Some hotels find per diems hurt more than help

Hotel & Motel Management, Jan 10, 2005 by Bruce Adams

NATIONAL REPORT--David Welliver, g.m. of the Days Hotel and Conference Center at Dulles International Airport in Virginia views per-diem rate increases as poison.

"Government transient business tends to go where they perceive to be the best hotel for the best money," he said. "When the per diem went up to $150 in January 2002, it was a dark day for me. Upscale hotels opened their doors to get the per-diem business. I'm going to lose head to head against a Hyatt that needs the occupancy."

Much of the per-diem business is bought sight unseen, which puts Days Inn, an economy brand, at a competitive disadvantage against midscale and upscale hotels.

"But we are not a typical roadside Days Inn," he said. "If you see the hotel, you understand that we compete with the Hiltons and Sheratons. Once I get a transient traveler to the hotel, I have a decent chance of getting him back."

About 8 percent of the hotel's business is per diem business, said Welliver, who has been at the hotel since 1989 and working in the Washington market since 1981.

"In 2001, our per-diem business was growing until they raised the per diem in January 2002," he said.

He tried to compete by offering other extra freebies, such as a full breakfast, dinner, airport-shuttle service and shuttles to local businesses.

"A government traveler also is reimbursed a daily meal per diem," Welliver said. "If he can go to a hotel and pay at or below the per diem and get meals included, he doesn't have to spend his meal per diem. He gets the meal per diem whether he buys the meal or gets it free."

Peter Favier, g.m. of the Holiday Inn Select Orlando International Airport, agreed.

"Government contractors have to make up the per diem at their own expense," he said. "They look for added values, such as free shuttle service, free breakfast, free high-speed Internet access, toll-free calls and starting this year, Priority Club points."

Favier said the hotel made more than $300,000 in per-diem revenue in 2003, more than $600,000 in 2004, and plans to increase that in 2005. The rate in Orlando increased to $98 in 2005 from $95.

badams@advanstar.com