What Hilton, Hyatt and Marriott Don't Want You To Know

Summary

The video script discusses the high costs of hotel stays, suggesting that hotels are using algorithms to artificially inflate prices. Lawsuits accuse hotels of price-fixing via software like Cendyn and STR, which propose 'optimal' rates, leading to a 65% increase in Atlantic City's average room rate from 2017 to 2022. Despite lower occupancy, revenue rose due to higher prices. The DOJ argues this could violate antitrust laws, highlighting a need for regulatory intervention against potentially illegal corporate practices.

Takeaways

• 🏨 Hotel room rates have surged, with some suites costing up to $12,000 a night, raising questions about price inflation.
• ⚖️ Multiple federal lawsuits suggest hotels are using algorithms to artificially inflate prices, potentially violating antitrust laws.
• 💡 The shift to algorithmic pricing began in 2018 when hotels started sharing data with Cendyn, a software company specializing in hospitality.
• 📈 Cendyn's software uses algorithms to suggest 'optimal' room prices, aiming to eliminate competition by suggesting rates that are uniformly high.
• 📊 Since 2018, there's been a notable increase in room rates and a simultaneous drop in occupancy rates, yet overall hotel revenue has increased.
• 📉 Despite a drop in occupancy from 87% to 73%, hotels in Atlantic City saw a 40% rise in revenue from 2017 to 2022 by raising prices.
• 🏢 Similar price-fixing allegations have been made against RealPage in the rental property market, hinting at a broader issue with algorithmic pricing.
• 🔗 Both Cendyn and RealPage trace back to Rainmaker, suggesting a common origin for the software used in price-fixing schemes.
• 📚 Another lawsuit implicates Smith Travel Research (STR), used by luxury hotel chains, for sharing price, supply, and future planning information to maintain high revenues.
• ⚠️ The U.S. Department of Justice argues that using a common system to set prices, even without direct communication, could violate antitrust laws.
• 🛑 The hotel industry's use of algorithms to fix prices underscores the need for regulatory intervention to prevent corporate manipulation of market prices.

Q & A

Why are hotel room rates so high currently?

Hotel room rates are high due to allegations of price-fixing through algorithms, as suggested by multiple federal lawsuits.

How do hotels allegedly fix prices?

Hotels are accused of using algorithms to fix prices without direct communication, potentially in violation of antitrust laws.

What is Cendyn and what role does it play in hotel pricing?

Cendyn is a software company that provides algorithms to suggest 'optimal' room prices, aiming to bypass competition and stabilize rates.

How did the hotel industry's pricing strategy change in 2018?

In 2018, hotels started sharing their internal data with Cendyn, which led to a significant increase in room rates and a decrease in occupancy.

What was the average hotel room rate in Atlantic City in 2017 and 2022?

The average hotel room rate in Atlantic City was $108 per night in 2017 and increased to $178 in 2022, a 65% increase.

How did occupancy rates change in Atlantic City between 2017 and 2022?

Occupancy rates in Atlantic City dropped from 87% in 2017 to 73% in 2022.

What was the impact of increased room rates on the hotel industry's revenue in Atlantic City?

Despite lower occupancy rates, the hotel industry's revenue in Atlantic City rose by 40% between 2017 and 2022 due to higher room rates.

What is the connection between Cendyn and RealPage?

Cendyn and RealPage can both be traced back to the same company, Rainmaker, which sold its software to them in separate transactions.

What is Smith Travel Research (STR) and how is it involved in hotel pricing?

STR is a technology used by luxury hotel chains to share detailed information about prices, supply, and future plans, which is then used to inform pricing strategies.

How do the hotels defend their use of algorithms for pricing?

Hotels argue that since they are not communicating directly with each other and the prices suggested by software like Cendyn and STR are not binding, they are not violating antitrust laws.

What is the stance of the U.S. Department of Justice on the use of algorithms for hotel pricing?

The U.S. Department of Justice argues that using a common system to set prices, even without direct communication, could violate antitrust laws, and conspiring to fix the starting point of pricing is unlawful.