A lawsuit filed last week in California alleges the hotel industry engaged in illegal price-fixing using AI software.
At Inman Connect Las Vegas, July 30-Aug. 1, 2024, the noise and misinformation will be banished, all your big questions will be answered, and new business opportunities will be revealed. Join us.
Major U.S. hotel chains are next on the list for the courthouse.
A new lawsuit filed on Friday alleges that Hilton, Wyndham, Four Seasons and other major brands colluded to fix their prices using artificial intelligence in a way that illegally inflated prices for consumers.
The complaint alleges that the chains shared non-public pricing data with each other by using software created by a Minnesota-based company called Integrated Decisions and Systems (IDeaS), which in turn drove up the cost of hotel rooms.
The complaint’s allegations mirror some of those made in proposed class action lawsuits targeting some of the nation’s largest landlords. In those cases, renter plaintiffs alleged that software that accumulated rental prices from landlords in markets across the country and gave pricing recommendations illegally raised the price of rent.
“By sending their sensitive confidential pricing and occupancy information to a third party to process, analyze, and develop supra-competitive prices, the Operator 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,” eight consumer plaintiffs wrote in their complaint.
“This is an old-fashioned horizontal conspiracy between competitors, and it is per se illegal,” they said.
The plaintiffs point to marketing materials from IDeaS that boast about the computer model’s ability to take real-time pricing data that’s shared among the competing brands and recommend pricing to maximize occupancy and pricing, driving up revenue for the hotels.
On the list are popular brands like Hyatt, Hilton and Four Seasons, along with other conglomerates that have subsidiaries, like Quality Inn, Sleep Inn, Econo Lodge and Comfort.
- Hilton Worldwide Holdings Inc
- Wyndham Hotels & Resorts Inc
- Four Seasons Hotels and Resorts US Inc
- Omni Hotels and Resorts Inc
- Hyatt Hotel Corporation
- Choice Hotels International Inc
The lawsuit alleges the firms used IDeaS as a revenue management system, and that the system was capable of analyzing the pricing for 100 million bookings for 1.6 million hotel rooms every day.
“Based on publicly available data, every Operator Defendant is currently charging the highest or near-highest average hotel rates for hotel rooms in its history despite a lack of corresponding increase in occupancy demand,” the plaintiffs alleged.
Email Taylor Anderson
