The advice on understaniding government per diem rates below is from a reliable and trusted source who wishes to remain anonymous.
Per Diem Misconception
The core misunderstanding is that lodging owners are confusing a reimbursement cap with a pricing guideline. The federal per diem rate is the maximum amount a contractor or government employee can be reimbursed for lodging costs. It is not an amount they are required to spend, nor is it a suggested nightly rate. A successful contractor's goal is to stay as far below the per diem rate as possible to save money on the project and increase their profit margin.
Risk of Price Gouging
If lodging owners set their rates at the per diem limit, they are essentially charging a premium price, which can be perceived as price gouging by the contractors. This approach completely ignores the basic principle of a competitive market. A contractor will naturally seek the most cost-effective solution for their employees, and if they feel a rate is artificially inflated, they will look elsewhere.
Interstate Proximity
Most of the contractors will need lodging for months, not days. This is why contractors would consider less expensive extended stay options in a nearby communities like Bristol, Abingdon or Glade Spring along Interstate 81. If lodging owners in Damascus are charging a flat rate of $110, but a clean, safe, and comfortable option is available in Bristol for $60 a night or Abingdon for $1,300 a month, the contractor will choose the alternative lodging.
In summary, the most effective strategy for Damascus lodging owners interested in converting to a long-term rental arrangement is to offer a competitive rate that provides excellent value and attracts contractors, rather than matching a reimbursement cap that will send contractors to other towns in search of more affordable options. By temporarily moving away from a transient occupancy model, a lodging owner can dramatically reduce operational expenses such as cleaning and laundry services, which are typically required after every short-term guest stay. This change also lessens the administrative burden of constantly managing bookings, marketing on multiple platforms, handling individual guest inquiries, and the complex process of remitting lodging taxes. Furthermore, long-term rentals will offer the added benefit of a predictable and stable income stream with a single, reliable tenant, reducing the risk of vacancy and providing greater financial security.
