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A group of consumers filed suit against six major hotel operators in federal court in Northern California, alleging that the hoteliers colluded to fix prices for their rooms via algorithmic software in several markets.
“By sending their sensitive confidential pricing and occupancy information to a third party [the defendants] are able to achieve the same result as if they secretly met in a back room and exchanged their information and agreed to a supra-competitive price,” the suit says. “This is an old-fashioned horizontal conspiracy between competitors, and it is per se illegal.”
“Supracompetitive prices” refers to pricing higher than in a competitive market and often implies price fixing.
The hotel operators named in the suit are among the largest: Choice Hotels International, Wyndham Hotels and Resorts, Hilton Worldwide Holdings, Four Seasons Hotels and Resorts, Omni Hotels and Resorts, and Hyatt Hotel Corp. The plaintiffs are eight individuals who have stayed at one or more of the chains' properties over the last four years.
The 41-page complaint says the operators supplied Integrated Decisions and Systems, or IDeaS, a subsidiary of SAS Institute, with proprietary information about their room availability and demand continuously and in real time. Software known as G3 RMS, created and licensed by IDeaS, then provided pricing recommendations to the hoteliers, which they generally followed.
IDeaS chacterizes the software as “hospitality revenue management systems.” The company didn't respond to a request for comment Tuesday morning.
“Defendants’ conspiracy has succeeded,” the suit says. “By agreeing to provide IDeaS with nonpublic data and implementing the resulting price recommendations ... defendants have been able to increase hotel room rates significantly above the competitive level in the relevant sub-markets.
“Every ... defendant is currently charging the highest or near-highest average rates for hotel rooms in its history despite a lack of corresponding increase in occupancy demand.”
The use of algorithms to fix prices is a new frontier in antitrust litigation, with research supporting the notion that “algorithms learn to enter a collusive state and charge supra-competitive prices, without explicitly communicating with one another, and even without seeing each other's prices,” as one 2023 research paper put it.
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