Atlantic City Casino-Hotels Conspired to Fix Room Prices, Class Action Alleges

New to ClassAction.org? Read our Newswire Disclaimer

A proposed class action lawsuit alleges a host of Atlantic City hotel and casino heavyweights have illegally conspired to fix, raise and stabilize hotel room prices. 

Think you overpaid for your Atlantic City hotel room? Let us know here. 

The sprawling 109-page case alleges the operators of Caesars, Harrah’s, Tropicana, Borgata, Bally’s, MGM Tower, Hard Rock and other Atlantic City hotels have for years used a “shared pricing algorithm” platform to conspire on room prices, causing consumers to overpay for guest rooms rented directly from the companies since at least late June 2018. 

As the lawsuit tells it, the casino-hotel operators’ anticompetitive scheme has worked given that room rates and revenue have spiked during the relevant time period. 

“The numbers reveal substantial increases in room rates and revenue coupled with marked decreases in occupancy rates, while casino gaming revenue from the same period increased at a much lower rate,” the antitrust suit says. 

Until recently, casino-hotels set their room rates independently from each other as dictated by market forces, the filing explains. Given that casino-hotels aim primarily to increase demand for on-site gambling, they have historically offered low room rates so as to fill hotels with guests who might gamble in a hotel’s casino, rather than that of a competitor, the suit says. 

However, a seismic shift began when a platform was developed and released by The Rainmaker Group to help hospitality clients “capture revenue they believed was being lost during the process of competing for guests,” the case states. This pricing algorithm, which Cendyn has come to refer to as “the hotel revenue and profit optimization cloud” after acquiring it in 2019, is designed to “optimize” room rates casino-hotels charge guests in order to “maximize” the corresponding revenue, the filing shares. 

“At a basic level, the algorithm platform works like this: Each casino-hotel client provides its current, non-public room pricing and occupancy data to the platform on a continuous basis. In turn, the algorithm continuously processes and analyzes this information, along with the same type of data the client’s participating competitors also submit to the platform, and other relevant supply and demand-related data. The algorithm utilizes this continuous flow of real-time data to obtain a clear and complete picture of market supply and demand and competitive dynamics at any given time. The algorithm ultimately uses this information to generate 'optimal' room rates, updated multiple times per day, for each client to charge guests.” 

The defendants, which own and operate most of the casino-hotels in Atlantic City, each began using Cendyn’s pricing algorithm sometime before June 28, 2018 after a “sustained period of financial distress,” the complaint says. As the Atlantic City casino-hotel defendants recovered financially, conditions existed for the companies to “raise room rates through their shared use of the Rainmaker platform,” knowingly fixing, stabilizing and artificially inflating room prices in coordination with each other, the lawsuit contends. 

“In doing so, Casino-Hotel Defendants replaced a historically independent room pricing system in Atlantic City with an interdependent, collusive one,” the case summarizes. 

The suit says that it is “hardly surprising” that Atlantic City casino-hotels have come to use Cendryn’s pricing algorithm given the company’s assurance that it can help increase revenue. Indeed, statistics touted by Cendyn show that the pricing algorithm has come to be an essential, indispensable tool for casino-hotel operators as far as setting room rates, the lawsuit states. 

Most importantly for the defendants, the suit alleges, is the comfort in knowing that they can increase hotel room rates while their competitors will not undercut them. 

“Casino-Hotel Defendants’ shared use of the Rainmaker pricing algorithm platform … has allowed them to charge more for rooms while knowing that their competitors would not lower their own room rates to take share—i.e., what would have happened under normal competitive conditions,” the case contests. 

Per the case, defendant Cendyn Group, LLC has heavily promoted “collective adherence” to its algorithm’s pricing recommendations, and key personnel have emphasized that revenue managers must recognize that a “race to the bottom” price-wise in the market need not be the only solution when competition becomes fierce. Cendyn personnel have delivered the common message to casino-hotel clients that they must “see the importance of a disciplined group revenue solution,” the filing adds. 

“This direct evidence of collusion is enough to prove an antitrust violation,” the lawsuit alleges. 

The lawsuit looks to cover all persons who have directly purchased a guest room in Atlantic City, New Jersey from one or more of the defendants (listed below) or their alleged co-conspirators since at least June 28, 2018. 

Named as defendants are Caesars Atlantic City Hotel & Casino, Harrah’s Resort Atlantic City Hotel & Casino, Tropicana Casino and Resort Atlantic City, MGM Resorts International, Borgata Hotel Casino & Spa, Hard Rock Hotel & Casino Atlantic City and Cendyn Group, LLC. According to the case, the defendants, minus Cendyn, have controlled at least between 72 percent and 80 percent of the hotel-casino market share in Atlantic City since June 2018. 

Think you overpaid for your Atlantic City hotel room? Let us know here.