CoStar Faces Lawsuit Alleging It Helped Luxury Hotels Fix Prices

26.02.2024 - 23:23 / skift.com / Ihg / Sean Oneill / Pranavi Agarwal

CoStar Group, the real-estate data giant, was hit last week with a consumer class action lawsuit alleging it enabled several hotel operators, such as Marriott and Hilton, to artificially boost their hotel rates.

The suit, brought by seven residents of California and Illinois, notes that CoStar’s subsidiary STR shared data with five of its paying clients: Hilton, Hyatt, IHG, Loews, and Marriott.

The data let the hotel operators know about each other’s room rates and occupancy. The suit alleged the hotels used the data to charge an average of 4% more than they otherwise could for luxury hotels in major U.S. cities.

The suit argues that the five hotel operators together hold 70% market share across 15 U.S cities.

By sharing detailed data through STR reports, competitors could make more informed decisions about pricing strategies, the suit claims, rather than engaging in competitive pricing that drives down rates.

Marriott and Hilton declined to comment. STR, Hyatt, IHG, and Loews didn’t respond to requests prior to publication.

STR is not accused in the suit of formally running a conspiracy. It merely creates reports that allow participating hotels to compare their performance against competitors and the market.

The plaintiffs’ law firm, Hagens Berman Sobol Shapiro, has “brought similar data-related price-fixing lawsuits against hotels in Las Vegas and rental property management companies,” Reuters noted.

“STR is the most widely used and respected dataset in the hotel industry,” said Pranavi Agarwal, a senior research analyst at Skift Research. “The price-fixing claim is focussed only in the luxury segment, which has seen significant ADR [average daily rate] increases in the last four years – such as being the only chain scale to see ADRs rise above inflation, on average.”

The case, Portillo v. CoStar Group, was filed in the U.S. District Court for the Western District of Washington.