Franchisees sue Choice, Wyndham over loyalty program fees

ORLANDO Franchisees of Wyndham Worldwide Inc. and Choice Hotels International Inc. have filed class-action lawsuits claiming that the hotel groups are illegally collecting fees from loyalty club guests who do not even know they are members.

Lawyers representing Wyndham franchisees are seeking US$260 million in damages, while the Choice lawsuit seeks US$225 million. The lawsuits filed in U.S. District Court in Orlando last month allege that Wyndham and Choice have inflated the ranks of their Wyndham Rewards and Choice Priveleges programs and are collecting fees from hotels when those guests stay, regardless of whether the guests are aware of their loyalty membership.

Representatives from both Wyndham and Choice declined to comment to HOTELS, citing company policy on pending legal action.

The lawsuits object to a pair of practices that are somewhat common in the hotel industry: auto-enrollment and proactive matching. With auto-enrollment, guests who book online are automatically enrolled as loyalty club members unless they opt out. Proactive matching means the companies use personal data to identify loyalty members and award them stay credit, even if such credit is not requested.

The franchisees in the class action lawsuits say in these instances, the loyalty programs are not providing value to the hotels. The companies charge up to 5% of the gross rooms revenue of member guests.

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

The lead plaintiffs are Jade Hospitality LLC and Amar Shakti Enterprises LLC.