GSA alters method for setting hotel per diems

The General Services Administration is modifying the methodology it uses to set per diem rates for fiscal 2006.

To establish the new rates, GSA travel officials will use data from April 2004 through March 2005. To set the current rates, GSA relied mostly on data from calendar year 2003.

An announcement of the 2006 per diem rates is expected Aug. 31, but the change won't take effect until Oct. 1.

Industry observers have criticized GSA's method for figuring per diems, charging that the data did not reflect current market conditions for hotel rooms.

The hotel portion of the per diem -- the annually adjusted rate that governs the maximum amount a federal employee can be reimbursed for official travel expenses -- is based on price data gathered by Smith Travel Research, a GSA contractor based in Hendersonville, Tenn., that is considered to be the travel industry's authority on hotel pricing rates.

Much of the country is covered under a standard rate, based on Consumer Price Index data, which is $60 for lodging and $31 for meals and incidental expenses. But about 420 locations, including nearly all major metropolitan areas, are given per diem rates higher than the standard. GSA began the process of setting the 2006 per diem rates for the designated locations in the spring of this year.

The standard lodging rate rose $5 for fiscal 2005, but the meals and incidental expenses rate remained the same. GSA said a new meals survey is being conducted that could change the standard meals rate for fiscal 2006. According to GSA, the agency will not look to change the standard lodging rate until the fiscal 2008 rate-setting process.

The 2006 rates will be based on the business travel week -- Monday through Thursday -- rather than the entire week, as was used for the 2005 rates. And GSA will analyze a wider range of rates, from those offered by mid-price properties to the upper range of upscale hotels.

For example, GSA said that if the lowest priced mid-scale hotel's average daily rate in an area is $75 and the highest upscale hotel price is $175, then all economy, luxury or independent hotels with average daily rates within that range will be included in the analysis. GSA also eliminated the use of price ceilings and floors, which had prohibited rate drops or increases of more than $50.

GSA has adjusted the per diem rate in the middle of the year on occasion, most recently in April when rates were raised slightly in 17 cities.

A complete listing of GSA's per diem rates can be found on its Web site.