New federal per diem rates provide bump for hotels

The federal government’s fiscal 2024 per diem reimbursement rates — released Aug. 16 by the General Services Administration — will largely benefit Virginia’s hotels, but not necessarily its restaurants.

The continental United States (CONUS) rates — dictating lodging allowances and meals and incidental expenses (M&IE) for federal employees while traveling — will be effective Oct. 1 through Sept. 30, 2024.

The standard CONUS lodging rate, which applies to all localities that GSA does not specify rates for, will increase from $98 to $107. GSA bases the lodging allowances on average daily rate data, less 5%. Fiscal 2024 rates are based on data from April 2022 through March 2023.

“Virginia is probably the most impacted state by this, just because of the amount of government and military traffic that we have … and so it’s a nice lift for Virginia overall,” said Eric Terry, president of the Virginia Restaurant, Lodging and Travel Association.

Northern Virginia sees heavy government employee travel traffic due to its proximity to Washington, D.C. The GSA provides a set rate for D.C., the cities of Alexandria, Falls Church and Fairfax and the counties of Arlington and Fairfax, as well as Montgomery and Prince George’s counties in Maryland.

For fiscal 2024, the Washington, D.C.-area lodging rate will vary by month, with reimbursement rates scheduled to hit a low of $176 in July and August 2024 and a high of $261 in October 2023 and September 2024. That’s a slight increase from fiscal 2023 rates, which ranged from $172 to $258, although rates for March through July remain steady, at $258.

The fact that rates stayed roughly the same is good news for area hotels, said Visit Fairfax President and CEO Barry H. Biggar. Northern Virginia hotel rates dropped for a period of time as business travel declined, a result of the COVID-19 pandemic. From January through July, Northern Virginia hotel revenues were 3.6% lower than the same period in 2019.

“There was a period of time where the rates were actually going down a bit, so to maintain [almost] the exact same per diem as we had last year, we’re happy to be in that position,” he said, adding that it will contribute to the rebuild of travel and tourism in the county.

The per diem rates seem comparable to current hotel room rates in the county, particularly in areas that see a lot of government travel, like Reston and Tysons, Biggar said.

While the standard room rate per diem will increase, GSA did not change meals and incidental expense rates. That rate remains at $59, and the highest tier will stay $79. Starting with rates for fiscal 2016, the GSA began reviewing M&IE rates every three years.

The lack of an increase in the M&IE rate is frustrating, Terry said, since restaurant prices have increased over the last 18 months.

Northern Virginia’s M&IE allowance remains $79, but Biggar said he hasn’t heard concerns from restaurants.

“No one really is complaining about anything at this point, understanding that it’s going to still take a little while to regain back all the markets,” Biggar said.

Hampton Roads is another area that sees heavy federal employee travel, a benefit of it being home to Naval Station Norfolk, the world’s largest Navy base. Although much of the area falls under the standard rate, Virginia Beach receives a nonstandard rate. For fiscal 2024, GSA set the lodging rate at $120 for most of the year, up from $117 in fiscal 2023, and $222 for June, July and August, the same allowance as FY23. For James City and York counties and the city of Williamsburg, lodging rates range from $107 to $137 depending on the month, up from $103 to $130. The M&IE total in that region will remain $64.

In nearby Norfolk, the standard rate of $107 is attractive for hotels outside of downtown, said Visit Norfolk President and CEO Kurt J. Krause. Although the average room rates downtown are closer to $150, at times of low demand, such as December through February, hotels in that area will likely offer the CONUS rate to help fill rooms when demand from business travel decreases.

“The good news is they’ve raised it, because the average rates in Hampton Roads, I know, but specifically in Norfolk, they’ve gone up appreciatively in the last couple of years, post-COVID,” Krause said. While it is not ideal that the federal government’s per diem changes trail that trend, the new allowance still provides an attractive rate, he said.

In other areas of the state, rates have largely stayed static or reflected the slight increases seen in the standard rate. In Richmond, the lodging rate will increase from $145 to $149, and Charlottesville will see a jump from $126 to $133. Lynchburg’s lodging rate bumps up from $105 to $109.

Roanoke’s rate remains the same, $122, while Blacksburg and Montgomery County’s rates will range from $111 to $134, depending on the month, up from $105 to $123.

For hotels that honor the per diem rates, “this is going to be a nice increase for them,” Terry said. “This should be welcome news for most of our hotels.”