What Court Documents Reveal About Le Parker Meridien’s Alleged Fraud Scheme Against Starwood Preferred Guest

Loyalty Lobby uncovered additional filings in the lawsuit between Starwood and the Parker Meridien hotels over Parker Meridien’s alleged fraud in boosting their supposed occupancy rates in order to overcharge SPG for guests’ free reward stays.

There are several items of interest in Starwood’s agreement with hotels on how much hotels pay to participate and what obligations are (.pdf).

  • Hotel pays 5% of eligible charges to Starwood Preferred Guest. This doesn’t seem that much to me, considering projected occupancy by SPG members per the contract is either 40% or 45% of the hotel.
  • If the hotel signs up a new SPG member they don’t pay the fee. Makes good sense, or else a hotel would never want someone to join the program once they’re already on property.
  • Hotels have to go through an extensive process to leave the program prior to agreement expiration even if Starwood increases its fees to the hotel — multiple rounds of meetings followed by binding arbitration. Unsurprisingly, Starwood (which wrote the agreement!) has much broader latitude to kick a hotel out.
  • Hotels have to honor SPG reservations even after they leave the program, as long as the reservations were made prior to their departure.

The hotel’s May 2003 amendment to its agreement with Le Meridien (.pdf) specifies that it pays 1.25% of room revenue plus 1% of the (inflation-adjusted) increase in revenue from year 2000 onward. That agreement is from two and a half years prior to Starwood’s acquisition of Le Meridien.

In another update to the case it seems that the Parker Meridien properties wired over $1 million to try to make good on the scheme to boost payments they received from Starwood for free nights. Starwood wasn’t satisfied with the make-good. Clearly the hotels value its participation in the Starwood Preferred Guest program — while I don’t know how many SPG members were staying there when it was a non-participating property, they anticipated that over 40% of occupancy would be constituted by program members, and continued participation is clearly valued by the property. These programs really do put heads in beds.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. I’m aware that many Starwood hotels compensate their front desk staff with SPG points for each person they sign up to the program. I’m curious if the 5% fee is common among all Starwood properties. If so, it seems like the properties can make a lot of money by signing up as many people as possible to avoid paying this fee?

    Also, who pays for the SPG points that one earns during a stay? I know that the hotel pays for promise points when things go wrong, but I wasn’t sure if they paid out the normal points earned.

  2. Of course “these programs” put heads in beds! Between the mileage and mattress runs just to maintain elite status, many of us out there are willing to spend a few extra hundred dollars to just re-qualify for elite status, regardless of hotel or airline programs. I was told by the front desk of the then Le Meridien King Edward Toronto that 60% of their guests comprised of SPG elites. Ever since Skyline took over and now that it’s no longer part of the SPG program, occupancy rates have dropped by 50%.

  3. Any word on what happened with the Hilton Paris location? When staying at the Paris La Defense location last September I met folks who had booked the Hilton Paris on points, only to be emailed less than a week in advance of their reservation that the Paris facility was no longer part of the Hilton family, due to a dispute over management contracts.

    They were moved from downtown Paris {60K points} to Paris La Defense {40K points} on a mere three days notice due to this “contractual dispute”. And the downtown location is, a year later, still no longer a part of the Hilton family. So I guess the message the new managers of the formerly Paris Hilton want to send to regular clients of their hotel is “you aren’t welcome here anymore”. WTF?

  4. @roberthanson – the Hilton ADT was rebranded after a legal fight. As far as I remember, the hotel thought that Hilton should give it more prominence in marketing. Hilton disagreed.

    The lawsuits were very quick and Hilton had little notice. Hilton was not proactive in getting people re-booked. The rebranded hotel is part of the I Prefer program.

    I don’t think the message is that you are not welcome – the message is that you are not going to receive any Hilton benefits.

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