Industry Dodges Bullet With GSA Freeze on Per Diems

A threatened cut in the per diem hotel rates used by the General Services Administration has been averted after an intense lobbying effort by the travel industry.

The GSA announced this week that it would freeze per diems at current levels for fiscal year 2013, which starts Oct. 1. In doing so, it abandoned a plan to change its methodology for calculating its per diems.

Huge spending cuts feared
The proposed change in methodology was considered far more onerous for the travel industry than a freeze in per diems.

It had been projected that the new calculations would precipitate cuts of up to 30% in spending on lodging by federal employees and contractors – and potentially private sector travelers – alarming some industry members.

The U.S. Travel Association had estimated a loss of $885 million in travel revenue if the change was approved.

To lobby against the change, industry representatives met with the GSA, the White House and members of Congress, said Shawn McBurney, senior vice president of governmental affairs for the American Hotel & Lodging Association, which led the lobbying efforts.

‘Massive ripple effects’
Industry members warned of “massive ripple effects,” McBurney told Travel Market Report.

“The change would have established artificially low per diems that would effectively lock travelers out of hotels because they would have been below the going market rate.  

“Another argument we made was that travelers would have had to stay far away from where they were doing business to achieve those low rates – spending more on taxi fares and other costs, and actually increasing spending.”

Freeze means 5% cuts
The freeze on per diems that the GSA is adopting instead will have its own negative impact on government and business travel spending, McBurney said. “A freeze still results in a cut of about 5% because rates have gone up by that much in the past year.”

The discussing around GSA per diems is part of an ongoing effort by the federal government to cut travel costs that includes a federal mandate to reduce travel spending by federal employees by 30%. The drive to cut costs was accelerated by a controversy this past spring over excessive spending at a 2011 GSA conference in Las Vegas.

Savings tips for the feds
The American Hotel & Lodging Association has advised the GSA on how to save on travel, McBurney said, calling the federal agency “very good partners in finding savings and efficiency.”

“We have told them that rather than freeze rates, there are other ways to save money.

“For instance, federal travelers, like most corporate travelers, usually stay in hotels on Tuesday and Wednesday nights, the most expensive nights. If they shifted to other nights, the same rooms would be cheaper.

“That’s one example and we will be making a continuing effort to educate them on those in the future.”

Lobbying a group effort
A number of travel industry associations, local hotel owners, national lodging chains, destination marketing organizations and other groups participated in the lobbying effort, according to a U.S. Travel statement.

State travel associations and destination marketing organizations from across the country hosted roundtables with government officials to discuss the importance of federal travel.

Roger Dow, CEO of U.S. Travel, affirmed the GSA’s decision to freeze per diem rates rather than implement a change that would effectively lower the rates.

“Given the negative media attention surrounding federal conferences, a contentious political environment and a shrinking federal budget, a freeze in the per diem rates is a sensible policy decision that minimizes economic impact on the travel industry and protects taxpayer dollars during these tight fiscal times,” Dow said in a statement.

Related stories:
“Agents Feel Impact of Govt. Travel Fracas,” June 26, 2012

“Govt. Travel Scrutiny Worries Private Sector,” July 19, 2012

“GSA Fallout Wreaks Havoc With Govt. Meetings,” July 16, 2012