The General Services Administration (GSA) has announced an increase in daily rates for fiscal year 2025. This decision is expected to give the US hotel industry a significant boost.
Beginning October 1, 2024, the standard daily lodging allowance in most parts of the continental United States will increase by $3 to $110, while the meal and incidental allowance will increase by $9 to $68 per day.
This represents the first increase in the food and beverage category in three years and reflects ongoing inflationary pressures and the economic realities facing the hotel industry.
A victory for the hotel industry
The American Hotel & Lodging Association (AHLA) is a strong supporter of fair per diem rates that reflect current market conditions. “These increases are an important victory for AHLA, which has made fair per diem rates a permanent priority at the federal level on behalf of our members,” said Kevin CareyInterim President and CEO of AHLA.
The daily rate increase is expected to generate approximately $100 million for the hotel industry, generating much-needed revenue as the industry continues to recover from the impacts of the COVID-19 pandemic and faces the ongoing challenges of a nationwide labor shortage.
Government travel is a major source of revenue for many hotels across the country. Per diem rates set by the GSA determine how much federal employees are reimbursed for room and board during official travel. These rates are therefore a critical factor in the financial planning of hotels that host government employees. AHLA’s successful lobbying ensures that these rates are fair and keep pace with economic conditions, benefiting both the hotel industry and federal employees.
The process behind calculating the daily rate
GSA’s methodology for setting per diem rates involves calculating the average per diem (ADR) for room and board over a 12-month period, less five percent. This approach is designed to balance the needs of federal employees with fiscal responsibility, ensuring that the government is spending taxpayer dollars wisely while also taking into account the operating costs of hotels.
For fiscal year 2025, the standard daily rate for most of the continental U.S. has been set at $178 per day, including $110 for lodging and $68 for meals and incidentals. This increase is a positive signal for the hotel industry and shows recognition of the higher costs hotels face due to inflation and other economic pressures.
The increase in per diem rates is expected to have a profound impact on the hotel industry, particularly in markets that rely heavily on government travel. For many hotels, particularly in smaller markets or areas with a significant government presence, government travelers provide a stable and reliable source of revenue. The new rates will help ensure that hotels can continue to provide quality accommodations and services to their government employees without jeopardizing their financial health.
As the hotel industry continues to grapple with the challenges of the post-pandemic landscape, the per diem rate increase is a welcome boost. It reflects ongoing collaboration between GSA and industry stakeholders like AHLA who are committed to ensuring that government travel policies are fair and sustainable.
