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6 ways to avoid antitrust violations
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6 ways to avoid antitrust violations
29 Aug 2013
Exchanging nonpublic information with competitors (e.g. call
arounds) could be in direct violation of
U.S. antitrust laws.
Highlights
Various hotel groups
have stopped “call-
around” exchanges
following
investigations by the
Connecticut Attorney
General.
Do not enter into any
agreements with your
actual or potential
competitors.
Alert your counsel if
a competitor invites
your company to
collude or exchange
competitively
sensitive information.
By Kirby Lewis
U.S. antitrust laws may be violated whenever a competitor
directly or
indirectly communicates, solicits or facilitates exchange of
competitively
sensitive, nonpublic information with its rivals. Such
communications
among competitors always have been suspect, but recent cases
illustrate
these rules fully apply to hotel owners and operators.
From 2010 to 2011, the Connecticut Attorney General
investigated La
Quinta Worldwide, McSam Hotel Group, Metro Ten Hotel and
Jamsan
Hotel Management concerning their long-term participation in
“call-
around” exchanges, wherein hoteliers in close proximity
exchanged
sensitive nonpublic information at least once a day about
occupancy and
room rates. The companies settled the cases with the Attorney
General, in
part by agreeing to terminate the “call-around” practices. The
Connecticut Attorney General’s investigation and settlement
attracted
media attention, making it likely this issue will remain an area
of interest
to government enforcement authorities.
The most prevalent forms of competitively sensitive information
are
nonpublic terms and conditions of sale to customers, such as:
• price (i.e., nonpublic or future);
• output (i.e., occupancy or other qualitative dimension of a
hotel
owner/operator’s supply); and
• competitive strategy data (i.e., expansion, growth,
retrenchment
planning), particularly when the exchanged information is
highly detailed,
disaggregated and forward looking.
In its most recent pronouncement, the Federal Trade
Commission, a
principal enforcer of antitrust laws, has emphasized three
primary risks
posed when competitors exchange such information among one
another:
1. What begins as a discussion of competitively sensitive prices,
output or
strategy easily can transform into a full conspiracy among
competitors to
fix prices or otherwise restrain trade. Conspiring to fix prices,
other terms,
allocating markets, or customers is often deemed unlawful per
se and
can trigger significant fines and civil liability. It may even
constitute a
criminal antitrust violation.
2. An information exchange may facilitate coordination among
competitors that harms competition even in the absence of an
explicit
agreement regarding future conduct. This is what the
Connecticut
Attorney General alleged in the “call-around” cases, finding
that the
information exchanges provided nonpublic data to competing
operators,
enabling them to increase room rates at certain hotels on
specific days.
Other recent enforcement actions under the Sherman Act by
FTC and a
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6 ways to avoid antitrust violations
http://www.hotelnewsnow.com/Article/11146/6-ways-to-avoid-
antitrust-violations[8/30/2013 9:46:39 AM]
private plaintiff’s action highlight the legal risk posed by
improper
information exchanges among competitors, even where the
parties do
not explicitly agree on pricing or other matters.
3. Knowledge of a competitor’s future strategic plans reduces
competitive
uncertainty and enables rivals to restrict their own competitive
efforts,
even in the absence of coordination with competitors. For
example, such
exchanges could give an owner/operator visibility into its
competitor’s
nonpublic strategies that could lead the owner/operator not to
open
competitive properties or market competitive services or
amenities in a
particular location.
To avoid these risks (and the burden and costs of being the
subject of an
antitrust investigation), hotel owner/operators should keep in
mind the
following guidelines:
• Absent prior consultation and approval from counsel, do not
enter into
any express or implicit agreements or understandings with your
actual or
potential competitors regarding your price, output and
competitive
strategic decision making.
• Absent prior consultation and approval from counsel, do not
even
discuss, exchange or share any competitively sensitive data with
your
competitors.
• If such competitively sensitive information exchanges have
previously
occurred, orally report to and discuss with counsel.
• Orally report to counsel any overtures or suggestions from
competitors
that invite your company to collude or exchange competitively
sensitive
information.
• Do not attend or remain at trade association meetings or other
formal
or casual gatherings with competitors where competitively
sensitive
information is exchanged or discussed, and immediately inform
counsel if
such communications have taken place.
• Consider antitrust compliance training for company officers
and any
employees who have contact with competitors and/or
responsibility for
sales, marketing or pricing.
By contrast, hotel owner/operators should continue to track and
rely on
publicly available competitive information, including data on
third-party
websites and statistics contained in recognized industry reports.
In this
regard, your in-house and outside counsel can help your
company
structure its ongoing competitive decision-making processes to
maximize
your commercial opportunities while minimizing your antitrust
risks.
Kirby Lewis is a counsel at Goodwin Procter and serves as a
member of the firm's Antitrust &
Competition Practice. Mr. Lewis specializes in antitrust and
trade regulation counseling and litigation,
with particular emphasis on defending government
investigations of mergers and acquisitions and
analyzing joint ventures and other competitor collaborations.
The opinions expressed in this column do not necessarily
reflect the opinions of Hotel News Now or
its parent company, STR and its affiliated companies.
Columnists published on this site are given the
freedom to express views that may be controversial, but our
goal is to provoke thought and
constructive discussion within our reader community. Please
feel free to comment or contact an editor
with any questions or concerns.
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06 September 2011
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Blog Archive
Friday, 02 September 2011
Price gouging after a disaster
Posted by Stacey Mieyal Higgins at 12:00 AM
Here we go again. Now that Hurricane Irene has bid farewell to
the
East Coast of the United States, stories of “bad business” are
emerging in her wake. The most recent I found was a hotel in
Brooklyn, New York—the Hotel Le Bleu—which reportedly
charged guests
US$999 rather than its usual US$250 per night during the
weekend of
evacuations in Manhattan, according to theNew York Daily
News.
A hotel employee was quoted in the story as defending supply
and demand
basics: “It was just because of high demand,” said the
employee, who would not
give her name. “A lot of hotels did that.”
There are many stories that paint hotel operators in a negative
light on the
subject. In London more than a year before the 2012 Olympics,
hotels also are
fighting claims of price gouging. In New Zealand ahead of the
Rugby World Cup,
hoteliers are justifying higher rates while the media quotes
hotel customers on
the “abhorrent” practice.
These examples, of course, refer to large-scale events that
impact demand and
are prepared for well in advance. Nevertheless, hotelier
practices still garner
media attention.
It’s an interesting topic that also commonly comes up after
natural disasters
around the world. Are hotels justified in capitalizing on
increased demand, no
matter the circumstances? That’s not a question I’m going to
answer, but it is
one that every hotel should address before natural disaster
strikes. How will your
revenue management team respond?
I’m curious to hear how you might react in similar
circumstances. Feel free to
share your thoughts in the comments section below.
The opinions expressed in this blog do not necessarily reflect
the opinions of HotelNewsNow.com or its
parent company, Smith Travel Research and its affiliated
companies. Bloggers published on this site are
given the freedom to express views that may be controversial,
but our goal is to provoke thought and
constructive discussion within our reader community. Please
feel free to comment or contact an editor
with any questions or concerns.
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[10/24/2011 9:49:59 PM]
24 October 2011
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Elevating the role of revenue manager
20 October 2011
By Jon Eliot
HotelNewsNow.com columnist
Story Highlights
Revenue managers should offer
insight and data.
Directors of sales should view
revenue managers as a valuable
resource—and utilize them as
such.
GMs should work to align goals
and resolve any “conflicts”
between sales and revenue
management.
Revenue management has grown and evolved in the hotel
industry during
the past 20-plus years. As part of this evolution, the role of a
revenue
manager has become a necessity. Whether a dedicated revenue
manager,
multi-property shared resource or a paid consultant, most
properties have
invested in some sort of revenue management support. Although
revenue
management has become an accepted practice, the role of the
revenue
manager can vary dramatically.
In many cases, the revenue manager’s role consists primarily of
report
creation and tactical implementation based on direction from
some
combination of the GM and director of sales. In these instances,
the RM is
not fulfilling the potential of the position, nor is he actively
practicing
revenue management. The RM should be an integral part of the
decision-
making process and provide direction and strategy based on
facts, data
and analysis. His expertise should not simply be in managing
the various
systems (CRS, PMS, RMS, third-party extranets, etc.) but in
synthesizing
data and making sound business decisions to positively affect
results.
The challenge becomes shifting the
role of RM to one of an influencer
and decision maker. This is not to
downplay the role of the GM or
director of sales in the process or
to wrestle “control” away from
other leaders, but to add a level of
expertise and specific viewpoint on
maximizing revenue potential as
well as nourishing a revenue-
management culture. Some steps
that can be taken to elevate the
role of revenue management and
that of the RM, from the
perspective of the RM, GM and
director of sales follow.
Revenue manager
• Own the Revenue Meeting—I
have seen far too many revenue
meetings where the RM brings
numerous reports and
spreadsheets, relays some
numbers and waits to be told what
to do. The RM’s role should be to
not only bring the data, but to
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[10/24/2011 9:49:59 PM]
come prepared with a strategy
based on his analysis of available
data and trends. This strategy
should be presented to the revenue
team using the facts as a basis for
the strategy. When disagreements
inevitably happen, listen to other
points of view and make decisions
as a team.
• Provide Conclusions, Not Just
Numbers—The RM is constantly
asked for numbers and reports.
Take this as an opportunity to
demonstrate value. The RM needs
to make it a rule to never just give
someone statistics. Provide a
summary of what the data is telling
you and what it means. When
emailing a spreadsheet, add a brief
review of what the information contains. This will not only
make it easier
for others to pick out what is important, it will aid in
positioning the RM
as a thought leader.
• Change the Language—When presenting a strategy or tactic to
drive
results, the RM should have done the due diligence necessary to
make
that decision and state it with confidence. Language like “I
think we
should …” or “maybe we could try …” should be replaced with
phrasing
more in line with “We need to …” or “Our best move is to … ,”
and be
followed up with the reasons why.
• Be a Team Player—Seek to understand others’ points of view
and
perspective. A RM should consider the challenges others face in
their roles
and why they might champion certain strategies and tactics. The
RM
needs to ensure they are working with, not at odds with, others
having a
common focus on the hotel’s goals. Part of accomplishing this
is educating
others about what the RM does and why they make the decisions
they
make.
• Challenge the Status Quo—The RM is the person who should
be asking
“Why?” They need to constantly look for new and better ways
of
achieving optimum performance without settling for doing
things because
they have always been done. Be an agent for change when
needed, but
also ensure validation of things that are being done currently.
• Know Your Peers—Develop a network with other RMs in the
market.
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low-cost-ways-to-win-guests
http://www.hotelnewsnow.com/adcounter.aspx?ad=Czw5nf7npff
rKoIwUPoadA==&adlink=http%3A//www.hotelnewsnow.com/H
otel_Investment_Barometer/HotelsforSale.aspx
Elevating the role of revenue manager
http://www.hotelnewsnow.com/Articles.aspx?ArticleId=6735&p
ar1=aFup8eR8kRDJtmbXliTWMw==&par2=lplDaxa9Ns8wgpW
xzZzfwD2pHad9+HvkiqzNrQgoCqfMS2Y9njYhKjYhU+jD9V2P
[10/24/2011 9:49:59 PM]
Jon Eliot
Vice chair
HSMAI Revenue Management
Advisory Board
Although you cannot discuss prices or proprietary information,
it is always
a good idea to talk to your counterparts at competing hotels to
better
understand local market conditions.
• Be Informed—Keep up on what is happening in the industry.
There are
some easy ways to accomplish this. Joining relevant groups on
sites like
LinkedIn will provide access to many interesting discussions.
Another
excellent resource is subscribing to email updates from some of
the many
industry specific websites and publications. It is important to
learn to
filter through the articles and discussions that are sent to you to
ensure
you are reading relevant information, otherwise it is easy to be
overwhelmed with the volume of information. Also, be aware
that much of
what you see will be authored by vendors who are ultimately
trying to
promote products and services. Do not ignore these as they can
be very
useful and informative; simply understand that there may be
some bias
involved.
Another way to keep informed is to join organizations like
HSMAI that
focus on revenue management as part of their mission. HSMAI
provides
many face-to-face and virtual educational opportunities, as well
as
publications, articles and resources, that address important and
timely
issues in the discipline. Connecting with your local chapter,
most of which
have revenue-management specific events as well, provides a
built-in
network of peers that will help you stay on top of trends.
Director of sales
• Team First—Ensure the sales team is fully aware of the
overall hotel
goals and are aligned properly to achieve these goals. Sales
managers
must strive to achieve their individual goals, but not at the cost
of the
overarching hotel goals.
• Revenue Management as a Resource—The revenue
management
department should be positioned so they can provide valuable
data and
analysis to aid the decision-making process on issues such as:
pricing,
group acceptance, marketing tactics and goal setting, for
instance. The
directors of sales should utilize the RM as a business partner.
• Educate—The RM might not have a complete understanding of
the sales
team’s structure and processes. The director of sales can
proactively seek
to educate the RM to ensure they fully understand why the team
is set up
the way it is and what the sales process entails. This
education/understanding will assist in building a cooperative
atmosphere.
GM
• Build Consensus—The GM of one of the most
successful revenue management teams I worked
on did an incredible job of letting the director of
sales and RM come to consensus. When
differences of opinion arose, he would ask probing
questions and let us make our arguments and
challenge each other. He would participate in the
discussion without taking sides and only dictate a
final decision when it was apparent a consensus
could not be reached. This helped us to learn from
each other and, as revenue manager, forced me to
be prepared and ready to defend my strategy.
• Support Growth and Learning—Encourage the
RM to participate in available learning and
networking opportunities. This might include
conferences, webinars, networking events and
educational opportunities. Have the RM report
back on what they learned and who they
interfaced with as part of the opportunity.
• Align Goals—I am surprised at how often the
question of solving the “conflict” between sales and revenue
management
comes up. There is really a simple solution: align goals. I
worked with a
hotel where the sales managers had only roomnight goals. There
were no
parameters about when the roomnights should be or what kind
of revenue
they should generate. The sales team was motivated by this goal
and
Elevating the role of revenue manager
http://www.hotelnewsnow.com/Articles.aspx?ArticleId=6735&p
ar1=aFup8eR8kRDJtmbXliTWMw==&par2=lplDaxa9Ns8wgpW
xzZzfwD2pHad9+HvkiqzNrQgoCqfMS2Y9njYhKjYhU+jD9V2P
[10/24/2011 9:49:59 PM]
quite successful in achieving it. However, the hotel wasn’t
making its
overall goals. To avoid working at cross purposes, it is
important to make
sure the entire hotel team’s goals are aligned. Individual goals
and
targets are definitely a large part of the equation, but everyone
should
have a stake in achieving the big picture goals. Incentive
programs may
be dictated from above the hotel level, but the GM can work to
ensure
goals are established to best support the overall success of the
hotel.
• Examine Reporting Lines—To whom does the RM report? The
RM would
ideally report to the GM. However, based on the team dynamic
and
experience level of the RM, reporting to the director of sales
can work. As
revenue management becomes ingrained in the culture of a
hotel, the role
of RM should answer directly to the GM.
Today’s revenue manager can play a larger role in the overall
success of
the hotel than ever before. For the potential of the role to be
realized, the
RM has to take a leadership role and gain the support of others
in the
organization. It is not always an easy transition and may not be
the
direction some leaders are willing to take. Just as a revenue
manager
should have a strategy to achieve hotel goals, they should have
a strategy
to reach their potential as a leader and influencer.
Special Note: This topic will be explored in more detail on 25
October as
part of the 10-part 2011 Revenue Management Webinar Series.
The
related webinar is titled “Why Does the Revenue Manager
Exist? –
Elevating the Role of the Revenue Manager.”
Want to Learn More?
This topic will be addressed as part of the 10-part 2011 Revenue
Management Webinar Series
produced by the HSMAI University in partnership with
HotelNewsNow and STR, and sponsored
by IDeaS. Each month a webinar covers one aspect of cutting
edge revenue management in
today's economy in conjunction with articles written by
members of the HSMAI Revenue
Management Advisory Board. If you’re not able to attend a live
program, archives are available.
Also, some of these and other timely revenue management
topics were the focus of the HSMAI
Revenue Optimization Conference on June 20, 2011.
Presentation recordings are now available
in the ROC 365 Conference Archive.
About the Author
Jon has over twenty years experience in the hospitality industry
at the property, regional, and
brand levels working across a variety of brands and industry
segments. In his most recent role
as Director of Revenue Optimization with Carlson Hotels, Jon
was responsible for the
development and delivery of revenue enhancement programs
and strategies as well as training
and development of revenue management staff. During his
tenure with Carlson, Jon created a
subscription-based revenue management program and was
integral in the conception,
development, and deployment of a leading edge automated price
optimization system. Jon is
currently seeking new opportunities in the hotel industry. He
serves as vice chair of the HSMAI
Revenue Management Advisory Board.
The opinions expressed in this column do not necessarily reflect
the opinions of
HotelNewsNow.com or its parent company, Smith Travel
Research and its affiliated companies.
Columnists published on this site are given the freedom to
express views that may be
controversial, but our goal is to provoke thought and
constructive discussion within our reader
community. Please feel free to comment or contact an editor
with any questions or concerns.
About the HSMAI Revenue Management Advisory Board
The Revenue Management Advisory Board leverages insights,
emerging trends, and industry
innovations to guide the development of products and programs
that optimize revenue for
hotels. www.revmanagement.org
Members include:
• Chris K. Anderson, Ph.D., Professor, Cornell University
• Christopher Crenshaw, CRME, Vice President, Marketing
Intelligence, Loews Hotels
• Kathleen Cullen, CRME, Corporate Director of Revenue
Strategies, Heritage Hotels and Resorts
• Sloan Dean, CRME, Vice President of Sales & Marketing,
Interstate Hotels & Resorts
• Jon Eliot, CRME, CHA
• Tammy Farley, Principal, The Rainmaker Group
• Fred Heintz, CRME, Director of Group Strategy, Marriott &
Renaissance Hotels of New York
City
• Jay Hubbs, Director Hotel Supplier Relations, Expedia Partner
Services Group / Hotwire
• Burl Hutchison, CRME, Manager of Revenue Optimization,
Sabre Hospitality
Solution
s
• Warren T. Jahn, Jr., Ph.D., Manager, Revenue Systems
Training AMER, IHG
• Klaus Kohlmayr, Senior Director, Consulting, IDeaS Revenue
Optimization
• Orly Ripmaster, CRME, Senior Analyst, STR Analytics
• Scott Roby, CRME, Vice President, Revenue Management,
Evolution Hospitality
• Chinmai Sharma, Vice President, Revenue Management,
Wyndham Hotel Group
• Susan Spencer, Market Director - N. America, ChannelRUSH
• Trevor Stuart-Hill, CRME, President, Revenue Matters
• Paul Wood, CRME, CHBA, Vice President of Revenue
Management, Greenwood Hospitality
Group
https://www.hsmai.org/Events/event.cfm?id=2288
https://www.hsmai.org/Events/event.cfm?id=2288
http://eo2.commpartners.com/users/hsmai/
http://hsmai.org/Events/event.cfm?id=2152
http://hsmai.org/Events/event.cfm?id=2152
https://online.hsmai.org/cgi-
bin/msascartlist.dll/ProductInfo?productcd=ROC365
http://www.revmanagement.org/
Starwood, Expedia Win Dismissal of Room Price-Fixing Suit -
Businessweek
http://www.businessweek.com/news/2014-02-18/hotel-room-
online-price-fixing-lawsuit-dismissed-by-u-dot-s-dot-
judge[2/24/2014 2:23:55 PM]
Bloomberg News
Starwood, Expedia Win Dismissal of
Room Price-Fixing Suit
By Andrew Harris, Tom Korosec and Margaret Cronin Fisk
February 19, 2014
Starwood Hotels & Resorts Worldwide Inc. (HOT:US) and
Expedia Inc. (EXPE:US)
among other hotel and Internet travel agencies won dismissal of
an antitrust
lawsuit after a judge found consumers hadn’t showed the
companies conspired to
fix room prices.
“The well-pled facts do not plausibly suggest that defendants
entered into an
industrywide conspiracy,” U.S. District Judge Jane J. Boyle in
Dallas said yesterday
in a ruling throwing out the case.
The plaintiffs, who bought hotel rooms across the U.S., claimed
in more than two
dozen consolidated cases that the companies agreed to prevent
consumers from
getting lower prices. The companies denied any attempt to fix
prices.
STORY: Boutique Hotelier Ian Schrager and Marriott Join
Forces
The hotels and travel companies were accused in the lawsuit of
entering
agreements to prevent hotels from selling rooms for less than
the participating
travel agents charged, causing consumers to pay “artificially
inflated prices,”
according to a May 1 complaint.
“The defendants’ ‘best price’ or ‘best rate’ guarantees are
nothing more than a cover
for their conspiracy to fix prices,” according to the complaint.
Boyle said she would allow the consumers to re-file the
complaint if they tell her
within 30 days how their proposed revision would remedy the
shortcomings in the
one she threw out and she agrees with them.
STORY: The Ski Resort Fight Over Park City Mountain
Genuine Competition
In her ruling, Boyle rejected the plaintiffs’ three antitrust
claims and a consumer
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Starwood, Expedia Win Dismissal of Room Price-Fixing Suit -
Businessweek
http://www.businessweek.com/news/2014-02-18/hotel-room-
online-price-fixing-lawsuit-dismissed-by-u-dot-s-dot-
judge[2/24/2014 2:23:55 PM]
protection claim. She found they didn’t adequately allege that a
price-fixing
conspiracy began in about 2003. The judge also said the
consumers failed to
adequately allege there were agreements that online travel
agencies wouldn’t
genuinely compete with one another and that individual hotel
chains would
publish the best-available room rates and that no online travel
agency would be
allowed to offer that room for less than any other or the chain
itself.
Those business practices were the result of independent efforts
by the online travel
companies to protect their interests by adopting similar
“vertical distribution
agreements” with the hotel chains, according to the ruling.
Boyle said she agreed
with the companies’s explanation that the allegations amounted
to “nothing more
than parallel business activity.”
Single Suit
The lawsuits, dating back to 2012, were later combined in a
multidistrict litigation
in which the plaintiffs sought to turn the consolidated cases into
a single lawsuit on
behalf of all consumers who paid for hotel rooms reserved
through the defendants’
websites from Jan. 1, 2003, to May 1, 2013.
STORY: E-Cigarettes: A $1.5 Billion Industry Braces for FDA
Regulation
The class of transactions wouldn’t include reservations made as
a part of a package
deal, or where the name of the hotel wasn’t disclosed until after
the reservation was
paid for.
The defendants said the consumers’ allegations didn’t meet the
standards for
lawsuits claiming antitrust violations.
“There is nothing anticompetitive, much less unlawful, about a
hotel setting
specific pricing terms for its distributors so that it competes
effectively with other
hotels,” they said in their July 1 motion to dismiss the lawsuit.
“Plaintiffs assert the
novel proposition that a hotel must compete against itself.”
The online travel site defendants included Expedia, Hotels.com
LP,
Travelocity.com LP, Booking.com BV, Priceline.com Inc.
(PCLN:US) and Orbitz
Worldwide Inc. (OWW:US) The hotel defendants included
Starwood,
Intercontinental, Marriott International (MAR:US) Inc., Trump
International
Hotels Management LLC and Hilton Worldwide (HLT:US) Inc.
‘Interbrand Competition’
“The hotels can control the price of the rooms they offer,”
Thomas Barnett, an
attorney for the travel sites, said at a Dec. 17 hearing. “As long
as there is
interbrand competition going on, consumers don’t have to
worry,” he said,
referring to competition among hotels within a city or area.
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Starwood, Expedia Win Dismissal of Room Price-Fixing Suit -
Businessweek
http://www.businessweek.com/news/2014-02-18/hotel-room-
online-price-fixing-lawsuit-dismissed-by-u-dot-s-dot-
judge[2/24/2014 2:23:55 PM]
The agreements with online travel sites allowed hotels to
advertise the same price
for rooms across multiple outlets, said Jeffrey Cashdan,
representing
Intercontinental Hotels Group Resources Inc., whose affiliates
include Holiday
Inns and InterContinental Hotels. (IHG) “To call that price-
fixing is absurd,” he
said at the December hearing.
The case is In re On-Line Travel Company (OTC)/Hotel
Booking Antitrust
Litigation, 12-cv-3515-B, U.S. District Court, Northern District
of Texas (Dallas).
To contact the reporters on this story: Andrew Harris in federal
court in Chicago at
[email protected]; Tom Korosec in Dallas at [email protected];
Margaret Cronin Fisk in Detroit at [email protected]
To contact the editor responsible for this story: Michael Hytha
at
[email protected]
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Hoteliers agree with parity lawsuit dismissal
http://www.hotelnewsnow.com/Article/13184/Hoteliers-agree-
with-parity-lawsuit-dismissal[2/24/2014 2:03:27 PM]
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Opinions Marketplace
Hoteliers agree with parity lawsuit dismissal
February 19 2014
A Dallas judge on Tuesday described industry-wide rate-parity
clauses as “rational business
interests,” rather than anti-competitive behavior.
Highlights
Robert Cole of
RockCheetah said the
case was frivolous
from the outset.
Tim Peter of Tim
Peter & Associates
said the ruling is a
big win for everyone
involved.
Drew Salapka of
Hotel Equities said
rate parity between
distribution channels
is often confused as
rate parity between
competing operators.
By Jason Q. Freed
News Editor
[email protected]
REPORT FROM THE U.S.—The dismissal of an antitrust
lawsuit Tuesday
against hotel brands and online travel agencies accused of
colluding on
price should bring some closure to the ongoing debate over rate
parity
and price fixing, hoteliers said.
United States District Judge Jane Boyle in Dallas described
industry-wide
rate-parity clauses as “rational business interests,” rather than
anti-
competitive behavior, according to a filing in the case of Online
Travel
Company Hotel Booking Antitrust Litigation in the U.S. District
Court for
the Northern District of Texas.
Companies named in the lawsuit were: Starwood Hotels &
Resorts
Worldwide, InterContinental Hotels Group, Marriott
International, Expedia,
Inc., Orbitz Worldwide and Priceline.com. The lawsuit was a
consolidation
of several class-action complaints from various states.
Robert Cole, founder of RockCheetah consulting firm, said the
case was
frivolous from the outset.
“The rate-parity practice employed by hotels in the U.S. is
technically
known as resale price maintenance, which is a perfectly legal
vertical
price constraint, as long as it does not constrain trade or
negatively
impact consumers,” Cole said via email. “The claim made by
the litigants
not only failed to provide any indication of collusion by or
between
hotels and/or OTAs to dictate pricing, but also demonstrated
that the
group had very limited familiarity with how hotels and OTAs
function.”
Tim Peter, managing director of Tim Peter & Associates
consulting firm,
said the ruling is a big win for hoteliers, OTAs and consumers.
“For hoteliers, it provides the continued ability to price their
rooms
appropriately based on demand and the value of the offering,”
he said
via email. “For OTAs, it provides an opportunity to compete
based on
offering guests a core value proposition and avoids the need to
…
undercut hotels and other OTAs. Consumers ultimately benefit
because it
forces hotels and OTAs to develop clear, consistent value
propositions.”
In practice
Rate parity—the practice of hotel suppliers and third-party
distributors
agreeing to sell rooms at a standard base price—is a common
industry-
wide practice. Both parties can alter the price of the rooms by
including
them in packages or “fencing” deals, which means offering them
to a
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Hoteliers agree with parity lawsuit dismissal
http://www.hotelnewsnow.com/Article/13184/Hoteliers-agree-
with-parity-lawsuit-dismissal[2/24/2014 2:03:27 PM]
limited, private group of travelers. For example, opaque sites,
loyalty
groups and mobile app users can all receive lower-rated
inventory.
Drew Salapka, VP of sales and revenue generation for Hotel
Equities, said
rate parity between distribution channels is often confused as
rate parity
between competing hotel brands or operators.
“There would be no rational business sense for hotels to join
together
and fix their rates,” he said via email. “The brands do not
promote it and
our ownership groups would never want us doing this. We base
our
pricing on what is best for each hotel, what sort of demand each
hotel/market is experiencing, and their current mix of business.
“As for rate parity, all of our brands believe that you should
offer the
same price point across all channels, but this has nothing to do
with
collusion among hotels; it has to do with our hotels not wanting
to
confuse our guests by offering different rates for the same
product
across different channels.”
The practice helps hoteliers evaluate their various distribution
partners'
effectiveness at bringing true, incremental business, not just
those who
drive occupancy due to artificially low prices, Peter said.
“The ruling removes any additional, unnecessary complexity
and puts the
focus back where it should be: which channels best serve the
needs of
the guest and the hotelier,” he said.
Tom Botts, executive VP and chief customer officer with
Denihan
Hospitality Group, said rate parity is not collusion but rather is
a common
business practice.
“We compete very hard with the OTAs and other hotel
competitors to
crack the best and most innovative deal for the customer,” he
said.
“Having worked on both sides of the table, I can tell you every
one of
these deals is different. All have different parts to them. That
right there
is reason enough (to dismiss the notion of price fixing).”
Botts pointed to the rising popularity of hotel metasearch sites
to
illustrate that there are different pricing structures for the same
hotel
rooms. “If rate parity was perfect, there would be no point of
metasearch,” he said.
However, he said the lawsuit won’t end all complaints against
OTAs.
“The OTAs will always be a ripe target for litigation,” Botts
said. “Whether
it’s the tax issue or this issue, there’s always lots of stuff out
there
because of the nature of the beast. Will someone turn around
and find
something else? Probably.”
Cole said the rate-parity legal situation is much different in the
United
Kingdom and throughout the European Union, where resale
price
maintenance is generally not permitted.
“I would argue that consumers are not hurt by the practice,
since rate
parity is the fundamental mechanism that enables hotels to
provide
guests with lowest price guarantees,” he said.
COMMENTS 1 Show All
skooshhotels
February 19 2014
Another confusing legal case for the industry. Perhaps they
should have gone
straight for abuse of dominant position.
Login or enter a name
Post Your Comment
VIDEO
Chris Nassetta talks lifestyle brand
Chris Nassetta on IPO, Hilton's
future
Interstate outlines challenges in
Sochi
ALIS 2014 postgame discussion
LIIC video roundtable part 1
LATEST NEWS
Orient’s rebranding to boost cross
visitation
Sunstone focus remains on renovations
5 free tech tools for hoteliers
Chinese brands follow travelers overseas
Challenges arise as development grows
Global development going strong at
Marriott
RM Readings6 ways to avoid antitrust
violationshotelnewsnow.com6 ways to avoid antitrust
violationsUK authority closes rate parity
investigationhotelnewsnow.comUK authority closes rate parity
investigationPrice gouging after a
disasterhotelnewsnow.comBlogRewriting a revenue manager’s
job descriptionhotelnewsnow.comRewriting a revenue
manager’s job descriptionElevating the role of revenue
managerhotelnewsnow.comElevating the role of revenue
managerRM Readings 1Starwood, Expedia Win Dismissal of
Room Price-Fixing Suit -
Businessweekbusinessweek.comStarwood, Expedia Win
Dismissal of Room Price-Fixing Suit - BusinessweekGoogle,
Facebook, TripAdvisor tout benefitshotelnewsnow.comGoogle,
Facebook, TripAdvisor tout benefitsrate parity
FudGl0cnVzdC12aW9sYXRpb25zAA==: input0: Searchinput2:
textarea7: input9: onMyWTlualloS2pZaFUrakQ5VjJQAA==:
aspnetForm: ctl00$myHeader$txtSearch:
Searchctl00$myHeader$ibSearch:
ctl00$ContentPlaceHolder1$ArticleZone$ctl00$SendToFriend:
ctl00$ContentPlaceHolder1$ArticleZone$ctl00$ibSendToPdf:
QtYnktdS1kb3Qtcy1kb3QtanVkZ2UA: form1: commit: [email]:
form3: q: SearchNlP0Fjcm9iYXRXZWJDYXBUSUQ0AA==:
form1: button0:
Reading Assignments:
Chapter 9
Chapter 5
Supplementary Readings provided
1. Refer to the pricing gouging article provided to you, for the
Hotel Le Bleu case (charged guests $999 than its $250 per night
during the weekend of evacuations in Manhattan), in your
opinion, is the hotel justified to do so? Why or why not? Based
on other readings this week, in your opinion, how should your
revenue management team set the prices during natural
disasters?
2. Based on information from the textbook, readings, lecture
and discussion, discuss the concept of rate parity. Is rate parity
different from price fixing? If you were to argue that rate
parity is a legitimate and legal practice in the lodging, what
would your arguments be?
3. How can you avoid antitrust violations in your pricing
practices? Focus on your discussion from a legal perspective.
4. Based on textbook, the lecture, and the readings provided to
you, what roles do you see RM, Director of Sales and GM play
respectively in revenue management?
5. Page 160, Question 3 from the text book.

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