Everyone knows you can’t beat the house in Vegas, but now a couple of visitors say you can’t even beat the hotel — and they’re suing.
The biggest hotels on the Las Vegas strip, including Bellagio, Caesars Palace and Wynn, colluded to overcharge visitors for rooms through an algorithm designed to maximize their profits, according to the lawsuit filed Wednesday in Nevada federal court.
The defendants are MGM Resorts International, Caesars Entertainment, Wynn Resorts Holdings and Treasure Island; the plaintiffs are a couple of frequent visitors to Las Vegas who claim they overpaid for their rooms as a result of an anti-competitive arrangement. Cendyn Group and its subsidiary Rainmaker Group Unlimited were also sued, suppliers of the price algorithms.
The case is the latest in a growing wave of antitrust cases targeting algorithmic models or data brokerage services allegedly used to facilitate price coordination across an entire industry. The allegations echo dozens of recently filed lawsuits hitting the nation’s top homeowners with similar claims.
Hotel operators used to try to fill all their rooms, even if it meant discounts. With the use of the pricing algorithms, the hotels raise room rates while accepting a loss of revenue from unrented suites, according to the lawsuit.
In a competitive market, that would never work, and “a hotel operator with overpriced, empty rooms would eventually go out of business,” the plaintiffs’ lawyers wrote in the suit.
But that is not what is happening, they say.
Instead, the operators being sued have claimed revenue increases of as much as 15% when using Rainmaker Group’s products, according to the complaint. Now, about 90% of hotel operators on the Strip use the products, the plaintiffs said.
Travel Weekly found that visitors to Las Vegas “paid the highest average daily room rate” in the city’s history in September, “a trend that is likely to continue,” the attorneys wrote.
There are about 30 hotels on the four-mile strip, and the defendant operators control at least 20 of them, according to the complaint.
An MGM spokesperson denied any wrongdoing in a statement Thursday.
“The allegations against MGM Resorts are factually inaccurate and we intend to vigorously defend ourselves,” the spokesperson said, calling the allegations “meritless.”
Representatives for Wynn and Cendyn declined to comment. Caesars and Treasure Island did not immediately respond to requests for comment.
Rainmaker Group collects a variety of data, including pricing information, details of each order or attempted order, even identifying individual visitors, ranking them by the amount they are likely to spend visiting casinos, according to the complaint.
The algorithm then makes a price recommendation to the hotel, which Rainmaker claims is accepted 90% of the time, the lawyers wrote.
That means the algorithm, “not normal market forces,” sets the prices, they said.