Industry NewsCuts to Per Diem Rates Could Mean Less Business for Hotels

Cuts to Per Diem Rates Could Mean Less Business for Hotels

As Congress and the Administration make decisions on how to reduce fiscal spending, there is a basic set of principles they must follow to make sure the policies enacted are fair and balanced. While cuts in spending are guaranteed to have an adverse effect on at least one group or geographical area, a 2014 policy on per diem rates for military personnel and defense civilian employees who receive temporary duty assignment (TDY) for long-term periods failed to be either fair or balanced. It affected service members and defense personnel in my home state of Hawaii to a far greater extent than the small amount of savings it contributed to the budget. That is why I made it my top priority in the 2016 National Defense Authorization Act and was successful in including the provision in the bill that reversed this ill-thought-out policy.

Defense spending heavily supports Hawaii’s economy—nearly 20 percent, according to a study by the RAND Corporation. This economic contribution falls second only to our tourism industry, which adds approximately $14 billion to the state’s gross domestic product every year. Therefore, dedicating support to preserve and enhance these industries is a top priority for any politician representing the state. Reversing policies with unintended consequences that negatively affect these industries, along with the almost 20,000 Department of Defense civilian employees in the state, also should take
top consideration.

This is exactly what happened following a 2014 Department of Defense policy that made deep cuts to per diem rates of defense civilians and military personnel who receive temporary duty assignments of more than 30 and 180 days. A policy that started out as a way for the Department of Defense to come up with needed cost savings actually ended up being a huge blow to morale for our defense civilian employees and military personnel. In reducing the per diem rates for longer-term temporary duty assignments, a simple economic concept followed, one where the Department of Defense simply passed these costs on to the employees and military personnel who were designated for assignment.

The Department of Defense made this change in order to save what it estimated to be around $22 million per year, and it reduced rates by 25 percent for trips lasting longer than 30 days and by 45 percent for trips over 180 days. The policy would create a three-tiered rate structure to compensate the workforce for official travel: the standard rate for travel below 30 days, a new rate for employees and members of the military who travel between 30 and 180 days, and another new rate for
employees and members of the military who travel for more than 180 days. Though the rationale was used that hotels offer lower rates to travelers staying long term in lodging, this is not the case in markets where rates stabilize over the long term, and many hotels near military installations already offer below-market rates to meet the per diem levels.

Moreover, asking a member of the military or federal employee to pay for expenses incurred from Official Travel is neither fair nor reasonable. In some areas, this policy could result in gaps of more than $200 that defense personnel are forced to pay for out of their own pockets. The Department of Defense has acknowledged that no one will have to pay out pocket; we hope that will be the case. These are the men and women who go to work every day to protect our country from the many threats around the world that would seek to do the United States harm. In many cases, personnel are shifted to respond to the ever-changing threat environment, to help ramp up readiness, or to respond to disasters across the globe. By no means is this the community we should be looking for a quick fix to save a bit of money in.

However, not only does this policy penalize the men and women who ensure our national security on a daily basis, but it also threatens to erode the morale of the workforce and will mean less business for hotels and firms that cater to federal travelers. These same companies are extremely supportive of our military and veteran communities, and they too will face negative effects of this policy. For example, Outrigger Hotels & Resorts in Hawaii has implemented special liaison programs for military personnel, has sponsored and helped fund different veterans initiatives, and has a chief executive officer who also serves as chairman of the Military Affairs Council in Hawaii. This type of integration is built over years of working together, and this industry is also negatively affected by any policy that goes after our military and civilian defense personnel.

I believe the policy put forward by the Department of Defense on TDY per diem rates in 2014 was unmeasured, unfair, and unfounded. Working closely with the hotel industry under the leadership of AH&LA, we were able to take a stand against forcing our military and defense personnel to spend more of their own money to conduct their official duties, in order to achieve a small cost savings. I thank all of my colleagues and the various organizations and associations that helped me take this stand, and I will continue to make sure any policy decisions in the future for this area are fair and balanced.

U.S. Rep. Mark Takai represents the First Congressional District of Hawaii, where he serves on the House Armed Services Committee and House Committee on Small Business.