BCD Travel's Advito consultancy, Carlson Wagonlit Travel and lodging industry representatives are calling for the U.S. General Services Administration to reconfigure government lodging per diem rates to account for projected average daily room rate increases and economic uncertainties. GSA frequently has been criticized for not keeping up with the times in terms of setting per diems. As a result, some industry officials are floating the possibility of a new proposal to resolve the conflict.
Society of Government Travel Professionals president Marc Stec said a proposal may be drafted by year-end. "It has to be a joint industry-government effort to see what would be more reasonable for all parties," said Stec. If there is to be change, it will stem from suggestions made by the lodging industry, he noted.
Currently, GSA sets per diem rates as the maximum dollar amount a government employee can be reimbursed for a travel expense, specifically lodging, food and incidental expenses. The lodging per diems are based on a report released annually by Smith Travel Research on average daily room rates in the continental United States. GSA analyzes STR's previous year's indices and average rates per specified "zone," and deducts 5 percent off the average daily room rate.
A variety of rates exist within any given zone. Ultimately, a lower average daily rate in an inexpensive area may reduce the average daily rate for a much more expensive area when GSA averages the figures for the entire zone. For example, hotel average daily rates in downtown New Orleans are much higher than the surrounding suburban hotel rates, but all the hotels are included in determining a per diem rate, which ultimately does not reflect the true lodging cost in the downtown area, according to Marriott International director of sales, government and affinity Paul Somogyi.
Stec and Somogyi agreed that a proposal should focus on breaking up the zones in order to accommodate higher per diem lodging rates.
GSA did just that for regions in Alabama, California, Illinois, Missouri, New York and Texas effective Monday after it determined that the per diem rates were "inadequate." As of Monday, the hotel per diem for Queens, N.Y., jumped to $244, up significantly from $135. But in peak season this September, the GSA hotel per diem will escalate to $311. In both the Illinois and Missouri suburbs around St. Louis, the hotel per diem as of Monday increased to $111 from $70, while the total per diem (including meals and incidentals) increased to $170 from $109. For Monterey, Calif., the daily per diem increased to $197 from $133 through Sunday. Other increases are detailed for Mobile, Ala.; Eureka, Arcata and McKinleyville, Calif.; and Beaumont, Texas.
Meanwhile, Advito and CWT agreed that limiting spending on meals and incidental expenses is reasonable, but limits on lodging can present unnecessary hardships when booking a business trip.
"You're not going to be going to the big steak house most of the time," said Advito vice president of business development Mark Williams. "A majority of the complaints come from the lodging. The per diems do not take into account the price of lodging--the total cost of stay in a hotel room, including taxes, Internet access and parking."
GSA acting director of travel management and policy Patrick McConnell acknowledged that per diems, like anything else, could be perfected, but there have been few suggestions to attune their accuracy. GSA views the process to be as "good as it gets," McConnell told Management.travel.
"Standard industry market research is really what per diem is based on today. That process probably will not change," said McConnell. "I don't see how people could argue with that."
McConnell explained that GSA previously made cold calls to several hoteliers to get information about daily rates, and determined per diem rates based on a telephone survey, according to McConnell. "We have come a long way," he said. "I just don't see us tweaking the process a lot."
Hoteliers are not obligated to offer per diem rates set by GSA, but instead provide a costlier "government rate" reflective of the actual average room per night rate, according to Somogyi. Hotels "may or may not extend the rate to other individuals such as government contractors," according to the GSA Web site. But a government contractors' contract may stipulate that the federal government would reimburse travel expenses only at the GSA per diem rate.
Indeed, finding hotels that accept per diem rates can be challenging, said Karen Leff, CWTSatoTravel director of government hotel programs. In most cases, government business travelers accept government rates offered by hoteliers that are higher than the GSA per diem and pay the difference out of pocket, she explained. "All hotels are not offering the per diem, and my clients are staying farther away from their destination," Leff added.
GSA reviews rates for "nonstandard" areas within the continental United States (CONUS) every year and rates for "standard" areas every three years. GSA reviews meals and incidental expenses every three to five years. CWT appealed to GSA, asking it to review all rates annually, "especially because of what is going on with this economy," Leff said.
"I think at some point in the future they will probably [re-evaluate the rates] with more frequency," Stec said. "It increases the workload on the government, but it will be a fairer" model linking the government and the industry.
GSA recently increased the standard CONUS per diem rate to $70, from $60, but that will not be up for review until 2011. CWT and Advito said these rates do not reflect average daily hotel rates for many CONUS areas considered standard.
Instead of leaving the hotel companies with little or no say in determining the federal per diem rates, Somogyi suggested GSA step up to the negotiating table and negotiate rates like corporations in order to ensure that government employees' needs are met and the government is given a similar bargaining chip as corporations.
"This is a concern that everyone shares," Somogyi said. "Government businesses should take more of a corporate approach and negotiate based upon last room availability rates." If GSA rejects the idea, Somogyi continued, it should at least increase the average daily room rate by 5 percent to incorporate economic uncertainty and hotel rate increases as opposed to shaving it off the top.
However, "the government isn't committed to a specific share of business and is not willing to incur penalties if they don't commit to those goals or specific volume of business," said Stec.
Meanwhile, after conducting an internal audit, Marriott determined that about 30 percent of those who booked government rates were not eligible to receive those rates. So Marriott "put a stake in the ground" by implementing harsher restrictions on the use of per diems--only government employees with valid identification or active duty military personnel can be granted the per diem rate, not government contractors.