Tag: maximizing site fees

A warning shot about RV price fixing

The use of algorithms to set prices of common goods and services, enabled by widespread computerization and data scraping, has seeped into various parts of the economy. Proponents claim such “advances” simply promote greater market efficiency, but that increased “efficiency” benefits just the price-setting side of each transaction—buyers don’t have similar access to data that would enable them to get a more efficient price.

RVers and campers have experienced this problem first-hand. It wasn’t so long ago that RV parks provided rate sheets spelling out how much a particular site would cost on a particular night, but these days that kind of transparent pricing has been supplanted by “dynamic pricing.” How much you’ll be charged for an RV site will depend not just on the day you want to reserve, but on the day—and even time of day—when you make the reservation. Of course, which day will get you the best price is not something a consumer can learn, not least because the “dynamic” piece of that pricing system makes this a moving target. But this system wasn’t designed to benefit customers, anyway.

The industry rationalizes this two-step as simply a response to supply and demand, neglecting to acknowledge a third piece of today’s pricing puzzle: what is the competition charging? Back in pre-algorithmic days that wasn’t a question to be answered easily, since it required obtaining and looking at numerous published rates or contacting other campground operators directly, which not only was a lot of work but also raised all kinds of messy price-fixing and antitrust concerns. But then the campground industry embraced online reservation systems, and as the saying goes, That. Changed. Everything.

Or not. Digitally-driven sales and marketing have made price collusion a lot easier to implement, but the legal (and ethical) considerations have not gone away, making push-back inevitable.

This coming Tuesday, a group of U.S. senators will be introducing legislation, dubbed the Preventing the Algorithmic Facilitation of Rental Housing Cartels Act, to make it illegal for landlords to use algorithms to artificially inflate rents or reduce the supply of housing. The proposed law apparently was catalyzed by an extensive ProPublica investigation, on which I reported in the fall of 2022, that found software used by competing landlords was collecting their proprietary data and feeding it into an algorithm that would “suggest” what rents they should charge. As price setting goes, according to bill sponsor Sen. Ron Wyden of Oregon, that’s “no different from doing it over cigars and whiskey in a private club.”

Although Wyden said he believes existing antitrust laws already apply to what data-compiling companies like RealPage and Yardi are doing, “I want the law to be painfully clear that algorithmic price-fixing of rents is a crime.” Next week’s proposal, therefore, brushes aside industry protestations that it’s only providing information—in its words, making price-fixing collusion “implausible”—by make it illegal for property owners to contract with companies that coordinate rent prices. It also would bar two or more rental owners from coordinating on such information.

The parallels between rental housing algorithms and those now available to RV park owners are stunning, as manifested most widely by Campspot, easily the big dog among campground reservation software providers. The Grand Rapids-based booking agent last year made 3.1 million reservations across more than 2,100 campgrounds, processing in excess of $1.9 billion. But as reported last July, Campspot also introduced a reporting dashboard for its RV park clients that leverages all the reservation data it is constantly accumulating, enabling “individual campground owners to compare their metrics, such as average daily rates, occupancy rates and revenue per available site, with what everyone else is doing—and to make adjustments as desired.”

Campspot’s helpful guidance to campground operators seems to fall a step short of the problem next week’s Senate bill will address among landlords, in that it apparently doesn’t suggest a specific site rate; it just provides all the information for campground owners to reach their own conclusions. Or as Campspot puts it, “With these tools at their fingertips, campgrounds are able to stay ahead of the competition, make confident pricing decisions, and unlock their park’s full potential.” Collusion? Nah—that’s so implausible.

Compared with the massive rental housing industry, RV parks and campgrounds are just an economic blip, and so may readily slip under the radar of antitrust regulators and lawmakers. But to the extent that RV parks increasingly serve as part of the nation’s housing stock, it wouldn’t be surprising to see the introduction of a Preventing the Algorithmic Facilitation of RV Park Cartels Act, enabling the public to make confident pricing decisions when reserving campground sites.

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One likely reason site fees are up

Scarcely more than a year after ProPublica reported that algorithm-driven software was partly responsible for exorbitant apartment rents, the Wall Street Journal reported yesterday (subscription needed) that two of the companies behind such practices are being sued by tenants in federal courts in Tennessee and Washington. The lawsuits come as the U.S. Justice Dept.’s antitrust division continues an investigation that started last fall and considers potential enforcement action against RealPage, the company at the heart of ProPublica’s reporting.

At issue is a pricing system, used by dozens of landlords when setting their rates, that analyzes giant amounts of proprietary data —provided by those same landlords—to come up with “suggested” rent increases. This amounts to collusion that is illegal, anticompetitive and keeps rents artificially high, the lawsuits contend, pointing to such evidence as a landlord saying the pricing software enabled him to “push rents more aggressively” and “quickly.” Marketing materials from RealPage, meanwhile, boasted of the opportunity for landlords to “outperform the market by 3% to 7%.”

Why should that matter to you? Quite possibly because a similar dynamic is developing within the campground industry, as I reported in broad strokes just days after the ProPublica story, and then more specifically this past July. That’s when Campspot, a leading reservation software company now serving more than 2,200 RV parks and campgrounds, announced its release of Signals, a computerized database that enables campground owners to see the competition’s aggregate rates, occupancy, revenue per site and other variables in real time.

As with RealPage, Campspot maintains it’s simply amassing “anonymized metrics,” so no proprietary data is disclosed. And as with RealPage, Campspot stresses that it’s only enabling its customers “to compare their performance against a recommended comp set”—what they do with that information is up to them. Indeed, in a consolidating industry that is seeing a rapid increase of investor-owned chains, Campspot sees itself as providing smaller operators with tools to offset their larger competitors’ advantages of scale and marketing resources. “Our goal is to level the playing field,” a Campspot executive assured me in August.

Well, maybe. Then again, Campspot is rapidly closing in on oligopoly status—it claims to be processing approximately 25% of all campground reservations in North America—and can fairly be said to occupy the “big data” niche within the campground industry that RealPage is accused of claiming among landlords. Indeed, a letter from four U.S. senators to the Dept. of Justice earlier this year raised concerns that RealPage’s software, YieldStar, was playing a significant role in driving rent inflation in some of the country’s biggest markets—even though YieldStar’s data base represents only 8% of all rental units nationwide, or less than one-third Campspot’s market share of campground reservations.

“Given YieldStar’s market share, even the widespread use of its anonymized and aggregated proprietary rental data by the country’s largest landlords could result in de-facto price-setting by those companies, driving up prices and hurting renters,” the senators wrote. Similarly, the algorithmic use of “big data” across industries as varied as grocery chains, ride-sharing companies and the pork and poultry industry has resulted in ever more widespread automated pricing across the economy, increasing costs, reducing market competition and fueling rising concern in the Biden administration.

The campground industry is neither as large nor as vital to social welfare as its apartment counterpart—although the balance keeps shifting, as more money rushes into the sector and campgrounds increasingly accommodate long-term residents—and therefore tends to fly under the regulatory radar. But that creates a conundrum for Campspot, whose business plan depends on attracting attention, even if some of it is unwelcome. For example, the Inc. 500 for 2023, a list of the country’s fastest-growing private companies, was announced just a couple of months ago—with Campspot weighing in at #341, up from its debut appearance the year before, at #487. The company’s three-year revenue growth rate? An astonishing 1,693%. Those are the kinds of numbers, when viewed in the context of market share, that can make antitrust regulators sit up and take notice.

But unless and until they do, the juggernaut keeps rolling along. The National Association of RV Parks and Campgrounds (ARVC) announced mid-October that it has a vaguely defined “new partnership” with Campspot, even though a fistful of other campground reservation companies also are ARVC associate members. Just what this new partnership entails isn’t clear, other than scheduling Campspot to lead a “featured breakout session” Nov. 8 at ARVC’s annual convention. (The session title, interestingly, is “Navigating the Camping-Hotel Crossover: Lessons for Success in Outdoor Hospitality,” attesting to Campspot’s founders’ hotel industry roots.) But it does attest to Campspot’s increasing influence and agenda-setting capability within the industry.

Ultimately, being successful in business is neither a sin nor illegal. The point at which it becomes questionable, however, arises when “success” flows from unfair advantage. The lawsuits in Tennessee and Washington, as well as any Justice Dept. action against RealPage, may well signal whether big data has crossed that line—and if it has, whether Campspot has something to worry about.