Saturday, February 24, 2024
A lawsuit has been filed against top hotel brands, including Marriott International and Hilton, accusing them of collaborating with CoStar’s subsidiary, Smith Travel Research, to maintain artificially elevated room prices in premier luxury markets throughout the United States.
The legal action, initiated on Tuesday in the U.S. District Court for the Western District of Washington in Seattle, alleges that these hotel chains have engaged in sharing sensitive competitive information regarding pricing, availability, and strategic plans through a system orchestrated by CoStar and its subsidiary. This setup is characterized by the plaintiffs as a contemporary form of price-fixing.
Other hotel groups named in the lawsuit are InterContinental Hotels Corporation, Loews Hotels Holding Corporation, and Accor Management US Inc., along with CoStar and STR, known for providing the hospitality sector with benchmarking services, market insights, and data analytics.
The hotels implicated in the lawsuit represent a significant portion of the luxury hotel sector in key American cities such as Boston, Chicago, Denver, Los Angeles, Miami, Nashville, New York, Phoenix, San Francisco, Washington, D.C., and Seattle.
The plaintiffs, who have booked rooms in these locations from February 21, 2020, to the present, include individuals who claim to have paid inflated rates due to the alleged illicit exchange of information. The lawsuit also lists Choice Hotels International, Wyndham Hotels & Resorts, Great Eagle Holdings Limited, and Omni Hotels Management Corporation as co-conspirators.
According to the lawsuit, the defendant hotel operators have been involved in an agreement to exchange sensitive competitive data through STR, allowing them to share and receive comprehensive revenue and occupancy details, including available rooms, rooms sold, and revenue. In exchange, they obtain comparative data on their competitors via STR’s STAR Reports, which also gathers prospective booking information for future occupancy rates.
The complaint further details that this data sharing arrangement is specified in CoStar’s contracts, necessitating hotel operators to provide data to STR to gain access to benchmarking information. It also reveals that participants are aware of their competitors in the exchange and the frequency of their participation, as obtaining STR reports requires selecting a “competitive set.” A confidential witness, described as a revenue management market director at Marriott Ritz-Carlton Hotels, has provided insights into this process.
This systematic sharing of information is alleged to enable hotels to set higher room rates than they would be able to without access to their competitors’ data, according to the plaintiffs’ claims.
According to the filing, competitors sharing data – “even through a third-party intermediary” – is likely to have “anticompetitive effects.”
Doha Mekki, the principal deputy assistant attorney general of the Antitrust Division at the U.S. Department of Justice, emphasized in the lawsuit that the role of intermediaries in facilitating exchanges between competitors could lead to anticompetitive outcomes similar to direct collusion. Mekki pointed out that in certain cases, data intermediaries might amplify competitive restrictions rather than mitigate them.
The lawsuit alleges that the data sharing among hotel chains through STR constitutes a contemporary form of price-fixing, which violates the Sherman Act. The Sherman Act is a foundational antitrust statute in the United States, outlawing agreements and practices that restrict free trade and competition, including any efforts to monopolize.
This legal challenge comes at a time when antitrust scrutiny is intensifying in the hotel sector, highlighted by the Federal Trade Commission’s (FTC) ongoing investigation into Choice Hotels’ attempt to merge with Wyndham, announced in October.
Attempts to get comments from CoStar, STR, Marriott, and Hyatt on the lawsuit were unsuccessful. A representative from Hilton declined to comment on the ongoing legal matter, citing the company’s policy on pending litigation.
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