Government Affairs - Detail

Federal Times Reports Dip in Per Diem Rates Within Sight

June 18, 2009

PER DIEM RATES LIKELY TO DIP -- BY NOT RIGHT AWAY
By Gregg Carlstrom

FEDERAL TIMES
June 15, 2009

Hotel rates have been falling for months because of the stalled economy but
Federal Travelers' per diem rates might not fall until 2010 or 2011, according to the General Services Administration, which sets hotel per diem rates for the Continental US. destinations.

The average price of a hotel room in the fourth quarter of 2008 dropped 12% compared with the same period in 2007, according to Hotels.com, which tracks the prices consumers pay for rooms. The decline has been particularly sharp in major cities like New York, which has seen rates fall more than 22%.

Those falling rates-- an efforts by the hotel industry to boost sagging demand during the recession--- will eventually mean lower per diem rates for Federal travelers.

"I believe that the lodging industry is finally starting to take a hit," Cy Greenridge, GSA's per diem program manager, said. "I am guessing, but this is a unique year that we're looking at right now."

Any big decline in per diem rates would be unusual --- most hotel per diems increas year over year. In fiscal year 2009, for example. rates increased in 94% of the markets for which GSA sets per diem rates.Only 4% decreased.

"You may have more than a 4% decrease next year, Greenridge said. "It's too early to say where the decreases will be though." GSA conducts an annual review of per diem rates using room rate date gathered from hotels over the previous year. The current review, scheduled to end in July, determines the per diem rates for fiscal 2010. It uses data collected from April 2008 to March 2009-- so it doesn't factor in changes to hotel rates from this spring and summer, when many analysts expect the hotel industry to continue its steep price reduction.

"The data is stagnant, so to speak, by the time we start conducting the review," Greenridge said. "So when the rates go down, sometimes our rates
don't go down immediately, sometimes it takes a year or two for them to catch up."

Greenridge said Federal travelers could expect a decrease in some rates in
2010 and another decrease in 2011 as the rtes :"catch up" with the hotel
industry.

Greenridge said GSA is studying ways to use real-time data in its per diem
review but that change is at least 1-2 years away.

The rates for fiscal year 2010 should be finalized in mid-August.