Government rate hotels: a guide for hotels and travellers

What a government rate is

When a hotel advertises a government rate, it usually means a room price at or below the lodging part of the federal per diem for that city and month. The per diem itself is not a hotel price. It is the most a federal traveller on official business is reimbursed for a room per night, set by GSA for the continental US^[1]. A hotel that prices a room at or under that cap makes it easy for a federal traveller to book without paying the difference out of pocket.

Nothing obliges a hotel to do this. GSA says hotels are not required to honor the federal per diem rates and that offering the rate is each property's business decision^[2]. A government rate is therefore a commercial choice, like any other negotiated or segment rate, and the hotel sets its own conditions for it.

The cap also leaves out two things a guest pays at the desk. Lodging taxes are not included in the CONUS per diem rate^[2], and meals are covered by a separate daily allowance, M&IE, that the hotel never sees. When a traveller says the room has to be "at per diem", they mean the pre-tax room rate.

Who can book a government rate, and what ID hotels ask for

GSA sets per diem rates for federal travellers on official travel only^[2]. Whether anyone else gets the rate is up to the hotel: GSA notes that hotels may or may not choose to extend it to other people, such as government contractors^[2]. For contractors, GSA points to the contracting officer and the terms of the contract rather than to the hotel^[2].

Through GSA's own lodging programme, FedRooms, all US government and military personnel can book^[3]. Outside that programme, eligibility is whatever the hotel's rate rules say, which is why the same traveller can qualify at one property and not at the next.

Neither GSA's per diem FAQ nor its FedRooms page sets a rule for proving eligibility at check-in, so each hotel decides what to ask for. A hotel that offers a government rate should write its proof rule into the rate description, train the front desk to apply it the same way every time, and decide in advance what happens when a guest cannot show it, for example moving the booking to the public rate.

• Write down who qualifies: federal employees, military, state or local government staff, contractors.
• Write down what counts as proof, and whether travel orders are needed or a government ID is enough.
• Decide whether leisure stays qualify or only official travel.

How the GSA lodging cap works by month

GSA publishes lodging caps for each non-standard locality and a standard rate for everywhere else in the continental US^[1]. A locality is a key city plus, usually, one or more counties; when a destination is not listed but its county is, the county rate applies to the whole county^[2].

Many localities change their cap by month, so a busy season can carry a higher cap than the rest of the year. For a hotel this matters more than the headline number: the cap in a slow month can sit well below the rate the hotel needs, while the cap in a peak month can be easy to meet. The worked example below shows one city's caps for the whole fiscal year next to the standard rate, and every city page on this site has the same month-by-month table.

The caps run on the federal fiscal year, from 1 October to 30 September, and GSA reviews them every year^[2]. New rates are typically announced in mid-August^[1], which gives a revenue manager about six weeks to decide whether a government rate still works before the new caps apply.

Lodging taxes and where state exemption forms come from

Because taxes sit outside the per diem, the next question is whether they apply at all. GSA says some states and local governments may exempt federal travellers from taxes, and sends travellers to its state tax forms page for the details^[2]. The answer depends on the state and on how the room is paid for.

GSA's SmartPay vendor guide draws the line by account type. Expenses on a centrally billed account are paid directly by the federal government and should not be charged state taxes. Expenses on an individually billed account are paid by the cardholder and may or may not be exempt, depending on the state^[4]. The guide tells merchants that the sixth digit of a travel card number shows the account type, and to check GSA's state-by-state tax pages and the state's exemption form before charging tax^[4].

For a hotel, the practical step is to know your own state's rule before the guest arrives, know whether the state requires an exemption form, and be ready to hand the traveller a copy of it^[4]. The same guide tells hotels to ask for a government ID or travel orders before granting the exemption, and warns that photocopying a government ID is unlawful^[4]. Your state's tax authority, and the city or county for any local room tax, remain the final word.

FedRooms

FedRooms is GSA's lodging programme for federal travellers. GSA describes it as offering Federal Travel Regulation compliant hotels at or below per diem, with standardised amenities, and it is open to all US government and military personnel^[3]. Travellers book it through their agency's booking tool or travel management company^[3].

For a hotel, joining means accepting the programme's conditions. GSA lists them on the same page: rates at or below per diem, cancellation allowed until 4 p.m. on the day of arrival for domestic stays, no deposits or early departure fees, free in-room internet, the FedRooms rate honoured for phone bookings, and current FEMA certification and ADA compliance^[3]. The same page promises travellers no additional fees such as early departure, resort or booking fees^[3]. GSA also tells travellers to check FedRooms before asking for more than per diem when no room is available at the cap^[2].

hotels.tools is not affiliated with GSA, FedRooms or any hotel chain, and nothing here is an offer to join the programme. The conditions above are GSA's; check the current version on GSA's page before you apply.

How the IRS high-low method relates to private employers

Private companies are not bound by GSA rates. For an employer that pays its staff a per diem allowance, the IRS publishes a simplified method each year, the high-low method^[5]. Under it, an employer uses one daily rate for a listed set of high-cost localities and another rate for the rest of the continental US, with a part of each treated as meals^[5].

The two systems are linked. The notice defines a high-cost locality by its federal per diem rate, the GSA lodging cap plus M&IE, and lists each locality with the months it qualifies^[5]. For a hotel, this means corporate travellers whose employer uses the high-low method can carry a daily allowance that does not follow the GSA cap for that city at all, which is one reason a government rate and a corporate rate are different products. Which method an employer uses is a tax question for that employer, and nothing here is tax advice.

What a hotel should check before offering a government rate

A government rate is worth offering when it fills rooms that would otherwise stay empty without pulling down the price paid by guests who would have booked anyway. Before loading one, work through the questions below for your own city and months.

• Compare the cap with your own ADR month by month, not with the annual headline; the city pages here do this for you.
• Decide which months the rate is open in, and close it in months where the cap sits far below what you sell.
• Set the eligibility rule and the proof you will ask for, and put both in the rate description.
• Check your state's lodging tax rule for federal travellers and how you will tell a centrally billed card from an individually billed one.
• Read GSA's FedRooms conditions before applying, especially cancellation, fees and amenities.
• Review the rate every year after GSA announces the new caps in August, before they apply on 1 October.