The General Services Administration (GSA) has announced an increase in per diem rates for fiscal year 2025, a decision that is expected to provide a significant boost to the U.S. hotel industry.
Starting October 1, 2024, the standard daily lodging allowance for most of the continental United States will rise by $3 to $110 per day, while the meals and incidental expenses allowance will increase by $9 to $68 per day.
This marks the first increase in the meals and incidental expenses category in three years, reflecting the ongoing inflationary pressures and the economic realities faced by the hotel industry.
A Victory for the Hotel Industry
The American Hotel & Lodging Association (AHLA) has been a strong advocate for 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 perennial federal advocacy priority on behalf of our members,” said Kevin Carey, AHLA Interim President & CEO.
The increase in per diem rates is expected to be worth approximately $100 million to the hotel industry, providing much-needed revenue as the industry continues to recover from the effects of the COVID-19 pandemic and the ongoing challenges of a nationwide workforce shortage.
Government travel is a vital source of income for many hotels across the country. The per diem rates set by the GSA govern how much federal employees are reimbursed for lodging and meals during official travel, making these rates a critical factor in the financial planning of hotels that cater to government employees. The AHLA’s successful advocacy ensures that these rates are fair and keep pace with economic conditions, benefiting both the hotel industry and the federal workforce.
The Process Behind the Per Diem Rate Calculation
The GSA’s methodology for setting per diem rates involves calculating the average daily rate (ADR) for lodging and meals from a trailing 12-month period, minus five percent. This approach aims to balance the needs of federal employees with fiscal responsibility, ensuring that the government spends taxpayer dollars wisely while also recognizing the operational costs faced by hotels.
For fiscal year 2025, the standard per diem rate for most of the continental U.S. has been set at $178 per day, including $110 for lodging and $68 for meals and incidental expenses. This increase is a positive signal for the hotel industry, indicating a recognition of the higher costs that hotels are facing due to inflation and other economic pressures.
The increase in per diem rates is expected to have a broad impact on the hotel industry, particularly in markets that rely heavily on government travel. For many hotels, especially those in smaller markets or areas with a significant federal presence, government travelers represent a stable and dependable revenue stream. The new rates will help ensure that hotels can continue to provide quality accommodations and services to federal employees without compromising their financial health.
As the hotel industry continues to navigate the challenges of the post-pandemic landscape, the increase in per diem rates provides a welcome boost. It reflects the ongoing collaboration between the GSA and industry advocates like the AHLA, who work to ensure that government travel policies are fair and sustainable.
