Hotels Shortchanged by Feds: Federal Travelers Get Half as Much to Stay in Loudoun

If you’re a federal employee or contractor, and you stay in the Hyatt House Sterling/Dulles Airport North along Rt. 28 and Old Ox Road for work this week, the government will cover $97 a day for your hotel room.

Drive 10 minutes down Rt. 28 to The Westin Washington Dulles Airport, and Uncle Sam will pick up $174. If you stayed there in September or October, it would be $222, more than twice as much as the Hyatt.

Why? Because the Westin is about 70 feet inside Fairfax County.

The Hyatt House Sterling/Dulles Airport North off Rt. 28 and Old Ox Road, near Dulles airport. (Renss Greene/Loudoun Now)
The Hyatt House Sterling/Dulles Airport North off Rt. 28 and Old Ox Road, near Dulles airport. (Renss Greene/Loudoun Now)

“It’s difficult for us to compete with those hotels, because they are able to charge much higher rates for their government travel, whereas during those same times of year, we are refusing to accept that rate,” said Herb Glose, an assistant vice president in the B.F. Saul Company Hospitality Group and chairman of the Visit Loudoun Board of Directors.

His company owns six hotels in Loudoun, including five along Rt. 28. They are plagued by the General Services Administration’s per diem rate, which is the money it allots a federal traveler to stay in a given locality.

Until 2007, Loudoun was in D.C.’s Non-Standard Area, a GSA designation for an area with a higher per diem. Fairfax is still in that area. Loudoun has been put in its own Non-Standard Area, with a rate $8 higher than the usual per diem, and for parts of the year, less than half of the D.C. area per diem.

That means less money flowing into Loudoun and lower hotel tax revenues. And in Northern Virginia, the GSA’s per diem rate sets expectations not only for government travel, but a huge part of business travel, too.

The Westin Washington Dulles Airport, just across the county line in Fairfax. (Renss Greene/Loudoun Now)
The Westin Washington Dulles Airport, just across the county line in Fairfax. (Renss Greene/Loudoun Now)

“The government is the market maker,” Glose said. “That doesn’t hold true for almost every market in the country—maybe some military-heavy counties or locations—but they’re the market maker here.”

A lot of the business travel here is on government contracts, Glose explained, so businesses also often negotiate with hotels for the per diem rate. Anything above that cuts into their profits.

“That means all of your government business, plus a good deal of your corporate negotiated business, is all set by that one rate,” Glose said. So in busy parts of the year, their hotels simply don’t offer rooms at the per diem rate, forcing many work travelers in Loudoun to either find other hotels or pay out of pocket.

Other hotels work to keep offering the per diem rate, even when they could be charging more. Steven de Fillipis, the director of sales manager at the Hyatt House, said his hotel tries to strike a balance between occupancy and room rates, rather than charge more and have empty rooms.

“Perhaps the $97 rated room may hurt in peak season, but their loyalty will help you in the low season,” de Fillipis said. “Furthermore, such guests may spend other revenue in our bar/restaurant or convenience store. Finally, it is good to know your housekeepers have full shifts and not have to rely on a second job for supplemental income.”

The problem, de Fillipis said, is how per diem is calculated.

“The GSA looks at average rates to determine a fair per diem,” de Fillipis said. “The problem in Loudoun is that we sit in the middle of a high-tech corridor, in the richest county, and our rates are averaged with a limited service hotel in Purcellville. We are not attracting the same travelers.”

Lobbying the GSA

This year, the county has again hired The Ferguson Group to argue on its behalf in the national capital. Top on its list of priorities is getting Loudoun back into the D.C. Non-Standard Area.

The Ferguson Group says it has made progress with the General Services Administration, which has already changed the way it sets per diem rates and is in the process of changing the way it delineates Non-Standard Area boundaries.

Jennifer Imo, a managing partner at The Ferguson Group, said the boundary process historically has been more subjective than objective, and there’s no documentation explaining just why Loudoun was taken out of the D.C. Non-Standard Area.

“Loudoun County is the only community that’s paying into the [Washington Metropolitan Area Transit Authority] compact that’s not part of the D.C. Non-Standard Area,” Imo said. “You’ve got Metro coming out to Loudoun County, you’ve got Dulles airport in Loudoun County, so at the very least let’s carve out that relevant portion of eastern Loudoun.”

Her firm has formed a coalition with the county, Visit Loudoun, the Metropolitan Washington Airports Authority, the U.S. Department of Transportation, and Loudoun’s congressional delegation to pressure the GSA.

“The Marriott that’s on the airport property, versus, say, a Marriott that’s across the street in Fairfax—they literally have to charge so much less on the Loudoun side in order to attract those federal employees to stay there,” Imo said. “But I will tell you this: the GSA is not concerned about the financial well-being of the hotel industry or the financial well-being even of a local government like Loudoun County. Their goal is to ensure they’re providing adequately for the federal traveler.”

She said The Ferguson Group is focusing on the impact on federal travelers, to whom nearby rooms aren’t always available at the per diem rate, and on Dulles Airport, which gets much of its traffic and hotel stays from federal travelers. Hotels on the property pay into the Metropolitan Washington Airports Authority.

“The Marriott has lost revenue in terms of what it pays to MWAA because of the per diem,” said Visit Loudoun president and CEO Beth Erickson.

Making Progress

The GSA has moved the responsibility of setting its per diem rates to its Office of Government-Wide Policy, and Imo said that GSA Administrator Denise Turner Roth has asked the GSA staff for proposals on new, more objective ways to set Non-Standard Areas. But that process, she said, could take more than a year.

“I think at the end of the day, this is a work in progress,” Imo said. “We’ve made a lot of progress over the last year. We’re not there yet, but when you deal with changes at the federal agency level, things take a long time.”

“The fact that this is at the level of importance that it is for the Board of Supervisors speaks to the importance of tourism and hospitality in Loudoun County,” Erickson said.

If Loudoun, or at least eastern Loudoun, can get back into the D.C. Non-Standard Area, it will be a good day for Glose and de Filippi.

“You would immediately see a step change in the rates that we’re able to charge,” Glose said. “Which from the perspective of Loudoun County means that you’ve got healthier businesses that are paying more into their real estate taxes, their sales taxes, their transient occupancy taxes, so it’s something that would significantly affect not only the whole industry, but also the health of Loudoun County in general.”

One thought on “Hotels Shortchanged by Feds: Federal Travelers Get Half as Much to Stay in Loudoun

  • 2016-07-12 at 6:43 pm

    One study presented to us in 2013 showed the County has lost about $14 million in hotel tax since 2007 when the GSA removed Loudoun from the Metro DC MSA, simply because Frederick County, MD, complained about it. The per diem is used by federal contractors, too, and that’s where Loudoun gets pinched — not so much with federal employees coming here on business as we have few federal institutions nearby. Many of us on the board personally lobbied GSA and members of Congress on this matter, but due to the various travel scandals involving federal employees, Congress has cut back on federal travel. So, there is really no interest in Congress to level the playing field for the sake of Loudoun’s hotels — and equalizing the per diem by lowering it across the board in DC to encourage use of suburban and cheaper hotels will take money out of the hide of hotel chains that operate inside the Beltway. In addition, I think federal employees are making more use of Skype for their meetings vs. flying places.

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