyers for the hoteliers have asked for more than $260 million in damages from Wyndham, and more than $225 million from Choice — figures they termed “very conservative.”

Choice’s hotel brands include Clarion, Quality and Comfort Inn, while Wyndham’s stable includes Days Inn, Ramada and Super 8.
The suit was filed in Central Florida because the lead plaintiffs — Jade Hospitality LLC and Amar Shakti Enterprises LLC — are locally based.

At issue in the lawsuit are two practices: Auto-enrollment and “proactive matching.” Franchisees say the hotel companies had been auto-enrolling guests who booked online into loyalty programs, unless the guests opted out. The matching happened when personal data were used to reward loyalty points to guests even if they didn’t provide their membership information at the time of booking or check-in.

Franchisees say the result was that they were paying program fees of up to 5 percent of gross room sales generated by the program guests, who may or may not have stayed at their property because of the loyalty program, and who may not have known they were entitled to benefits.

“The real purpose of a rewards program is that you build customer loyalty,” said David Wood, an attorney for the franchisees. “In that event, the hotel franchisee would benefit. But under proactive matching, that doesn’t happen.”

Wood also argues that charging the extra fee for the loyalty programs is against the franchise contracts of both companies and is a violation of Florida’s Deceptive and Unfair Trade Practices Act.

“The issue in both cases is that the fee is not authorized by the franchise agreements,” he said.

(Sara K. Clarke can be reached at skclarke@orlandosentinel.com or 407-420-5664)


3 Comments

  • Mirage

    TO SOME EXTENT THE FRANCHISEE’S MIGHT HAVE AN EDGE –IF SUCH FEES AREN’T INCLUDED INSIDE THE FRANCHISE AGREEMENT; HOWEVER; I DOUBT THAT…

    AS A DIAMOND LOYAL MEMBER TO THE CHOICE PRIVLIDGE MEMBERSHIP; THE [HOTELS[ FRANCHISES TEND TO BENEFIT MORE THAN NOT; WHEN GUESTS ARE AUTOMATICALLY ENROLLED –DUE TO THE FACT; IF A GUEST CAN TAKE ADVANTAGE ON NUMEROUS PROMOTIONS AND DISCOUNTS TO A HOTEL RATE / COSTS; AND LOW POINTS FOR A FREE NIGHT STAY—-I WOULD SAY ITS A ‘BENEFIT’;

    IF THE FRANCHISOR ARE COLLECTING A PROGRAM FEE; ITS PROBABLY LEGAL–BECAUSE THE CHOICE POINTS LOYALTY PROGRAM —ARE PAID OUT BY ITS MEMBERS —AND AS EACH TIME A LOYAL MEMBER BUYS HOTELS STAYS IT PUTS POINTs INTO THE ACCOUNT FOR USE AT A LATER DATE; MAKING IT MORE OF REASON FOR A GUEST TO STAY AT ANY PROPERTY; AND ONCE GUEST IS THERE; MORE THAN LIKELY GUEST WOULD EXTEND –LIKELY TO PAY REVENUE, ———GIVE SOMETHING TO GET SOMETHING,

    I FIND MOST CHOICE INTL HOTELS SOMETIMES UNFAIR TO LOYAL MEMBERS SOMETIMES; WHEN IT COMES TO FREE NIGHTS…SO WHY ARE [THEY] FRANCHISEES TRYING TO PROFIT OFF –LOYAL MEMBERS. –

    —and making the franchisor pay for similar practice as to Hilton Corp [Hilton Honors] Marriott Rewards, Star Preferred /Westin, and especially ICH InterContinental/Holiday Inn.

  • Mirage

    BTW: — Where I believe the legal energy should go with this; is assisting ‘hotel guests’ with the constant problems , complaints, and poor /quality services, ; with many of the Choice properties; across the U.S>

    The franchisee should learn to become more of a hotel; with ultimate customer satisfaction,; clean and safe hotel rooms; not just another source of revenue.

    I’ve rated numerous Choice Hotels brands; and most have numerous issues; even a budget hotelier should be aprised of what’s required……loyal members are loyal to those properties that excel in this industry.

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