Federal lodging per diems will shrink by as much as one-third, according to the General Services Administration's Aug. 30 announcement. Above, the Waldorf-Astoria in Manhattan. (File photo / Getty Images)
You're going to have fewer choices and less money to play with on business trips beginning Oct. 1.
Lodging rates in 310 of the 378 so-called nonstandard areas — higher-cost areas where federal employees most frequently travel — will decline beginning Oct. 1, the General Services Administration announced Aug. 30. And for feds traveling to places like New York City — where lodging per diems will shrink by as much as one-third — that could make it tough to find affordable hotel rooms, some federal travel experts say.
These declines are "unprecedented," said Scott Lamb, treasurer of the Society of Government Travel Professionals. Lamb is also director of Hilton Hotels' government division. "We're coming off of the worst year ever for the lodging industry because of the economy. GSA probably generated the numbers correctly, but the problem is, are they sustainable? Will, or can, the industry offer those rates throughout the year for federal travelers?"
SGTP is a nonprofit association that represents all segments of the government's travel business, including federal travel managers.
GSA calculates lodging per diems based on hotels' average daily rates from April 2009 to March 2010. But because that includes the heart of the recession, and said travel has started to pick up over the last few months. If hotel rates rise as per diems fall, that could place some rooms out of feds' reach.
"This is data from the lowest point of the low," Lamb said. "It was no surprise rates went down. The surprise and concern was that it went down so much."
GSA dismissed concerns about the new per diems, and doubts hotels will raise their rates significantly over the next year. Jill Denning, GSA's per diem program manager, said that because per diems reflect actual hotel rate data, most feds will be able to find affordable rooms.
Denning said federal travel regulations allow a traveler to book a hotel that is up to three times the per diem limit — with approval from his agency — if he can't find a suitable hotel room at or under per diem. GSA said it did not know how many rooms are booked above the per diem rate each year.
"Each agency makes their decisions based on their needs," Denning said in a Sept. 2 interview. "I suspect agencies are going to find a way to make that happen."
But getting that approval isn't a sure thing, said one travel manager at a large independent agency who asked not to be identified.
"Some agencies, if you can't find a room below per diem, you don't go on travel," the travel manager said. "It may mean cutting down on the number of trips you take in a year."
An employee whose agency strictly follows the per diem may have to find a cheaper hotel on the outskirts of a city, further away from the business he needs to conduct. Lamb said that could require travelers to commute and spend money on rental cars, parking, cabs or subways.
Lamb said some hotels may opt out of GSA's governmentwide lodging program, FedRooms, if they decide they won't make enough money offering the government rate. FedRooms' 2011 requests for proposals from hotels are due Sept. 20.
Hotels "don't generally [drop out] en masse," Lamb said. "Individual hotels will have to make that decision. If the government business isn't competitive, the government gets closed out and other business is let in."
Denning said she doubted hotels would turn away from federal business in areas with lower per diems.
"They tell us they value the government as a customer," Denning said. "We think we're a good customer for them. We're there in both good times and bad. We hope they remember that."
But even if a hotel stays in FedRooms, there's no guarantee it will follow the rules and always offer the per diem rate, the travel manager said.
"Hotels can always say, ‘We don't have any rooms at all,' " the travel manager said. "They're tricky."
Hotels that stay in the federal market also could cut back on amenities such as free breakfast and late checkouts to turn a profit at the lower rates, SGTP Executive Director Rick Singer said.
Denning said GSA is trying to closely track hotel rates to ensure that the government doesn't spend more on lodging than necessary.
"We're trying to look out for the taxpayer dollar," Denning said.
Lamb agreed that the lower hotel rates could help the government be more frugal.
But GSA is likely to hear from concerned hotel vendors at SGTP's conference in Washington this week. SGTP added a last-minute panel on per diems to the conference after the lower rates surprised the industry last week.
Smith Travel Research, the contractor that provides the data GSA use to set per diem rates, said last month that there are signs the hotel industry is recovering. Hotel occupancy in July was 7 percent higher than it was one year earlier, and the average daily rate was up 1.3 percent, STR said.
STR also projects that 2010 will end with hotel room occupancy up 4.4 percent, and expects occupancy to increase another 1.4 percent in 2011. Average daily rates in 2010 are likely to remain virtually flat when compared with 2009 rates, but could increase 3.9 percent in 2011, STR said.
Per diems in Chicago and Las Vegas — two cities among the top 10 federal travel destinations — will go down 21 percent for part of 2011. Boston per diems will fall as much as 18 percent.
Twenty-eight areas that had their own higher per diem rates in 2010 will resort to the standard rate in 2011. The standard rate, which covers hotels in about 2,600 counties in the continental U.S., had not been re-evaluated since fiscal 2008.
Fifty of the 378 remaining nonstandard areas will see an increase in lodging rates, and 18 will see no change.
The current per diems for meals and incidental expenses — which range from $46 to $71 — will remain the same next year.