CoStar and Hotel Chains Request Judge to Dismiss 'Baseless' Price-Gouging Lawsuit

CoStar Group and six major hotel companies are pushing for the dismissal of a recent lawsuit accusing them of price-fixing collusion. The defendants argue the allegations are baseless fantasies lacking concrete evidence.

The lawsuit, filed in February by a group of renters, claims the hotel operators conspired with CoStar to access sensitive data in CoStar's database in order to charge artificially high room rates.

The defendants assert the plaintiffs are attempting to mimic a trend of antitrust cases targeting pricing algorithms, drawing parallels to lawsuits against RealPage and large multifamily owners over alleged price fixing.

In a motion filed last week, the defendants' lawyers stated CoStar's hotel benchmarking tool STR merely provides historical data on occupancy and revenues - it does not utilize pricing algorithms or recommendations. They described the claim that STR facilitates "price fixing in its modern form" through information sharing as "fanciful."

The court filing notes STR's benchmarking reports have existed since the late 1980s and are viewed as reputable industry resources by courts. Allowing this case to proceed could undermine the legitimacy of such commonplace benchmarking data, the defendants warned.

However, the plaintiffs insist the named hotels like Hilton, Hyatt and Marriott improperly shared pricing, supply and strategic planning information. They allege this collusion enabled the hotels to inflate room rates above competitive levels across major markets including Washington D.C., San Francisco, New York and others.

This lawsuit faces headwinds after a Las Vegas judge recently tossed out a similar case, ruling the plaintiffs failed to provide adequate proof that hotels conspired with tech firm Cendyn to violate antitrust laws.

Benchmarking Data's Role in Pricing Scrutinized

A core issue in this case is the controversy around the role of benchmarking data and information sharing in facilitating alleged price fixing by hotels. The defendants vigorously deny that STR's benchmarking reports, which aggregate historical data on metrics like occupancy rates and revenues, constitute improper sharing of competitively sensitive information.

They contend these reports have been standard industry practice for decades and are simply tools to analyze performance trends, not vehicles for collusion. Numerous court rulings have accepted STR data as reputable market analysis they argue. Allowing this suit to proceed could set a damaging precedent that undermines benchmarking practices across the hospitality sector and potentially other industries.

However, the plaintiffs insist the data sharing among the hotel chains went beyond legitimate benchmarking. They allege the hotels strategically exchanged live information on pricing strategies, inventory levels, and future plans in a way that allowed them to coordinate raising rates above competitive levels. This crosses an anti-competitive line in their view.

The judge's decision could have far-reaching impacts on what benchmarking data is deemed permissible versus facilitating collusion under antitrust law. Companies in all industries that rely on shared data pooling and benchmarking metrics will be watching closely.

Hospitality Pricing Collusion Lawsuits Mount

This lawsuit is just one of a rising tide of cases accusing major hotel chains and their tech vendors of anti-competitive pricing collusion and data sharing. The attorneys for the renters drawing parallels to the multi-billion dollar litigation by renters against RealPage and large apartment owners and operators.

In those cases, plaintiffs allege an AI-powered pricing software by RealPage enabled apartment complexes to synchronize rental pricing in local markets through an exchange of proprietary data. Prominent multifamily firms like MAA, Mid-America, AvalonBay and many others were accused of driving up rental rates in coordinated fashion through leveraging the software.

While the hotel lawsuit involves different data systems like STR benchmarking reports rather than active pricing algorithms, the plaintiffs see similarities in the alleged collusion enabled by data sharing between competitors. Their lawyers are taking a page from the RealPage playbook of anti-competitive claims around proprietary data pooling.

Both sets of cases showcase the mounting legal scrutiny around whether data sharing and collective benchmarking practices in the real estate industry have evolved into something more pernicious from an antitrust perspective. The judges' rulings will help set boundaries around what constitutes acceptable versus unlawful information exchange in these markets.

Source: Bisnow