Why Government Travel Policies Make Sense For No One.. Except Government

Last week I posted that federal government per diem allowances for travel would stay the same in 2013 as in 2012.

There was a big move afoot to reduce travel costs, in one model by excluding higher-end properties from the calculations of what hotels generally cost. The hotel industry enlisted its lobbyists, got Members of Congress to object, and the move was killed. Instead, the approach to ‘saving’ money was to ‘not spend more‘. Much to the disappointment (though relief) of members of Congress representing cities with the most hotel rooms in the world and with the most hotel rooms being sold at federal government rates in the world.

This post led to some interesting comments, both in the original post and with folks over email. (Some of the ideas in this post are mine, some theirs, all interesting… to me at least!)

One person recounting on the blog their argument about why reducing hotel allowances could actually increase costs of overall travel. They suggested that hotels at an acceptable price would be sold out in Boston, they’d have to stay in the suburbs and rent a car and pay gas and that total cost of that would be higher.

That’s Harry Reid’s purported argument for higher per diem, he’s the Senator from Nevada and Las Vegas has… most hotel rooms than anywhere else. But taking the example of Boston, it doesn’t seem to make any sense. The per diem in the suburbs isn’t much more than half of what it is for downtown Boston’s. It’s more difficult to get a room at the suburb per diem in the suburbs than the downtown per diem downtown (unless the traveler is paying Boston per diem outside the city, a violation of policy). Stay in the suburbs and rent a car usually would be cheaper rather than more expensive than staying downtown, even factoring in parking. It may not make sense to do because of the inconvenience, but it’s unlikely to be higher cost.

The government per diem rates have geographic boundaries. In DC is includes not just the suburbs but even the exurbs. That brings down the average hotel rate and thus pulls down the amount the government will pay for a room. But it also means foks traveling farther out from city center get a higher per diem than is actually necessary to get a room in the area (the cheap exurban stays are allowed at closer to downtown rates). Cities like Boston include only nearby Cambridge in the calculation. In Chicago, O’Hare is calculated with downtown (so if you’re staying by the airport, government employees will be able to stay pretty much anywhere any time, as the rates are allowable based on average downtown pricing).

One common complaint of government employees is that the ‘published government rate’ on a hotel website may be higher than what’s actually allowed. The hotel is offering the discounted rate that they only make available to federal government employees, that’s their ‘government rate,’ but the government employee won’t get the entire rate covered by their employer if it’s above the allowable per diem. Of course, one can top off the amount out of pocket. Hyatt’s website is a frequent target of this complaint.

Federal government per diems are fixed, they do not vary based on demand — high or low. There are dates when rooms are more expensive. And those make great arguments for raising the per diem…. except much of the year the per diem is way too high, weekends in the summertime you can get the Ritz-Carlton Tysons corner for $109 or $129. And have plenty of money left over. I know federal employees who book weekend trips all the time to stay at Park Hyatts around the country on cheap government rates for their weekends. I admit, I’m jealous.

I’m also willing to admit that my first reaction on how to ‘fix’ the government’s travel allowance system is probably wrong. The government can’t really do what private sector companies can.

When you have per diems, fixed amounts allowable on a given trip, those become goals for travelers to spend, rather than maximums.

And you get both too much spending at times, and at other times the amounts aren’t high enough to efficiently accomplish a trip’s goals.

There’s no question that private sector travel policies can be screwy and gamed, I sat on a panel last month at the Global Business Travel Association’s annual conference in Boston precisely on the topic of gaming travel policies. But the better ones are flexible enough to meet business needs — recognizing that the right decision about where to stay, how to fly, etc. depends on the purpose of the trip and a whole variety of tradeoffs for the traveler.

Sometimes it makes sense to stay in a conference hotel, for lower cost or likelihood of better informal interactions between, before, and after sessions. Sometimes schedules are tight and commute time matters. Sometimes the signaling matters — to the heavy traveling employee, to a client, what have you. And sometimes it doesn’t.

Who is traveling, for what purpose, over what period of time makes where to stay on a given trip entirely contingent… and all of this needs to be weighed against the costs for travel on a given set of dates, not the average rate over a set of months.

And a system like that, as much as I think it’s ‘better,’ simply does not work for the federal government.

One imagines it would be possible, using modern technology, to vary the allowable price of a hotel night based on real-time rates on the day of booking for a given stay. That would solve not just seasonality issues but peak travel date issues. You would have one price that sometimes isn’t enough money to get the room you need and other times would allow a club room at the Ritz.

But you’re still going to have the oddities of geographic boundaries for a given location. What hotels should be included and what shouldn’t be in those averages? Where should someone stay? My contention is that there’s not one right answer for “a federal government employee” but you can’t just change travel policies and expect things to work differently inside the federal government, what works best in some corporate environments is the kind of discretion that doesn’t work at all inside government.

As one correspondent pointed out to me, “the second a manager exercises discretion to make things easier for one employee, but does not do so for another, some form of a grievance gets filed claiming abuse of discretion. Many government managers find being divested of discretion liberating rather than limiting.”

As much as I’d want to ‘fix’ government travel, things are the way they are because of the essence of the institution in all likelihood, not because of poor bureaucratic decision-making. So it’s more complicated to reform than I probably gave credit for in my previous post.

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. Let’s add another element. As a government contractor, I’m required to get my travel costs approved by the government and be governed by the per diem rates. Since I’m not a government employee, however, I’m not eligible for government rates! I still can’t figure out how I’m supposed to make that work…

  2. Per diem rates are nothing compared to the huge waste associated with contract fares on the airlines. To fly DC to Columbia, SC (home of DOJ’s National Advocacy Center) costs ~$400 on restricted economy or $1400+ on the contract fare. Add to that a $25 fee to book through the mandated travel agency *website*. Yeah, when is the last time a travel agency charged ticketing fees, much less ones to use their website?

    Ike

  3. This is a can of worms you’ve opened. For example I could say they could reduce cost by having less employees and/or less travel. In reality they get the best rates that most of us dream about so I’m to sure what else can be done. I think hotels that have a posted govt rate should match what that per diem limit is. In some cases they may be posting the state govt per diem rate instead which can be different however.

  4. That’s an incredibly rare occurrence, Dan. Rarely is the state per diem listed as THE govt rate.

    “I admit, I’m jealous.” This is the part of this post underscores the real issue you seem to have with govt travel.

    The Reid argument with Las Vegas is simply moot. Govt rates rarely exist at the nicer properties/resorts in LAS. Having been to LAS seven or eight times in the past 5-6 years, not once have I found a govt rate to be the better financial decision for my travels.

    You used the Boston argument. You should actually run the numbers if making this claim. Staying further away increases your time worked, as well. You didn’t factor this extra time worked (in transit) to downtown. A weekday rate could easily run $50 for a rental, and factor in $20-30 for parking, and another $20 for gas, you’re already at $100 in extra expense for being in the suburb. To say that “it’s unlikely” to be a higher cost is just wrong.

    You also don’t realize how often properties won’t have a govt rate, either. I’ve run into that issue many times.

    Where is the gripe about businesses and corporations being able to write off their $800+ domestic tickets as a business expense?

    There are just too many issues with your post to comment on all.

  5. Reality is that the system is not as broken as one might think. In vast majority of the cases it actually works. The problem is last minute travel to a high demand location. But those are rare, and those are just the inefficiencies built into the system.

    You have to remember that most Government employes have little to say on their travel arrangement. Most are mandated to use a booking agency (for a fee of course) that leaves one with very little flexibility. Having such discretionary decision making as you proposed on such a vast system will just not going to work.

    And as for the fairness of Government employees staying on Government rate for leisure travel – it has nothing to do with the system. That is totally up the hotels to decide whether they chose to offer those rates without official travel orders. Many hotels do offer that – but that is unilateral decision on the side of the hotel, probably because it make sense to them. It has nothing to do with Government travel system.

  6. @ Ike: Your $1400 example is a Y class fare, i.e. unrestricted. Federal employees can do and travel on restricted airfare, but Y class is often the default due to the last minute changes required for business travel. And the Y class fares negotiated with the airlines worldwide are almost always exceptionally better commercial fares. (Example: For FY12, the Y class flight for SYD-LAX on American [flying Qantas metal] is $534. Beat that with a stick.)

    As mrredskin says, there really are too many inaccuracies/misconceptions in this post to comment on every single one. That said, one important thing to remember is that the per diem is the MAXIMUM allowed for a hotel night, and the traveler doesn’t get to keep the difference. You can’t go to a city with a $280 per diem, stay in an airport motel, and pocket the difference. Most hotels offer substantial discounts.

    Furthermore, your example of friends who stay at the Park Hyatt is misleading. Some hotels offer government rates to federal employees for leisure travel, some don’t. This is admittedly an excellent perk, but it doesn’t cost the U.S. taxpayer a cent. Your post makes it sound like your friends are staying at the Park Hyatt over the weekend on official travel orders and therefore on the taxpayers’ dime, but if they are, they are breaking the law. Weekend per diem is only covered if official travel spans a weekend.

  7. @ Faceless Bureaucrat – I do not interpret the post as indicating that anyone is staying at a Park Hyatt, for leisure travel, on the federal dime. Rather, it notes that Hyatt makes the ability to pay a rather favorable rate available, and insinuates nothing more.

  8. @jfhscott – that’s correct, I am not making claims about billing personal travel to one’s (government) employer. My reference was to using these amazing rates on personal travel, which one pays for out of their own pocket

  9. *I* understood that, but it was written in such a way that it could be easily misinterpreted, and isn’t relevant to the issue anyway. See MDDCFlyer’s comment just before mine – the leisure rates have nothing to do with federal travel regulations, per diems, etc.

  10. My biggest issue as a traveler is that
    as a federal govt contractor I have to
    comply with FTR’s but hotels that
    offer govt rates can exclude
    contractors. I have a work around but
    its annoying

  11. @ Faceless Bureaucrat:

    No, we are *required* to fly on the government contract rate. There is no discretion. And the unrestricted fare requires a travel agent fee and airline change fee to make any changes. And, if the cost of the new ticket (with fees) is more than the price of the original fare for which I was authorized, I am in trouble and need to add a few more authorizations on top of the six I need to book the trip and get reimbursed.

    How frequently do people change these tickets to make it worthwhile, economically? If, on average, they change a ticket less than three times per trip, they are better off eating the cost of non-refundable tickets. And these are to go to a class with fixed start and end times.

    Ike

  12. I’ll also point out that one of the suggestions in the post, varying the rates based on demand, is already somewhat in place, since for some destinations the per diem rates vary from month-to-month. For example, Manhattan’s hotel per diem for 2012 can be any one of four different rates, depending on what month it is, with January through March being much lower than September through December.

    There is also a lot more flexibility in federal travel policies than the post suggests, although frequently that flexibility is exercised at the office level instead of at the level of an individual trip. I’ve worked in federal offices where you could exceed the hotel per diem if there was a compelling benefit to the government, but some offices don’t allow that no matter what. One office I worked in would never approve a rental car, no matter how much more time and money it cost to take taxis everywhere.

  13. @Robert i acknowledge month-to-month (decided a year in advance) in my post, that is not the same as varying based on demand

  14. @Ike: Man, I don’t know which agency your work for or who your travel contractor is, but that’s a big pile of butt.

    Check the GSA city pairs website. Each city pair (i.e. contract fair) includes both a restricted and an unrestricted fare.

    Unrestricted fares are just that – unrestricted. Unlimited changes, no penalites. If you’re getting dinged for that, something’s wrong. And we do have the option of flying restricted fares, which are used whenever possible, i.e. travel is booked in advance and confidence is very high that travel plans will not change.

    As for your cost/benefit analysis, that’s not necessarily true either. I was involved in an airline negotiation. If you run the numbers (which include # of cancellations/changes and penalities) against what are usually very highly discounted Y fares, it’s often a wash. Where I work, people travel constantly. Flexibility is a very good thing.

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