NASHVILLE, Tennessee—Jill Denning, the per-diem program manager for the U.S. General Services Administration, has lifted the veil on how the government agency determines per-diem rates.
The GSA announced last week that per-diem rates for “non-standard areas” that are frequently visited by federal employees will see a variety of changes during the 2015 fiscal year, while the standard continental U.S. per-diem rate will remain unchanged at $83. It last increased during fiscal year 2014 to $83 from $77.
During a presentation titled “Not so top secret: The methodology behind GSA lodging per-diem rates” last week at the 6th annual Hotel Data Conference presented by STR and Hotel News Now, Denning illuminated five key variables that go into how per-diem rates are calculated.
1. The sample
Denning said 11,500 properties (an average of 31 in each non-standard area) are used in GSA’s per-diem-rate calculations and that at least four hotels must be present in a market in order for a calculation to be done. The standard rate applies to 2,600 counties and is reviewed every three years. The non-standard areas apply to 366 unique locations in fiscal 2014, and the rate for these locations is reviewed every year.
Also, Denning said the per-diem rates apply to where the federal employee is working, not where they are staying unless there are no available properties where the employee is working.
2. The process
In calculating rates, Denning said the GSA first identifies area and primary ZIP codes and uses a list of approved properties for federal employees. The GSA is required by law to use only those properties that are certified as being fire safe.
Next, the GSA obtains and analyzes industry data. The agency then seeks out approval of the rates from senior management with the GSA and the Office of Management and Budget before notifying the U.S. Congress of the rate change. The final step in the process is publishing the fiscal year per-diem rates.
3. Methodology
The methodology behind the rate calculation involves the use of only hotel properties and excludes, for example, condominiums and cabins. Because federal employees generally travel only from Monday through Thursday, weekend rates are excluded. Data used in calculating the new rates covers a period ranging from April through March. Rates do reflect seasonality. For instance, for fiscal 2015 the New York (Manhattan) fall season rate ticked upward to $304 from $303.
4. Calculation
Denning provided an example of how a typical rate is determined. She said the GSA looks at rates of midscale through upper-upscale hotels. A luxury or economy scale property would be considered if its rates fall within the range of the midscale to upper-upscale rates.
After the applicable rates are obtained, the GSA determines the average rate of the properties, and then deducts a further 5% as part of a buying-in-bulk discount.
5. Exceptions to the rule
The agency is flexible on the rate in some cases, Denning said. The GSA allows, with agency approval, an increase of up to 300% of the market per diem in special circumstances, which is called “actual expense.” One example of this might be if there was a natural disaster in a given market that caused hotel rates to increase.
Further, there is a process in place for requests for per-diem reviews. The federal agency travel manager can notify the GSA that his or her respective travelers are having a difficult time locating rooms at the current per-diem rate. The letter from the travel manager should include the number of trips taken annually in a specific location; the address, ZIP codes and rates where the employees must stay; and the frequency with which actual expense is used.
Requests for reviews must be postmarked by 1 April or 31 December. Upon review, rates can increase, decrease or remain the same.