‘What Happens in Vegas Will No Longer Stay in Vegas’: Four Casinos Face Lawsuit for Allegedly Fixing Room Prices

‘What Happens in Vegas Will No Longer Stay in Vegas’: Four Casinos Face Lawsuit for Allegedly Fixing Room Prices
Traffic passes by the famous sign welcoming motorists on the south end of the Las Vegas Strip, in Las Vegas, Nev., on Nov. 11, 2005. (Ethan Miller/Getty Images)
Naveen Athrappully
1/27/2023
Updated:
1/27/2023
0:00

A class-action lawsuit filed Wednesday against four of the largest gaming and hospitality companies in Las Vegas alleges that the businesses engaged in “an illegal price-fixing scheme to raise the cost of hotel rooms.”

Rainmaker, a platform that is said to be used by roughly 90 percent of hotels in the Vegas strip, collects real-time information on the supply and pricing of room rental rates from competitors and offers recommendations that are “designed to unlawfully maximize profits for its hotel operator users,” according to a Jan. 25th press release by attorneys who filed the lawsuit. Such algorithm-driven pricing strategy violates antitrust laws and comes at the “expense” of customers, the attorneys claim.

The lawsuit, filed by Seattle-based law firm Hagens Berman in a Nevada federal court, names MGM Resorts, Caesars Entertainment, Wynn Resorts Holdings, and Treasure Island as defendants, while also pointing to the dominant market share of these entities on the renowned Las Vegas Strip. Combined, the four groups control roughly 20–30 hotels in the area.

“Our antitrust attorneys have uncovered what appears to be an unlawful agreement in which Rainmaker collects and shares data between Vegas hotel competitors to unlawfully raise prices of hotel rooms,” said Steve Berman, managing partner of Hagens Berman and an attorney seeking to represent consumers in the case.

“What happens in Vegas will no longer stay in Vegas. We intend to expose the under-the-table deals perpetrated by these Vegas hotels, and we intend to hold them accountable.”

Inflating Room Prices

The lawsuit claims that hotel room rates in Las Vegas are currently at “record highs.” Each of the four defendants is said to have used Rainmaker’s algorithms for pricing recommendations. Rainmakers focused on “maximizing defendants’ profitability, at the expense of competition,” according to the release.

The aim was to maximize profits rather than chasing occupancy growth. The attorneys insist that this practice runs contrary to a free and fair market where producers do not raise their revenue by restricting supply but by growing supply.

“By incentivizing its users to suppress the supply of hotel rooms, Rainmaker artificially drove up prices and directly harmed consumers,” said Berman. “These corporations created a scenario in which the house will always win, and they’ve broken the law to do so.”

The lawsuit cites a hotel that used the Rainmaker software to produce 70 percent of their prior year’s revenue with 50 percent of the volume throughout the pandemic despite this period witnessing restrictions and closures.

The case against the hotels is for violation of the Sherman Antitrust Act through the usage of Rainmaker. According to attorneys, people who have rented a hotel room on the Las Vegas Strip on or after Jan. 25, 2019, may have overpaid.

The lawsuit also cites a 2017 speech (pdf) by former acting chairperson of the Federal Trade Commission (FTC) Maureen Ohlhausen in which she raised concerns about algorithmic pricing.

In the speech, Ohlhausen gave an example of a group of competitors subcontracting their pricing decisions to a single vendor who uses algorithms for pricing strategies.

“Because the same outside vendor now has confidential price strategy information from multiple competitors, it can program its algorithm to maximize industry-wide pricing,” she said.

“In effect, the firms themselves don’t directly share their pricing strategies, but that information still ends up in common hands, and that shared information is then used to maximize market-wide prices.

“Again, this is fairly familiar territory for antitrust lawyers, and we even have an old-fashioned term for it, the hub-and-spoke conspiracy.”

Hotel Response, High Room Rates

An MGM Resorts spokesperson slammed the lawsuit, calling it “factually inaccurate” in a statement, according to Reuters. The resort plans to defend itself “vigorously against these meritless claims.”

The Epoch times has reached out to MGM Resorts, Caesars Entertainment, Wynn Resorts, and Treasure Island for comment.

The average daily room rate for resorts on the Las Vegas Strip hit record highs in 2022, according to the Las Vegas Review-Journal.

In April 2022, the Las Vegas Convention and Visitors Authority reported its highest-ever room rates in history, with the average rate coming in at $173.63 per night. The average rate for hotels on the Las Vegas Strip was $187.72.

This record was broken in September. In the next month, average room rates crossed $200 per night for the first time. For 2022 through November, the average rate was $170.45, which is the highest rate in history.