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.