April 5, 2010
The La Quinta hotel chain has formally agreed to nationally cease "call-arounds" -- a potentially anticompetitive practice in which competing hotels exchange current room rate and occupancy information that can be used to fix prices.
The hotel chain operates hundreds of establishments across the country under the "La Quinta Inn" and "La Quinta Inn & Suites" names.
An antitrust investigation into the hotel industry by Connecticut Attorney General Richard Blumenthal found the call-around practice is prevalent in the hospitality industry. It raises what Blumenthal's office calls "serious antitrust concerns" when competitors share current pricing and occupancy information because the information can be manipulated to raise or stabilize rates charged for hotel rooms.
A "Call-around" occurs when one hotel employee contacts competing hotels and exchanges with them information concerning their respective current room rates and occupancy rates. Such call-arounds or information exchanges generally happen multiple times daily by phone or Internet.
Sights set on entire industry
The investigation, which is continuing, has revealed that certain competitors of La Quinta have used call-around information to raise their prices on a regular basis.
"This agreement must be a wake-up call to the entire hotel industry -- signaling that call-arounds to set room prices are illegal and must be stopped," Blumenthal said. "I commend La Quinta for leading the hospitality industry and voluntarily stopping this potentially problematic practice."
Blumenthal says his office is investigating several national hotel chains that engaged in call-arounds, which he contends "interfere with the competitive market -- potentially fixing prices and increasing costs for consumers." He says he expects additional hotel companies will follow La Quinta's lead and cease anticompetitive call-arounds.
The agreement with LQ Management, LLC and La Quinta Franchising, LLC prohibits the hotel chain from engaging in call-arounds throughout the United States. Blumenthal says the La Quinta companies will cooperate with his antitrust investigation.
How it works
The call-around practice is typically conducted as follows:
• Hotels have a "call-around list" of hotels within a close proximity geographically that directly compete for hotel guests;
• The competing hotels engage in regular communications, typically by telephone with the hotels on their lists, two or three times daily to exchange each hotel's non-public current occupancy rate, and the standard rate currently being charged for rooms to be occupied that same day; and
• The hotels contemporaneously record the information provided by other hotels.
La Quinta's agreement to end call-arounds covers all of the company's hotels nationally. The prohibition does not prevent hotels from reviewing commercially available reports and information, communicating with any other hotel or motel on behalf of a specific guest seeking to relocate, or communicating with any other hotel/motel to accommodate guests in the event of a state of emergency, disaster or similar situation.
