Hotel pricing and how it gets set has always been a murky thing. No matter what part of the country you visit whether it be a tourist area, a business destination, or just a place you need to spend the night, it’s always hard to know exactly how to get the best price or what goes into setting prices in the first place.
Is it cheaper to book directly? Use a third party? Do loyalty members get a better price?
The answer is sometimes yes for all of those. In reality, hotel pricing is intentionally murky as it’s largely supply and demand but there’s no legal formula for how that works.
This makes it very hard for consumers to have any sense of whether they’re paying a good price or a bad one. That’s something that hotel operators certainly work to exploit, but there are legal parameters that regulate that behavior.
Now, three major Las Vegas Strip casino operators — Caesars Entertainment (CZR) – Get Free Report, Wynn Resorts (WYNN) – Get Free Report, and MGM Resorts International (MGM) – Get Free Report — face a class action lawsuit that alleges that they worked to artificially increase room prices.
Caesars, MGM, and Wynn Sued Over Room Pricing
Hagens Berman has filed a class action lawsuit that charges that Caesars, MGM, Wynn, and Treasure Island colluded with a third party, Rainmaker, to collude to raise hotel prices on the Las Vegas Strip.
“The lawsuit alleges that Rainmaker, a revenue management platform used by an estimated 90% of Vegas Strip hotels, collects real-time pricing and supply information from competitors and provides room rental rate recommendations designed to unlawfully maximize profits for its hotel operator users. Attorneys say this algorithmic-driven price-fixing comes at the expense of consumers and in violation of antitrust laws,” Hagens Berman shared.
The lawsuit alleges that Caesars, MGM, Wynn, and Treasure Island violated the Sherman Antitrust Act and wants to hold the defendants liable for repayment for guests who overpaid, according to a press release,
“Our antitrust attorneys have uncovered what appears to be an unlawful agreement in which Rainmaker collects and shares data between Vegas hotel competitors to unlawfully raise prices of hotel rooms,” said Hagens Berman Managing Partner Steve Berman. “What happens in Vegas will no longer stay in Vegas. We intend to expose the under-the-table deals perpetrated by these Vegas hotels, and we intend to hold them accountable.”
Caesars, Treasure Island, Wynn Resorts, and Cendyn Group did not immediately return requests for comment from the Las Vegas Review-Journal, which first broke the story.
Rainmaker Controls a Lot of Las Vegas Strip Inventory
The lawsuit alleges that Las Vegas Strip hotel rates are the highest they have ever been despite market conditions.
“Rainmaker advertises 15% revenue growth for its hotel operator users, and testimonials on the website for its parent company, Cendyn, describe implausible performance during market downturns and even the COVID-19 pandemic. The lawsuit quotes a Cendyn hotel customer claiming to have produced 70% of the prior year’s revenue with 50% of the volume despite closures and restrictions throughout the pandemic,” according to the Hagens Berman press release.
The hotel operators named in the lawsuit control roughly 20 of the 30 total available Strip hotels. Hagens Berman’s lawsuit states that defendants’ control of the market enabled the scheme.
“By incentivizing its users to suppress the supply of hotel rooms, Rainmaker artificially drove up prices and directly harmed consumers,” Berman said. “These corporations created a scenario in which the house will always win, and they’ve broken the law to do so.”