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 Wyndham Worldwide Inc. and Choice Hotels International Inc. have inflated the ranks of their loyalty programs and are collecting fees from hotels when those guests stay at franchise properties.
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.”
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.”
Read the full article here.