Luxury hotels and CoStar sued over price-fixing 'scheme'
Plaintiffs claim Marriott, Hilton, Hyatt and others conspired with CoStar subsidiary STR in an “unlawful” information exchange that drove inflated room rates in top U.S. markets.
Several major hotel operators, including Marriott International and Hilton, are being sued for allegedly conspiring with commercial real estate information giant CoStar to keep room rental prices “artificially high” in several top luxury markets across the country.
A class action complaint filed Tuesday (20th February) in the U.S. District Court for the Western District of Washington at Seattle claims several hotel operators are participating in an exchange of “competitively-sensitive information about their prices, supply, and future plans,” facilitated by CoStar subsidiary Smith Travel Research. Plaintiffs allege the exchange has led to “price-fixing in its modern form.”
In addition to Marriott International and Hilton, InterContinental Hotels Corporation, Loews Hotels Holding Corporation and Accor Management US Inc. are named as defendants in the complaint, alongside CoStar and STR, which provides performance benchmarking, marketplace insights and data analytics for the hospitality industry.
According to the filing, the hotel companies operate the vast majority of luxury hotels in major cities across the U.S., including Boston, Chicago, Denver, Los Angeles, Miami, Nashville, New York, Phoenix, San Francisco, Washington, D.C., and Seattle. It goes on to note that the defendants and co-conspirators “posses an average 70% market share across all 15 cities.
Plaintiffs in the complaint include individuals who rented rooms in those markets from a defendant or co-conspirator from Feb. 21, 2020, through present day. Co-conspirators listed in the complaint include Choice Hotels International, Wyndham Hotels & Resorts, Great Eagle Holdings Limited and Omni Hotels Management Corporation.
The plaintiffs allege they paid “artificially inflated prices” based on the hotel operators’ “unlawful” information exchange.
Data sharing
The complaint alleges that hotel operators “collectively participated in an information exchange agreement administered by STR that enables them to exchange competitively sensitive information with each other.”
The defendants are sharing “super-timely revenue and occupancy data,” including rooms available, rooms sold and revenue with STR, according to the filing. And in return, they receive similar data on their competitors through STR’s coined STAR Reports. STR also collects hotels’ forward-looking booking data on future occupancy levels, the filing details.
The so-called “information sharing scheme” is laid out in CoStar’s contractual agreements, which state “A Hotel Operator has to give information to STR in order to receive benchmarking information back,” according to the filing.
And the defendants know exactly which of their competitors are participating in the exchange as well as how often, because to receive STR’s reports, a participating operator needs to first select a “competitive set,” according to a confidential witness in the suit, identified as a market director of revenue management at Marriott Ritz-Carlton Hotels.
This exchange enables the hotel operators to set room rates higher than they otherwise would if they didn’t have competitors’ data, the plaintiffs claim.
In other words, the exchange of this information allows participating hotels to set prices higher than they would have been absent this agreement to exchange information. This is price fixing in its modern form and is illegal under the US’s Sherman Act.
CoStar, STR, Marriott and Hyatt could not be reached for comment on the class action complaint. A Hilton spokesperson told Hotel Dive the company does not comment on pending litigation.
Source: External
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