CoStar, hoteliers sued for colluding on rates

NATIONAL REPORT – Commercial real estate data giant CoStar has been sued in a proposed consumer class-action lawsuit that accuses it and luxury hotel operators, including Hilton, Hyatt and Marriott, of conspiring to make room rates artificially high. The suit is seeking damages for potentially hundreds of thousands of people who rented rooms from a defendant or alleged co-conspirator hotel from February 21, 2020, till today.

Seven residents of California, Florida, Illinois and other states filed the lawsuit in Seattle federal court on Tuesday, seeking damages under U.S. antitrust law for alleged room price overpayments.

The lawsuit accuses the hotel companies of sharing competitively sensitive information through CoStar’s Smith Travel Research (STR) reports that show “performance benchmarking and comparative analytics” for the industry.

The defendant hotels shared prices, supply and future plans, allowing participating companies to use rivals’ strategic information to inflate prices in Washington, D.C., San Francisco, New York, Nashville, Chicago, Boston, Austin and other cities, according to the lawsuit.

Michael Shindler, president of Four Corners Advisors, Chicago, told Hotel Investment Today that this lawsuit, being surprising and unexpected, reminds him of his first read in the California decision in Woolley v. Embassy Suites in 1990. “I thought then that the Woolley decision could have significant and unintended consequences in terms of how management agreements would be drafted thereafter. This has proven to be true.”

Shindler added that this case has the potential, if the Plaintiffs are successful, to “rock the very foundation of how hotels conduct their revenue management activities, how anyone – other than those who pay for ad hoc data – can use the ‘comp set’ data so frequently used in our industry, whether the data gathering and supplying would continue and, frankly, the very existence of STR as the ‘go to’ data provider.”

Other defendants include IHG Hotels & Resorts, Loews Hotels and the U.S. subsidiary of Accor.

The allegations are based partly on information from confidential witnesses, including a software engineer at STR and a market director of revenue management at Marriott Ritz-Carlton Hotels, the lawsuit said.

The case is Jeanette Portillo et al v. CoStar Group et al, U.S. District Court for the Western District of Washington, No. 2:24-cv-00229. 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. Those cases are ongoing.