Resort Accused Of Fixing Golf Discount Rates
OCEAN CITY - The on-again, off-again feud between Ocean City, several of its larger hotel groups and the golf-packaging industry boiled over again this week when a new golf packager accused the town of anti-trust law violations because of alleged attempts to 'fix' discount rates and coerce some area courses into not participating in its packaging plans.
The latest episode in the ongoing saga between the town of Ocean City and its partners in marketing the resort as a major golf destination began this summer when the largest provider of golf packages in the resort area, Pam's Golf Getaways, suddenly went out of business shortly before the fall golf package season. The owners of the River Run golf course swooped in and acquired the failing company's assets, including its advance bookings for the fall season, in an effort to reduce the potential losses for golfers who signed up well in advance for packages from Pam's and to mitigate any potential public relations nightmares for the resort's golf and hospitality community.
The new company, Pam's O.C. Asset Acquistion LLC, purchased the old company's business assets and name in an effort to save the fall golf package season and avoid the negative impacts of the sudden closure of the long-standing Pam's Golf Getaways, according to the new company's president, Hunt Crosby, in a letter to The Dispatch this week.
'Pam's would have returned all of the fall package monies it had on deposit directly to the golfers, leaving them to fend for themselves,' the letter reads. 'This would have resulted in lost business for hotels and golf courses and would have given the Ocean City golf package industry a black eye it would take years to overcome.'
Crosby said if the River Run ownership hadn't come in and bought out Pam's Golf Getaways assets, the participating golf courses and hotels would have no hope of recovering any past due items from the failing company and the resort area would have lost a substantial portion of the $5 million to $6 million per year in future golf and hotel business Pam's regularly provided, in addition to all the food and beverage and retails sales associated with the large group of travelers.
'Our quick action saved the fall golf package season,' said Crosby in the letter. 'Our new company was able to secure all of the remaining deposits and fulfill all of the packages in a seamless way for the golfer. Chaos and confusion were averted and all golf courses and hotels were paid in full and in record time.'
After allegedly bailing out the fall golf package season, Pam's O.C. Asset Acquisition started looking beyond the immediate crisis and began planning for 2008 and beyond. To that end, it began recruiting courses and hotels to participate in its packaging program in the future using a business model similar to that of a travel agency. Under the plan, the hotels would pay a small commission and the participating courses would pay a small per-round fee to the company to offset the cost of marketing and servicing the new packaging company.
It's similar in concept to the existing arrangement between the town, as the destination, the hotels in the resort and the participating golf courses. The town already has a solid relationship with the Greater Ocean City Golf Association, which was created last year in the wake of a similar feud between the town, the hotels and the courses.
However, when it came to recruiting the municipally-owned Eagles Landing course, town officials declined to participate in the new Pam's O.C. Asset Acquisition program and the reasons for the thanks, but no thanks attitude are varied depending on whom one believes. City Manager Dennis Dare, in an email to Crosby, said the town was reluctant to enter into an agreement to offer the proposed discounts at Eagles Landing because of several concerns including a reluctance to deal with a third-party packager again.
'The taxpayers of Ocean City have lost over $150,000 to two third-party packagers in the last year,' said Dare in the email. 'The Mayor and Council are working with their tax dollars and would find it nearly impossible to explain to citizens why we would become partners again with a third-party packager. It is hard to explain to the tax payers why a concept that has failed twice would work this time.'
With the issue of offering discounted rounds the apparent reason for declining to include Eagles Landing in the new golf packaging program, Pam's O.C. Asset Acquisition agreed to waive the discount requirement for the municipally-owned course in order to get it on board. However, Crosby said there was a more sinister reason for the town's decision and that it was tied to a core group of resort hoteliers' displeasure with the new golf packaging company.
'It was made clear to us early on that the town of Ocean City would not allow Eagles Landing to pay their share of these costs because of the pressure exerted by certain hoteliers in Ocean City,' he said. 'Therefore, we eliminated the per-round fee for the town's golf course - Eagles Landing - so they would have no reason not to accept bookings from us.'
Dare somewhat confirmed Crosby's allegations in his email to the new company's president, stating another reason for concern was the third tier pricing offered by the new packager. Essentially, the new golf packager would be offering discounts lower than those offered by the hotels in town that offer their own golf packages.
'Ocean City hoteliers have made it perfectly clear to the Mayor and City Council that business needs to be conducted on a level playing field,' said Dare in the email. 'No matter how it is presented, there needs to be preferential pricing treatment by golf courses for third party packagers. This is contrary to what we spent the last year and a half resolving and would most likely force the mayor and Council into reconsidering its support of Golf Getaway.'
The notion that the town would not support Pam's O.C. Asset Acquisition regardless of whether Eagles Landing is included amounts to collusion and suggests certain hotel owners are pressuring Ocean City officials into the position, according to Crosby. The fear is other golf courses that have already signed on with the new company might bail out under the not-so-veiled threat the town might not be on board.
To that end, Pam's O.C. Asset Acquisition has hired a private anti-trust attorney to explore whether or not the town's action amount to collusion or price-fixing. In a letter to Dare this week, attorney Barry Rosen of Gordon-Feinblatt, said the town's apparent willingness to ignore applicable antitrust laws is extraordinary.
'Not only is the town of Ocean City, as an owner of its own golf course, Eagles Landing, trying to •€˜fix' the maximum discount at which all Ocean City golf courses sell their services, but your email makes it clear that the mayor and City Council are also quite willing to do the bidding of Ocean City hoteliers and wield their significant influence to •€˜fix' the maximum discount that all golf courses offer to all hotels and to all other packagers of golf and hotel services including Pam's.'
Rosen goes on to explain the serious consequences for violating federal antitrust laws from a criminal and civil standpoint. Violating federal antitrust laws can result in fines in the hundreds of thousands of dollars and even prison sentences in certain cases, and Rosen said his client would not hesitate to pursue legal action against the town.
'Each golf course in Ocean City should be free to set its own prices, and free to make its own decision as to whether it will grant different levels of discounts to packagers, without threats from the town of Ocean City,' said Rosen. 'Further, Pam's hereby demands you cease all overt and all covert attempts to fix the price at which Ocean City golf courses sell their services.'