Class Action Alleges Las Vegas Strip Hotel Operators Conspired to Juice Room Prices [DISMISSED]

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A who’s-who of hotel operators faces a proposed class action lawsuit that alleges the companies have illegally conspired to artificially inflate prices for rooms on the Las Vegas Strip. 

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The 29-page antitrust complaint alleges the operators of the Bellagio, Wynn, Caesar’s Palace, MGM Grand, Mandalay Bay and the “vast majority” of other hotels on the Strip have replaced their once-independent pricing and supply decisions with a “shared set of pricing algorithms,” allowing the companies to collect “supracompetitive” prices for their hotel rooms. 

The sharing of data among competitors raises significant antitrust concerns and is likely to produce unlawful prices, the filing stresses. 

“[A]cademics have widely documented, with both theoretical literature and empirical examples, that use of pricing algorithms by competitors in a market leads to elevated prices which in turn harms consumers,” the suit outlines. 

According to the filing, most of the hotels on the Las Vegas Strip use third party Rainmaker Group’s pricing algorithms. The lawsuit says a former Rainmaker executive, who the suit calls Confidential Witness 1, estimated that the company’s products are employed by 90 percent of the hotels on the Strip, while another confidential former employee stated that Rainmaker’s algorithm can be found in “just about every hotel” on the world-famous four-mile street. 

The hotel operator defendants—MGM Resorts International, Caesars Entertainment, Treasure Island and Wynn Resorts Holdings—provide real-time pricing and supply details to Rainmaker Group, who takes that competitive data and feeds it through its algorithms to generate “forward-looking, room-specific pricing recommendations” to the companies, the lawsuit says. Critically, Rainmaker Group’s algorithms are designed specifically to “raise profits” for the hotel companies while discouraging them from maxing out the occupancy of their rooms, i.e., the available supply, the suit states. 

However, this is not the way a truly competitive market works, the filing stresses. 

“[I]n a competitive market, any empty hotel room is lost revenue, so a hotel operator would try to fill each hotel room by granting concessions or lowering prices,” the filing relays. “By contrast, on Rainmaker Group’s recommendations … Hotel Operators kept prices high and some rooms empty, knowing their co-conspirators would not undercut these supracompetitive prices.”

Any information that discourages the hotel-running defendants from filling all of their available supply of rooms is “critical to maintaining unlawfully elevated prices,” the case emphasizes. Per the complaint, the data gathered by Rainmaker Group from the defendants is “incredibly granular,” such that the level of detail serves as “a sign post for when an exchange of information crosses the line to unlawfulness.” 

The hotel operators have touted revenue increases of up to 15 percent thanks to their use of Rainmaker’s algorithm products, the filing says. 

The lawsuit looks to cover all persons who have been direct purchasers of hotel room rentals on the Las Vegas Strip from MGM Resorts International, Caesars Entertainment, Treasure Island and Wynn Resorts Holdings or other hotel operators participating in Rainmaker parent company Cendyn’s pricing software at any time from January 24, 2019 until the defendants’ allegedly unlawful conduct and its “anticompetitive effects” ends. 

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