Six of the hospitality industry’s largest hotel companies are named in a new class-action lawsuit, which claims to have uncovered an antitrust scheme to reduce competition and raise consumer prices.
The lawsuit, which has been filed by class-action law firm Hagens Berman, contests that Choice Hotels International, Hilton, Hyatt Hotels Corporation, InterContinental Hotels Group, Marriott International and Wyndham Worldwide took part in an anticompetitive agreement to reduce or eliminate online branded keyword search advertising against each other. Hagens Berman maintains that as a result of this, consumers were deprived of the “free flow of competitive information,” raising the price of hotel rooms as well as the cost of finding rooms.
“Instead of honest competition, these hotel chains chose to cheat the system and deceive their customers,” Steve Berman, managing partner of Hagens Berman, said in a statement. “We believe consumers deserve payback from defendants for their deceptive advertising practices. Millions of consumers have collectively been upcharged by billions of dollars since 2015.”
The lawsuit states that each hotel defendant entered into an agreement to refrain from using specific online advertising methods to compete for consumers. The agreement prevented competing hotel entities from bidding for online advertising that used their competitors’ brand names. In the example included in a release from Hagens Berman, Hilton Hotels declined to bid on keywords that would prompt its hotels to appear in searches for Hyatt-branded properties, in turn making it more difficult for consumers to obtain information about competing hotels. Because of this, Hagens Berman maintains that the defendants made it more difficult to compare and contrast information such as price and quality when booking hotel stays.
“By agreeing not to advertise in response to searches for competitors’ brands, these hotel chains have effectively reduced the ability for consumers to conduct a reasonable comparison between various hotel chains to get the best price for their hotel rooms,” a statement from Hagens Berman reads. “This leaves hotel chains with free rein to keep prices high, with no threat of consumers seeing competing ads.”
The suit also claims that the defendants also prevented online travel agencies from bidding on branded keywords, specifically naming Expedia and Priceline.
“Online travel agencies need access to hotels' room availability and other information. In exchange, these hotel chains made the travel agencies play by their rules, keeping them from advertising for their branded keywords, thus making it less likely consumers would see the choices available on those online travel agency websites,” the release reads.
Behind Closed Tabs
The veracity of these claims remains to be seen. However, if true, it would mean that roughly 60 percent of hotel rooms in the U.S. were compromised by inaccurate search results. Proving these claims may be difficult, but the lawsuit includes a number of examples. For example, Hagens Berman claims searches for the Honolulu Hyatt no longer produce advertisements from entities other than Hyatt or non-owned OTAs. The lawsuit goes on to display the same information for searches of “Detroit Marriott” and “Los Angeles InterContinental,” which results in displaying only ads for the parent company listed in the search.
This data, while interesting, is far from conclusive. The algorithms behind search engines such as Google and Bing remain cloaked in mystery to outsiders of these companies. Individual searches are also not representative of an advertiser’s activity, but we are not likely to get more than a glimpse of what Hagens Berman has to support its case until the lawsuit goes to court—if it even makes it there.
Nonetheless, Hagens Berman is calling for all travelers who have booked rooms in the past three years to join the class action. Hotel Management reached out to each of the accused hotel companies in this case. A spokesperson for Marriott and IHG each responded that the filing is currently under review, and both companies plan to respond to any allegations through the appropriate judicial process.