LAS VEGAS (KLAS) — A lawsuit alleges collusion and price fixing at some of the Strip’s biggest resorts to charge customers illegally inflated prices for hotel rooms.
Caesars Entertainment, MGM Resorts International, Wynn Resorts and Treasure Island are named along with Cendyn Group and Cendyn subsidiary The Rainmaker Group — makers of software used to compare and adjust hotel room prices.
The lawsuit seeks class action status and alleges antitrust violations by the four resort companies, which control 20 of the 30 biggest resorts on the Strip. Some class action lawsuits have produced settlements worth billions of dollars. Lawyers are seeking more participants to join the lawsuit but initially list the plaintiffs as Richard Gibson, of Washington, and Heriberto Valiente, of Florida. Both rented rooms in Las Vegas — Gibson at the MGM Grand and Valiente at the Bellagio.
Using software produced by Rainmaker, Strip hotels have participated in price fixing by sharing their room rates. The software uses an algorithm to set prices in the market. A confidential informant cited in the lawsuit alleges that 90% of the hotels on the Strip use Rainmaker’s products. A former employee said a colleague said, “We’re just about in every hotel on the Strip.”
Rainmaker’s algorithms “are specifically intended to raise profits for Hotel Operators while discouraging them from maximizing occupancy of hotel rooms (i.e., supply),” according to the lawsuit.
That algorithm, centered on profit rather than adjusting for lower demand, constitutes antitrust, the lawsuit argues. It works because participants agree not to undercut competitors’ prices.
“This is not how a competitive market works: in a competitive market, any empty hotel room is lost revenue, so a hotel operator would try to fill each hotel room by granting concessions or lowering prices. By contrast, on Rainmaker Group’s recommendations and as an integral part of the conspiracy, Hotel Operators kept prices high and some rooms empty, knowing their co-conspirators would not undercut these supracompetitive prices,” according to the lawsuit.
8 News Now reached out to the resort companies listed as defendants in the lawsuit early Thursday afternoon.
“The claims against MGM Resorts are factually inaccurate, and we intend to defend ourselves vigorously against these meritless claims,” according to an MGM Resorts spokesperson.
A spokesperson for Wynn Resorts said they had no comment at this time.
Responses from Caesars and Treasure Island have not been received, but we will update this story with their replies when we receive them.
The Nevada Resort Association declined comment.
The Associated Press requested comment from Rainmaker. Michael Bennett, a representative of Boca Raton, Florida-based Cendyn, declined to comment.
And there’s evidence the scheme was working, the lawsuit argues.
An 8 News Now report from September is mentioned in the lawsuit, citing room prices that ranged from $331 per night on the low end to as high as over $1,000 at Wynn Las Vegas. A quote in our report describes what consumers should expect, but it’s possible that the opposite was actually happening:
“They raise when demand is high,” Jonathan Fine, owner of Fine Entertainment Management said. “And they lower their rates when supply is high.”
The average daily room rate was at its highest in September, breaking the $200 barrier for the first time ever at $209.89. The average on the Strip was $225.69, according to published reports from the Las Vegas Convention and Visitors Authority.
“They used to offer a lot of offers in Las Vegas especially,” a tourist told 8 News Now at the time. “Like if you go to a casino the hotel is really cheap, but that is not the case right now.”
The lawsuit was filed Wednesday by the Seattle law firm Hagens Berman and the California firm Panish Shea Boyle Ravipudi.
“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. “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.”