Introduction
Hotel guests may file claims for services received for a variety of reasons. Most often, hostile services want to enrich themselves at the expense of their customers, using illegal methods to do this. In a recent lawsuit to a Nevada state court, people accused some major Las Vegas hotels of conspiring to gouge prices. According to available information, hotels have developed a special algorithm that helped them maximize their profits while simultaneously causing inconvenience to guests. This case demonstrates an increasing trend in antitrust litigation against using an algorithm for pricing. Therefore, this paper aims to analyze this case and develop possible ways to prevent the situation.
The Issue
Major hotels in Las Vegas are accused of overcharging their guests. According to information presented in the media, many hotels use a special pricing algorithm to get as much profit from their customers as possible. The result of this is price collusion between hotels, which accuses “MGM Resorts International, Caesars Entertainment Inc., Wynn Resorts Holdings, and Treasure Island” (Ross, 2023, para. 2). The plaintiffs allege that instead of placing customers at acceptable and competitive prices, hotels negotiate among themselves to raise the price of services. Consequently, visitors to Las Vegas accuse the city’s largest hotels of violating consumer rights and monopolizing the hotel business.
The Facts
The lawsuit involves significant hotels in Las Vegas and a company engaged in the digital transformation of the business in collaboration to inflate prices for customers and make more profit. Using the Rainmaker platform developed by Cendyn Group, hotels have significantly increased their prices, which has led to customer dissatisfaction (Ross, 2023). Previously, Las Vegas Strip hotels tried to increase their profits by increasing the number of customers. They used various discount systems and loyalty programs (Schneider & Leonard, 2023). However, after the digital transformation of business models, pricing algorithms began to be used, significantly increasing the price of renting a room.
In addition to violating antitrust policy, this practice has led to a decrease in the flow of customers to these hotels and, as a result, to the loss of income from unrented apartments. Explaining how the algorithms work, the Rainmaker Group stated that “about 90% of hotel operators on the Strip use the products” (Schneider & Leonard, 2023, para. 8). The operation of the algorithm is based on the analysis of a large amount of data, including prices, bookings, as well as information about visitors, based on which pricing recommendations are formed.
The Court’s Decision
The class action lawsuit in this case was filed in January 2023, so a final court decision has not been made. However, lawyers for hotels accused of using algorithms have filed a motion to dismiss the lawsuit (Ross, 2023). They argue that there is no direct evidence of price collusion between hotels. Moreover, businesses are justifying their price hikes as recommendations from algorithms, not as an attempt to monopolize the Las Vegas hotel business. Nevertheless, there still needs to be a court decision on this case, just as there is no decision regarding the petition filed.
The Reasoning Supporting the Decision
Although the court’s decision has yet to be announced, it is possible to assess the existence of justifications. Lawyers hired by the hotels argue that the lawsuit lacks essential elements necessary to substantiate collusion. Such elements include, for example, its participants or the beginning of an action (Ross, 2023). Therefore, the court may find the hotels not guilty of collusion due to the lack of necessary evidence.
Nevertheless, given the general trends in the fight against monopolization, there are grounds for conducting an additional investigation of the case. Business monopolization is a common problem requiring urgent intervention (Schneider & Leonard, 2023). In this case, the hotels violated consumers’ right to enrich themselves. The use of pricing algorithms can artificially inflate prices, harming customers. Therefore, the court may order an additional investigation of the case to obtain facts confirming or refuting the existence of an offense.
Preventative Actions to Avoid the Lawsuit
This lawsuit could have been prevented by taking the following actions. First, the primary step is to use a transparent pricing strategy. It might ensure that customers are treated fairly and that the hotel is competitive. Moreover, when visitors understand the principles of pricing and see the best value for money, they are more likely to use the services of a business. Secondly, this situation could arise because the algorithms were misused. Therefore, it is crucial to constantly monitor the algorithm’s performance and adjust it to avoid negative consequences, such as accusations of price fixing.
In addition, given today’s trends, businesses should carefully adhere to antitrust policies. Finally, another effective way to prevent the situation could be using additional sources of information in addition to algorithms. It implies the involvement of outsourcing companies for business audits and constant feedback from clients. It will help to identify and correct problems on time that may affect the experience of visitors to the hotel.
Conclusion
In conclusion, using pricing algorithms in Las Vegas hotels has led to inflated service prices, causing dissatisfaction among visitors. Major hotels in the city were accused of collusion, as a result of which they all offered their services at prices above market rates without providing alternatives for customers. A lawsuit accused the companies of monopolizing business and violating consumer rights. However, this situation could have been avoided by using a more comprehensive approach to pricing and maintaining customer feedback to identify the problem promptly.
References
Ross, M. (2023). Strip hotels accused of fixing room rates want lawsuit dismissed. Las Vegas Review Journal. Web.
Schneider J., & Leonard, M. (2023). Vegas visitors sue the Strip’s biggest hotels, alleging price collusion. Los Angeles Times. Web.