When I worked for Congress (not sure how the other branches do it, though I think they're similar) we got the GSA per diem for each day (it was generally $165 a few years ago, higher in certain cities) and had to pay our hotel and meals out of that. So the cheaper the hotel, the more you had to spend on meals. There were some caps on meals ($15 breakfast / $20 lunch / $35 dinner), but in a lot of cities if the hotel was close to $165 you didn't have much to work with and paid out of pocket.