HVS: Average per diem rates rising across top U.S. markets

The rates serve as economic indicators for hotels’ markets, article says

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In markets where federal government travel is significant to hotel demand, a hotel’s pro forma and any revenue projections should heavily consider the most recently published per diem rates, according to an article from consulting firm HVS.

THERE HAS BEEN an increase in average per diem rates across top U.S. lodging markets in 2020 expected to continue into 2021, according to an article from consulting firm HVS. The rates serve as an economic indicator for hotels and the markets in which they operate.

Per diem rates are set annually by the U.S. General Services Administration and provide allowances for lodging, meals and incidental expenses. The lodging rates are based on the costs of mid-priced hotels across several locations, according to the article from Chelsey Leffet, HVS senior vice president and head of the firm’s Washington consulting and valuation office.

While federal travelers generally are not primary sources of demand in many markets, the rates still provide a number of economic indications for certain areas. From a valuation standpoint, in markets where federal government travel is significant to hotel demand, a hotel’s pro forma and any revenue projections should heavily consider the most recently published rates, including the seasonality changes and recent changes that may affect future per-diem rates, as this could influence the hotel’s revenues.

“Given that the ADR data used by GSA to set per-diem rates for the fiscal 2020-21 period are from March 2019 to February 2020, the effects of the COVID-19 pandemic are not reflected in the rates set,” Leffet said. “It is unclear how per-diem rates will be set for the fiscal 2021-22 year, if different from historical procedures, given the substantial declines in ADR in markets nationwide because of the COVID-19 pandemic.”

San Francisco has the highest per diem rates with $291.66 against standard rate of $195.66. Boston/Cambridge comes second with $251.23 against the standard rate of $155.23. There has been around $100 increase when compared to standard rate in New York ($244.90), Columbia ($220.21) and Nashville ($219.81), according to an analysis by HVS.

For fiscal 2020-21, 319 Non-Standard Areas were considered to have higher rates than the standard rate, which was reported to be $96 for the lodging allowance. In fiscal 2019-20, there were 322 NSAs.

While the GSA has released its fiscal year 2021 per diem rates for federal government travelers, the U.S. Travel Association is pressing for legislation to freeze those rates where they are. In response, GSA agreed to base fiscal year 2021’s per diem rate on the ADR from March 2019 through February 2020.

Under the new rates, which will take effect in October, the standard continental U.S. lodging rate will remain unchanged at $96 and the meal and incidental expense per diem tiers also will stay at $55 to $76, according to GSA. The maximum lodging allowance for 319 Non-Standard Areas will receive a higher than the standard allowance.