Change in Per-Diem Rates Could Hurt Hotel Business

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It looks as though the federal government is about to level another attack on the hotel industry. As a by-product of the recent controversy over the big-spending ways of the General Services Administration, that agency is about to reset government per-diem rates for hotel stays. It's possible, but not certain, the new rates will be lower than what's allowed today for government travel. The result will be a shift in which hotels get the bulk of business from government employees who travel.

And as upsetting as this prospect may be for some hotels it could prove to be a boon for other lower-rated properties. The ultimate loser, however, could be the U.S taxpayer, who actually may end up paying more for government travel. After all, as example, a government employee who today is able to stay at a Courtyard next door to the meeting he or her is attending may in the future need to book a room at an Econo Lodge five or 10 miles down the road, requiring a rental car or multiple taxi rides and perhaps overall higher travel costs and lower worker productivity.

And just because you may not own or operate a hotel in the D.C. area or near Ft. Bragg or some other government installation, don't think a downshift in per-diem rates may not hurt you. Marriott CEO Arne Sorenson told stock analysts in a conference call last week that government travel accounts for a “mid-single digit percentage” of the company's business. That may be a small percentage but it's a big dollar amount.

And a report in Saturday's Orlando Sentinel quoted the director of sales at the Caribe Royale, a hotel in the heart of the city's tourism zone, who said his property recorded 35,000 room nights in government business in the past two years. Big-box hotels in that market and other convention cities, e.g., Las Vegas, Chicago, etc. need to worry they won't be able to land any government-sponsored meetings or events that draw a lot of federal workers if the government-allowable rates fall.

To make matters worse, some private companies use the federal government per-diem rates as the starting point in negotiations for bulk hotel contracts or as the absolute limits of what they allow their employees to pay for hotel rooms.

What can you do? The AH&LA has a number of options, including a website that enables you to send short messages to members of Congress to explain how the change in rates would hurt you. The association also has a list of regional GSA officials to whom you can lobby personally. The key is to shine as much light on this issue and its possible consequences to our industry, tourism in general and the U.S. economy.

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