Recovering Revenue: Leading the Fight for Fair Per Diem Rates

fair per diem rates

Hoteliers across the country have endured an unparalleled economic crisis brought about by the COVID-19 pandemic. Yet nearly 18 months since the pandemic began and hotel occupancy plummeted, the men and women of our industry are as resilient as ever, and we are finally starting down the long road to recovery.

Fortunately, thanks to the efforts of American Hotel & Lodging Association (AHLA) members and state associations across the country, we secured an important victory August 12 when the General Services Administration (GSA) announced it would freeze FY 2022 federal per diem rates for government travel in the continental United States at FY 2021 levels, which are based on pre-COVID-19 rates. The FY 2022 CONUS per diem rate is $151, which includes $96 for lodging and $55 for meals. This is the same as FY 2021.
So why is this such a big win for hoteliers?

The federal per diem rate is set each year by GSA and is typically calculated based on hotels’ average daily rate (ADR) from the previous fiscal year, less than 5 percent. But few people were traveling in 2020, and as a result, ADRs dropped significantly. If GSA had used its standard formula to calculate the FY 2022 per diem, it would have been based on data from the height of the pandemic and would have resulted in an artificially low per diem rate.

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Last year, AHLA led a successful effort on Capitol Hill and with GSA to freeze FY 2021 rates at pre-pandemic levels. We advocated for a rate freeze again in FY 2022, arguing that it was sound policy and critical to the recovery of the hotel industry.

Government travel is incredibly important to hotel employees and small businesses, traditionally supporting tens of thousands of jobs and billions in travel spending that benefits communities across the country.

A recent AHLA analysis using STR and Kalibri Labs data found that depressed per diem rates could have resulted in more than $900 million in hotel revenue losses nationwide—a 23 percent drop in government spending on hotels.

A drop in revenue this large would be devastating to the industry on its own, but because government per diem rates are often used as a guide by private businesses and organizations in setting their own travel standards, artificially low rates would have had a ripple effect that reached well beyond government travel sectors.

AHLA worked closely with GSA, the Biden Administration, and a bicameral group of legislators including U.S. Representatives Bill Posey (R-Fla.) and Charlie Crist (D-Fla.) and Senators Jerry Moran (R-Kan.) and Tim Kaine (D-Va.) on their federal legislation to ensure fair and equitable per diem rates for FY 2022. We are continuing to work with GSA and Congress to ensure the same relief through FY 2023.

As thousands of hotels struggle to stay afloat, the federal government must maintain fair per diem rates that reflect current economic conditions. With travel not expected to return to pre-pandemic levels until at least 2023 or 2024, per diem rates should continue to support government travel and provide taxpayers with good value, while also recognizing the unprecedented impact the pandemic has had on our industry.

This is a pivotal time for our industry, and the FY22 per diem rate freeze is an important victory. AHLA will continue to advocate for commonsense policies that will help hotel employees and small businesses as well as the communities we serve on the road to pandemic recovery.

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Andrew Usyk is Vice President of Government Affairs for AHLA.

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