Tag: price fixing

Feds go after reservation algorithms

The U.S. Justice Dept. today filed, at long last, an antitrust lawsuit against the real estate software company RealPage. As reported by the New York Times, the lawsuit accuses the company “of facilitating a price-fixing conspiracy that boosted rents beyond market forces for millions of people. It’s the first major civil antitrust lawsuit where the role of an algorithm in pricing manipulation is central to the case.”

Such a lawsuit has been nearly two years in the making, following extensive reporting by ProPublica in the fall of 2022 (as I reported here) that examined how reservation companies that aggregate data from hundreds of clients—in this case apartment buildings—can then “suggest” how rents might be adjusted and what occupancy rates should be targeted. That information, RealPage advertised, could help landlords earn 3% to 7% more than they would otherwise.

It doesn’t take much imagination to see how this sort of wink-wink price-fixing could be applied to any mass market that uses computerized data collection and algorithmically-driven communication with its primary customers. Indeed, the Times noted that in addition to the lawsuit against RealPage, both the Justice Department and the Federal Trade Commission have weighed in on private lawsuits against hotel companies that claim they’ve used similar algorithms to help determine room rates.

The private campground industry, suffering from a country bumpkin self-image within the “hospitality industry” to which it aspires, has uncritically adopted any number of its supposedly more sophisticated counterparts’ practices. So, too, with dynamic pricing, and then with the very sort of algorithmically-derived “guidance” that now has RealPage in the feds’ crosshairs. The most egregious promoter of this sort of invitation to price collusion is CampSpot, if only because of its dominant position within the reservation software marketplace, but it isn’t alone.

RealPage and its imitators argue that their customers are not obliged to act on the information they provide, even as their marketing emphasizes how that information can maximize revenues—and as the cost of renting an apartment has spiraled steadily upward over the past four or five years. Campers and RVers similarly have lived through a near-doubling of rates since the pandemic, and while there are numerous factors accounting for that increase, industry-wide price-fixing undoubtedly is part of the mix.

Congress has been paying attention to the broader problem, and the anti-trust watchdogs are looking more closely as well. The FTC last month, for example, began a study of how financial firms like Mastercard, JPMorgan Chase and Accenture are using data from customers to set prices. Individual states are also starting to weigh in, with North Carolina, California, Colorado, Connecticut, Minnesota, Oregon, Washington and Tennessee—a grab-bag of red and blue—joining the federal suit against RealPage.

Against that backdrop, the campground industry and CampSpot are insignificant economic gnats that may get by for years before someone tries to swat them. Or not. Algorithms do not operate in a law-free zone, a federal lawyer said at today’s news conference announcing the lawsuit. “After all, humans create them. Our laws will always apply to the people behind the machines and the companies behind the algorithms.”

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A handful of updates on past posts

The end of July marks the mid-point of the traditional camping season, although that term has become increasingly elastic and even meaningless due to the distorting effects of climate change. Nevertheless, this seems like an apt moment to hit “pause,” check back on what I’ve written in the past and provide updates where appropriate. Some stories actually do reach a resolution, but many more have a way of continuing with no clear end in sight.

Ghost Town in the Sky just won’t die

One such ongoing drama has to do with Ghost Town in the Sky, a now defunct amusement park in Maggie Valley, NC about which I last wrote nearly two years ago. The property’s greatest champion, Alaska Presley, had entered into a business partnership with a Myrtle Beach-based hustler, Frankie Wood, who sweet-talked her into naming him the managing partner of their joint venture despite his shady past. In addition to contributing the property itself, Presley apparently covered all of the venture’s operating costs; Wood’s end of the deal amounted to little more than half-baked ideas drizzled with snake oil.

Then Presley died, age 98.

Inheriting Presley’s 50% stake in the partnership was her niece, Jill McClure, who cast a notably more business-like eye on its affairs. It didn’t take her long to conclude she was holding one end of a snake—and not the business end of it, either. The upshot was a lawsuit seeking to dissolve the partnership, filed in North Carolina’s Superior Court, alleging that Wood had breached his fiduciary responsibilities and thus was putting McClure’s interests at risk. Given Wood’s history to date, that would have seemed like a slam dunk.

But no. Ruling more than 18 months after the case was filed—in part because of numerous filing extensions requested by Wood, earning a judicial rebuke for “litigation by ambush” that nevertheless had no effect on the final decision—Special Superior Court Judge for Complex Business Cases Adam M. Conrad concluded in mid-May that McClure didn’t have a case. The legal arrangement to which Presley had agreed, and which McClure had inherited, clearly specified that Wood “is the sole managing member of Ghost Town in the Sky and that it has unilateral authority under the operating agreement to manage the company’s day-to-day affairs without McClure’s consent.”

That “management,” as the decision also observes, includes four years in which the venture “did not secure financing, earn income or hire employees.” Since Presley’s death, it also includes non-payment of 2022 and 2023 property taxes. No matter. As Judge Conrad sees it, there is nothing extreme enough to merit an involuntary dissolution of the partnership—which leaves Wood still at the helm, Ghost Town in the Sky even more of a moldering heap than it was four years ago, and McClure gamely telling a local reporter, “I’m moving forward with a positive attitude.”

Stay tuned.

Cacapon locals knock out two RV parks

While Maggie Valley refuses to give up the ghost, a two-fisted attempt to put an RV park in or next to Cacapon State Park, West Virginia, finally appears to have been defeated.

The first such effort, as I wrote a year ago, featured an overly cozy relationship between state officials and Blue Water Development and their efforts to build an RV campground with more than 300 sites in the state park. The proposal quickly generated fierce local opposition from park advocates and local residents, who objected to its size and the amount of traffic it would generate in a rugged area notable for its narrow roads and rustic vibe. As more details emerged of Blue Water’s backdoor maneuvering, the whole idea became politically untenable and ended up getting axed.

But that only made way for a competing proposal that had already been floated as an alternative to the state facility: a 50-acre private development adjacent to Cacapon State Park, with up to 241 sites for RVs, cabins, yurts and tents, as well as such mega-park amenities as a swimming pool, bathhouse, mini golf course, sports courts, dog parks, several pavilions and food truck areas. Ironically, as local opponents worried that the “oversized RV campground” would scar a panoramic viewshed rated by National Geographic Magazine as “one of the top 5 scenic views in the East,” the developer of the proposed campground was . . . Scenic LLC.

Despite boisterous public hearings that divided the Morgan County Planning Commission, all needed permits were approved and Scenic LLC seemed set to proceed. But then the months rolled by and nothing seemed to be happening, encouraging the opposition to renew its battle. In late June, more than two dozen local residents showed up at a planning commission meeting to demand a reconsideration, with some accusing commissioners of “selling out” the community and the commissioners responding that the project had met all county guidelines for commercial development, so what else could they do.

And then, just like that, it was over. Two weeks ago, Aaron Bills, Scenic’s principal owner, announced that he is stepping away from the project. The plan had been to seek a KOA franchise for the property, but apparently the price tag was too steep. This is “shockingly bad timing for finances,” Bills told county officials, according to the Morgan Messenger. “As a family, we’ve decided we can’t deliver on a KOA-branded campground”–indeed, he added, would the county be interested in buying the property for itself?

Danville’s casino-related RV park craps out

A 333-site Roman-themed RV park in Danville, VA, proposed last year by  J. Cubas Holdings of Coral Gables, Florida—which, not incidentally, has absolutely no experience in operating an RV park of any size, much less an avowed “high end” operation—is no more.

After the neighbors rose up in arms for any number of obvious reasons, Cubas switched gears and said early this year he’d build a bunch of new homes, priced between $300,000 and $350,000. Ironically, he’d held that out as a threat against the city if it refused to permit his RV park—only to have the city elders say that more housing is exactly what Danville needs. “Folks moving here, they need somewhere to live and there’s only so many places you can build new developments, so we’re happy to have this moving forward,” explained city councilman Lee Vogler.

Plus here’s another bonus: putting the kibbosh on Cubas’ “Palace Resort” also deep-sixed his plans for an annual biker rally that he promised would rival those of Sturgis, SD and Orlando, FL.

Reservation software getting regulatory stink-eye

As public officials learn about the price-fixing potential of algorithms used by centralized reservation software systems, first extensively detailed by ProPublica two years ago, they’ve started erecting legislative constraints at the national level. Now that’s filtered down to the local precincts: yesterday, the San Francisco board of supervisors adopted the country’s first local ordinance banning landlords from using certain software to set rents.

According to CBS News, the measure bans the sale and use of software “which combines non-public competitors’ data to set, recommend or advise on rents and occupancy levels.” Doing so, said the ordinance’s sponsor, amounts to “automated price-fixing.”

Yes, that’s only one city, and a decidedly liberal one at that. And yes, the ordinance applies to rental apartments only. But it’s not much of a leap to see how the same concerns can apply to widely shared campground reservation systems, like CampSpot, which aggregate user data and enable “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.”

Sooner or later, the anti-trust police may take notice.

Frank Rolfe is at it again—but badly

Finally, scarcely more than two months after an email blast soliciting customers for his misleadingly titled RV Park University, Frank Rolfe is at it again, still hyping his “RV Park Investor’s Boot Camp.” This broadside, like the previous one, touts his 30 years of experience “building one of the largest portfolios in the U.S.”—experience that can be yours for only $997. “That’s for roughly 20 hours of video,” he writes. “And that’s a true bargain investment in your education on this sector.”

Okay. Pretty standard Frank Rolfe fare thus far. But embedded in the email is a link to a video that’s supposed to seal the deal, “Unlock RV Park Investment Success,” under the equally problematic headline, “The RV Park Boot Camp Is The Gold-Standard.” The first half of the two-minute video is Frank giving his sales pitch. The second half, without anything resembling an introduction, apparently is supposed to highlight one of Frank’s investment successes: the Mission Bell-Trade Winds RV and Mobile Home Resort, deep in the heart of Texas.

This is, as you might glean from the name, not an RV park but a long-term residential mixed-use development catering to retirees (“Homeownership Made Affordable”) and snowbirds. The residents, by all accounts, are a cheerful and welcoming bunch. The place itself is a dump, showing its age and in a generally run-down condition. Its website, where the only items under “news” urges readers to check out “the exciting events of the 2022-2023 season,” is just as outdated.

Judging by this example, Frank’s boot camp deserves the boot.

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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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‘Signals’ a sign of higher rates ahead

A screengrab of Campspot’s new reporting dashboard, Signals, which enables campground owners to compare their rates and occupancy levels with competitors in real time.

Campground rates keep going up, driven by increased demand and industry gentrification, the predictable result of RV parks getting acquired by investors whose only motivation is return on equity. But now there’s another development that inevitably will goose the trend: this week’s release of a computerized database enabling campground owners to see what the competition is charging in real time.

The reporting dashboard, called Signals, draws on the massive amount of data compiled by leading reservation software provider Campspot, which currently claims to have a customer base of approximately 2,100 private campgrounds and RV resorts. More than 3 million campground reservations were made through Campspot’s app last year, with millions more expected this year, and all the data from all those millions of reservations is crunched by Campspot and funneled into Signals—enough, as Campspot acknowledges, for Signals to be “the only product . . . for the outdoor hospitality industry at such a large scale.”

While Campspot emphasizes that this information flood is anonymized, blended into pools of parks with “similar” profiles, it nevertheless allows 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, usually to increase revenues. 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.”

I forecast just such a development last October, in a post titled “Can ‘dynamic pricing’ beget cartels?” that reported on the monopolization of data within the apartment leasing industry, how that had enabled the development of algorithms that came perilously close to price-fixing, and how Campspot was positioning itself to do the same with campgrounds. That post was followed by one this past March, “In a lockstep march to higher prices,” that detailed Campspot’s growing domination of the reservation software industry “with the ready compliance of campground owners who see nothing but more profit for themselves.”

Fawning industry observers like Ohio-based Modern Campground, which bills itself as “a dedicated news source for the outdoor hospitality industry,” see no reason to be concerned by such developments—indeed, Modern Campground praises Signals as a long overdue “comprehensive, large-scale tool for competitive benchmarking.” The new database “offers campground operators unrivaled insights to inform their pricing strategies and sharpen their competitive edge,” it rhapsodized yesterday, explaining that the previous lack of such a resource created “challenges when it comes to optimal pricing and maximizing revenue,” but Signals will “change that narrative by offering a unique benchmarking solution that could transform how the industry operates.”

It doesn’t take a genius to decode that a campground’s “optimal pricing” is a camper’s inflated invoice, while “competitive benchmarking” is an oxymoron that describes an anticompetitive practice. But there’s little doubt that Signals and similar computer-driven innovations are indeed transforming how the industry operates, leading not just to higher prices for campers but to a greatly consolidated software reservation industry—a development that campground owners will come to regret, once they realize how much that tail will be wagging their dog.

In other words, in the long run everyone will be a loser. Everyone, that is, except for Campspot.