This is Part 2 in a series on the impact of the GSA meetings scandal on travel.

Travel industry leaders are fearful that initiatives to reduce government spending on meetings travel could spill over to the private sector, putting a serious crimp on business travel.

After the GSA’s overspending on a 2010 meeting made news this spring, federal agencies, including the GSA, tightened travel policies, cancelled millions of dollars in bookings and in some cases suspended meetings travel altogether. Legislative initiatives curtailing government travel spending also are being considered. (See story, “GSA Fallout Wreaks Havoc with Govt. Meetings,” July 16, 2012.)

Now there are fears, as yet unrealized, that negative public perceptions of government-related travel will extend to all business travel. The possibility of cuts in GSA per diems is compounding the worries.

“My concern is that business leaders may think certain government policies may be something they need to follow, and that could have a dramatic impact on how clients consider their business,” said Kevin Hinton, executive vice president of Associated Luxury Hotels International and incoming chairman of Meeting Professionals International.

Little impact to date
So far the private sector does not appear to have been affected by the government crackdown on travel.

“We aren’t seeing any direct effect on the private sector at this time, which was one of our main concerns,” said Erik Hansen, vice president of domestic affairs for the U.S. Travel Association.

Still, U.S. Travel is concerned enough to have created a private sector focus group that keeps the organization updated on any negative impact.

Per diem peril
News that GSA per diems for the coming fiscal year may be reduced in key markets has raised the level of alarm.

The GSA has indicated that it is considering revising its methodology for calculating lodging per diem rates, effectively lowering the rates in some markets.

One proposal under consideration could reduce per diem rates in major travel markets by more than 30% by eliminating the highest category of permitted lodging.

“If a policy like this were enacted, the private sector could be impacted,” said Hansen.

Reductions in GSA per diems would have “wide-ranging impact on business travel, because private sector companies and government contractors routinely base their reimbursement rates on the government per diem,” according to a statement from U.S. Travel.

Groups take action
The specter of cuts in GSA per diems has prompted industry groups to swing into action.

U.S. Travel and the American Hotel & Lodging Association are meeting with GSA officials and officials at the Office of Management and Budget and the White House to explain the potential impact of the per diem changes.

U.S. Travel is also building a third-party advocacy coalition of nontraditional allies, including defense contractors and government vendors, that would be impacted by a change to GSA per diem rates.

Early in the game
The GSA reviews its per diems and issues revised rates before the start of the fiscal year on Oct. 1. The process of determining those rates and the methodology for calculating them is still in its early stages, Hansen suggested.

“The industry is going to meet with the relevant players. Going forward we will learn more about what’s being proposed and we will be able to provide a coordinated industry view on any possible changes,” Hansen said.

At the American Lodging & Hotel Association, vice president of governmental affairs Lisa Costello said that the organization “is on top of the per diem issue.”

“We have one staff member who is living and breathing the per diem issue, because the proposed changes would be devastating,” Costello said.

Ripple effect
At the National Conference Center in Arlington, Va., which relies heavily on government business, Eric Whitson, director of sales and marketing, explained the potential consequences of a cut in the per diems.

“We offer our full meeting package at the prevailing per diem rate,” said Whitson. “When you break it down it comes to less than the per diem, because we include breaks and other extras.

“We’re very concerned that if GSA changes the way they calculate per diems that will drop the average. Our argument is that rate should not be the only objective for a meeting; it makes it tough for a property like ours, where the value is strong but the rates might not be the lowest.”