Anti-Trust Issues - What Keeps Your Lawyer Up at Night

By William A. Brewer III Managing Partner, Bickel & Brewer | January 14, 2010

Consolidation has been a growth strategy of the lodging industry for more than a decade and a half, and some analysts predict that mergers and acquisitions (M&A) will continue to make economic sense to industry executives for the foreseeable future. The question is: will continued consolidation make sense to the trustbusters, competitors or even business partners who may harbor an antitrust gripe?

The wave of M&A activity, fueled by record hotel profits, globalization and an influx of private equity money, is increasing the market power of the big industry players. Hotel giants have been accumulating multiple brands - either in multiple market sectors or in a single sector - and that trend is expected to continue. As a result, fewer competitors hold larger market shares with more control over the nature of competition in various market segments.

These industry trends can draw unwelcome attention from more than just the trustbusters. Competitors and business partners alike have significant incentives to engage in private antitrust litigation, and this only adds to the antitrust concerns that keep your lawyer up at night.

The Effect of Market Concentration

Federal antitrust enforcers are likely to view a merger or acquisition as creating or enhancing market power (or facilitating the exercise of such power) if the merger or acquisition significantly increases market concentration and results in a concentrated market. The federal Horizontal Merger Guidelines treat market concentration as a measure of the likely anticompetitive consequences of mergers and acquisitions. The Federal Trade Commission ("FTC") and the Department of Justice employ the Herfindahl-Hirschman Index ("HHI") to gauge the concentrating effect of M&A activity. The HHI is calculated by summing the squares of the individual market shares of all market participants, and the difference between the pre-merger HHI and post-merger HHI suggests the merger's likely effect on market concentration. An HHI level below 1000 creates a presumption that the market is un-concentrated, which is considered competitive. HHI levels between 1000 and 1800 indicate moderately concentrated markets, which may or may not raise competitive concerns. Markets with HHI levels over 1800 are highly concentrated and are more likely to pose competitive concerns.

Private Antitrust Litigation

Choose a Social Network!

The social network you are looking for is not available.

Close

Hotel Newswire Headlines Feed  

Rahul Razdan
David Hogan
Kelly McGuire
Paul van Meerendonk
Russ Horner
Michael Schubach
John Mavros
Joshua Miller
Vanessa Horwell
J.Carter Allen
Coming up in June 2019...

Sales & Marketing: Selling Experiences

There are innumerable strategies that Hotel Sales and Marketing Directors employ to find, engage and entice guests to their property, and those strategies are constantly evolving. A breakthrough technology, pioneering platform, or even a simple algorithm update can cause new trends to emerge and upend the best laid plans. Sales and marketing departments must remain agile so they can adapt to the ever changing digital landscape. As an example, the popularity of virtual reality is on the rise, as 360 interactive technologies become more mainstream. Chatbots and artificial intelligence are also poised to become the next big things, as they take guest personalization to a whole new level. But one sales and marketing trend that is currently resulting in major benefits for hotels is experiential marketing - the effort to deliver an experience to potential guests. Mainly this is accomplished through the creative use of video and images, and by utilizing what has become known as User Generated Content. By sharing actual personal content (videos and pictures) from satisfied guests who have experienced the delights of a property, prospective guests can more easily imagine themselves having the same experience. Similarly, Hotel Generated Content is equally important. Hotels are more than beds and effective video presentations can tell a compelling story - a story about what makes the hotel appealing and unique. A video walk-through of rooms is essential, as are video tours in different areas of a hotel. The goal is to highlight what makes the property exceptional, but also to show real people having real fun - an experience that prospective guests can have too. The June Hotel Business Review will report on some of these issues and strategies, and examine how some sales and marketing professionals are integrating them into their operations.