Six New Jersey Casinos Face Class-Action Lawsuit Over Alleged Hotel Room Price Inflation

Quick Intro

Three class-action lawsuits have been filed against six prominent Atlantic City casinos, all of which also operate online casinos in New Jersey. These lawsuits have been approved for consolidation by US District Court Judge Karen Williams. The basis of these lawsuits is the accusation that the casinos, in collusion with a hotel booking software supplier, have been artificially inflating their hotel room rates since 2018.

Companies affected by Lawsuit

The lawsuits name several high-profile defendants, including Caesars Entertainment, MGM Resorts International, Hard Rock International, and the Cendyn Group, a Florida-based hotel booking software company. The allegation centers around an algorithm known as “Rainmaker” that was reportedly used to manipulate prices. To date, none of the accused parties have made any public statements regarding the lawsuit.

The implicated casinos are Caesars Atlantic City, Harrah’s Resort Atlantic City, Tropicana Atlantic City (all operated by Caesars Entertainment, which also managed Bally’s Atlantic City until 2020), and Borgata Hotel Casino (operated by MGM). Since June 2018, these establishments have reportedly dominated between 72%-80% of the market.

Court documents describe Cendyn’s involvement as an “anticompetitive scheme” leading to excessively high prices. According to the NJ Division of Gaming Enforcement, the average room rate was $142.11 with a 79% occupancy rate in 2019, which rose to $177.89 at a 73.4% occupancy in 2022.

The lawsuit alleges that this scheme was part of an effort to avoid aggressive competition and maintain high prices, as indicated by Cendyn’s advice to the casinos to avoid “chas[ing] after occupancy growth” and to steer clear of a “race to the bottom” in a competitive market. The next phase of the lawsuit involves a teleconference scheduled for February 21, 2024.

Impact on the Casino Industry

This lawsuit could have significant ramifications for the casino industry, particularly in terms of pricing strategies and the use of technology in setting room rates. If the allegations are proven, it could lead to a major shift in how casinos approach pricing and competition. It raises questions about the ethical use of algorithms and data in determining prices, potentially setting a precedent for future legal and regulatory actions in the hospitality and gaming sectors. This case highlights the need for transparency and fair competition in the industry, underscoring the importance of consumer rights and corporate responsibility.

Consumer Implications of the Lawsuit

The ongoing lawsuit against the six New Jersey casinos not only shakes the foundations of the casino industry but also holds significant implications for consumers. If the allegations of artificially inflated hotel room rates are proven true, it could reveal a broader issue of unfair pricing tactics in the hospitality sector. This case serves as a critical reminder of the importance of consumer vigilance and the potential risks of unchecked algorithmic pricing.

For casino patrons and hotel guests, this lawsuit could lead to more transparent and competitive pricing, ensuring fair market practices. Additionally, it may prompt other states to scrutinize similar practices within their jurisdictions, potentially leading to widespread changes in hotel pricing strategies across the casino and hospitality industries.