Real Estate

CoStar, Hilton, Marriott Seek Dismissal of Price-Fixing Lawsuit

CoStar and six hotel giants, including Hilton, seek dismissal of lawsuit alleging data-sharing inflated room prices in key markets.

By Tal Alexander

5/23, 09:59 EDT

Key Takeaway

  • CoStar Group, Hilton, Hyatt, and Marriott seek dismissal of a class-action lawsuit alleging price-fixing through shared data.
  • Plaintiffs claim hotels used CoStar's reports to inflate room prices in major markets like NYC and San Francisco.
  • Defendants argue the lawsuit lacks evidence of conspiracy and follows other failed antitrust cases involving "algorithmic pricing."

CoStar Group and Hotel Giants Face Antitrust Allegations

In a significant legal development, CoStar Group, along with six prominent hotel operators including Hilton, Hyatt, and Marriott, has filed a motion to dismiss a class-action lawsuit in Seattle federal court. The lawsuit accuses these entities of improperly sharing data to artificially inflate hotel room prices. Central to the case are CoStar’s Smith Travel Research reports, which the plaintiffs argue were used to share strategic information among competitors, leading to higher prices in key markets such as Washington, D.C., San Francisco, New York, Chicago, Boston, and Austin.

Allegations of Price-Fixing and Data Sharing

The plaintiffs, a group of renters seeking class-action status, allege that the defendant hotels shared prices, supply, and future plans, using this information to manipulate market prices. They claim that the data provided by CoStar’s reports acted as the “essential ‘fuel’ propelling pricing algorithms towards the ultimate goal of charging higher prices.” The defendants, however, have dismissed these claims as “fanciful,” arguing that the lawsuit is an attempt to mimic other antitrust cases that have linked algorithmic pricing with price-fixing, which they assert is not applicable in this instance.

Broader Implications for the Hospitality Industry

This lawsuit is not an isolated incident but part of a broader scrutiny of data-sharing practices in the hospitality industry. Last year, several major hotels in Las Vegas faced similar accusations of sharing information with a revenue management platform to coordinate room pricing illegally. Although that case was dismissed due to insufficient evidence, it highlights a growing concern over the use of data and algorithms in pricing strategies. The outcome of the current lawsuit could have significant implications for how hotels and other industries use data to set prices and manage competition.

Antitrust Actions in Other Sectors

The hospitality industry is not alone in facing antitrust scrutiny. The U.S. Department of Justice (DOJ) is preparing to file an antitrust lawsuit against Live Nation Entertainment, the parent company of Ticketmaster, over its dominance in the ticketing industry. This lawsuit, which could lead to the breakup of Live Nation, follows increased public and political pressure over high ticket prices and incidents like the Taylor Swift Eras Tour ticketing fiasco. The DOJ’s actions reflect a broader effort by the Biden administration to tackle anti-competitive practices across various industries, including Big Tech, healthcare, and groceries.

My Perspective on the Market Dynamics

The allegations against CoStar Group and the hotel operators, if proven, could signal a need for stricter regulations on data sharing and pricing algorithms in the hospitality industry. While the defendants argue that the data in question does not constitute price-fixing, the increasing reliance on sophisticated algorithms for pricing strategies raises important questions about market fairness and consumer protection. The DOJ’s aggressive stance on antitrust issues, as seen in the Live Nation case, suggests that we may see more rigorous enforcement and potentially significant changes in how companies operate across various sectors.