The U.S. General Services Administration (GSA) has announced it will not alter its market-based methodology in calculating federal per diem rates and will freeze the rates at the FY2012 level.
The announcement comes following efforts by the American Hotel & Lodging Association (AH&LA) and its members to block the shift.
For almost a decade, GSA calculated per diem rates based on the average rate of mid-priced hotel rooms. GSA determines hotel ADR by including rates from hotels in the four tiers of the “mid-price range,” with GSA omitting rates from economy and luxury. After determining ADR for locations throughout the United States, GSA then reduces those rates by 5% and establishes per diem rates at that discounted level.
GSA had been prepared to change that methodology by removing the data of an entire tier of mid-priced hotels in calculating the average, excluding most hotels in many large cites.
If the change were made, AH&LA contended, it would result in an artificially low “average” rate that would not reflect actual room rates. AH&LA stressed that if the formula was altered without regard to actual rates, federal workers would be priced out of market and unable to secure lodging where they had business. AH&LA also noted that the change would increase federal travel spending, because federal travelers would have to secure lodging far from their places of work and would have to pay for rental cars or taxis. In addition, federal travelers would end up paying up to 300% more than the per diem rate for rooms since hotels could not accept the new artificially low rate, according to AH&LA.
“AH&LA appreciates the consideration GSA gave to our concerns and looks forward to working with them to ensure per diem rates reflect the market and are good value to the federal government,” AH&LA said in a news release.