GSA Revising Per Diem Calculation For Room Rates Effective Oct. 1

The General Services Administration this year is revising its approach for calculating federal per diem lodging rates in an attempt to better reflect more current and comprehensive travel data. Expected to be released late this month or early September, GSA's per diem rates will be based on average daily rate data from a wider cross-section of hotels and from more recent rate information than used in previous years.

GSA in the past has come under criticism for its per diem calculation approach since, by the time rates are active, they are based on data that is up to three years old.

"Fiscal year 2005 rates were based on calendar year 2003 data," a GSA spokesperson said. " The Government-wide Per Diem Advisory Board recommended that GSA base per diem rates on fresher data to better reflect current market conditions. So, for fiscal year 2006, we are using data from April 2004 to March 2005. Again, in an attempt to get more current data, new rates will be announced at the end of the month or beginning of September. They will take effect Oct. 1, 2005."

In addition to using more current data, GSA also confirmed that 2006 per diem rates will be based exclusively on hotel data collected Monday through Thursday—the most widely traveled days of the week by corporate and government travelers alike—unlike in previous years when other days of the week were taken into consideration. GSA also is including a wider variety of hotel tiers to determine its 2006 rates.

"The GSA per diems tend to be derived more from prior years' data versus industry forecasts," said Frank Melesky, Lockheed Martin Corp. travel commodity manager for global hotels and groups and meetings programs. In fact, GSA said it used average daily rate data from 2002 and 2003 to determine the lodging per diem rates for 2005.

When GSA late last August released 2005 per diems for government travel, the agency increased hotel allowances in about 60 percent of 420 domestic locales, yet in most of the government's top 50 markets per diem rates declined. While the government locked in per diem rates that reflected a decrease in many travel–heavy markets over the previous year, the reality in 2005 for most travel buyers has been the opposite.

Although the federal government last year increased to $60 from $55 the standard lodging amount for destinations in the continental United States where per diems are not fixed, in the 10 most popular federal lodging locations, the average per diem for lodging for 2005 decreased by more than 5 percent.

Given the level that actual rates can fluctuate against per diems determined by GSA, in May the agency modified per diems in 17 markets, including Seattle, Pensacola, Fla., and Newark, N.J. The GSA adjusted per diem rates in these markets upward on average by 10 percent. In some cases, however, such as in Newark, daily reimbursable lodging costs jumped by more than 25 percent. The changes illustrate the difficulty of using historical data to determine fluctuating rates.

Such government contractors as Lockheed Martin have been the largest corporate adopters of the per diem rates, but the rates also provide a benchmark for many corporations.

Although looked at by corporate travel managers, the data—particularly in years past—have lent little support to travel managers trying to forecast lodging costs for the upcoming year.

GSA in recent years has modified its approach to calculating per diems. The Governmentwide Per Diem Advisory Board—a group of government travel executives, lodging purveyors and other travel professionals—advised GSA to use average daily rates for the first time last year to determine the cost of lodging. Historically, GSA hired an independent contractor to conduct an annual survey of roughly 500 U.S. locations, which entailed directly contacting the properties in the designated location. The agency now contracts with Smith Travel Research to access more comprehensive data.

"The travel experts' recommendation to base federal lodging rates on actual rates, provided by the industry, produces the most accurate lodging rate information available," GSA said in a statement last year.

GSA's per diem rates cover only continental U.S. locales. The U.S. Department of Defense sets travel per diem rates for non-continental U.S. destinations and "overseas non-foreign areas" and the U.S. Department of State sets rates for international travel.