Congress Could Make It Illegal For The Federal Government To Save More On Hotels

The U.S. government sets per diem rates for federal travelers. That’s the most they can spend in a given city on lodging, and also for things like meals and incidentals.

Two Florida Congressmen – Bill Posey (R-FL) and Charlie Crist (D-FL) – have proposed legislation that would prevent the federal government from negotiating lower rates on lodging than what they paid based on 2019 rates. They want to make sure the government pays more than it has to for travel.

Government employee unions represent a certain kind of conflict of interest. Take police unions which donate to politicians and turn out votes. The politicians aren’t bargaining at arm’s length. Instead of representing citizens and taxpayers, they work for the very people they’re supposed to be bargaining against to get the best deal. And the people who benefit have a much greater incentive to pay attention and learn about an issue than the general citizenry who feel a much more dispersed impact.

There’s a similar dynamic at play here. The General Services Administration (GSA) is supposed to get the best deal possible for taxpayers. The U.S. federal government is one of the largest buyers of travel in the world. They can use that purchasing clout to negotiate a great deal, or… travel suppliers can lean on members of Congress to instruct the GSA not to. They can tell the GSA that the federal government should overpay for travel, benefiting the travel providers. That’s what’s happening here.

During the pandemic these same two Members of Congress from Florida insisted the federal government keep paying hotel rates like it was 2019, even though hotels were empty in the spring and summer of 2020.

And by the way many private companies default to federal GSA rates to determine what’s objectively reasonable for their own travel policies. So this drives up their rates, too.

It’s a backdoor subsidy to hotel chains and owners. Although it wouldn’t work the way the hotel industry thinks. The government sets a single maximum. If that’s above the market rate for most hotels in town, that just means government employees will have their pick of hotels. They may take the most convenient one for their meetings or events. Or they may:

  • Take the nicest hotel in town, suddenly affordable under inflated per diems

  • Encourage hotels to rebate all manner of services, bundled in their room rates, in order to entice travelers.

Not all hotels will benefit equally. This bill doesn’t just let hotels get paid what they used to get paid for rooms. This will shift government travel demand to more upscale properties at the expense of average accommodations, and hotel owners don’t capture all of the additional money, some of it may be captured by federal workers instead in rebated services or points.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. So, surprise surprise:

    Bill Posey, $10k from the American Hotel and Lodging Association
    https://www.opensecrets.org/members-of-congress/bill-posey/contributors?cid=N00029662&cycle=2020

    Charlie Crist, $17,700 from Blackstone Group, owner of Hilton, Wyndham…
    https://www.opensecrets.org/members-of-congress/charlie-crist/contributors?cid=N00002942&cycle=2020

    They should be obliged to use their contributors’ names in the titles of their bills. Or wear a jacket with logos, NASCAR styles.

  2. Your unnecessary and political opinion on government employee unions being shoehorned in an article about hotel price negotiations detracts from this article and this site. Please discontinue.

  3. Once again Gary offers an opinion on a subject he knows nothing about. The GSA does not “negotiate” hotel rates with hotels. The GSA takes periodic surveys to assess the median hotel rates per area and sets the maximum lodging rate accordingly. Since the dramatic down-turn in all travel has forced hotels to offer rock-bottom discounts to attract business, these discounts would skew the survey and lower the per diem lodging rates.

    BTW Gary, the “government rate” is usually lower than the rack rate and often lower than the discounted advance-purchase non-refundable rate.

    If the GSA dropped per diem lodging rates to what hotels were offering at the height of the pandemic, most hotel chains would stop offering a government rate.

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