Concessions, Leases, And Adaptive Reuse In The National Parks
Editor's note: Just how does the National Park Service decide who will operate lodgings in the park system, and what uses are appropriate inside those facilities? In a two-part series, David and Kay Scott tackle those questions.
The operation of national park commercial facilities and services is typically put out for bid with NPS-stated minimums relating to fees, facility improvements, deferred maintenance, and other requirements expected of bidders. For example, prospective concessionaires for a park lodge generally must agree to pay a required percentage of revenues to the NPS as a form of rent for use of the facilities.
In addition, a prospectus may require a stated percentage of revenues be placed into a repair and maintenance reserve. Specified maintenance deficiencies may have to be addressed and a lump-sum payment made to the existing concessionaire for past improvements. Also, specific capital improvements may be required on the part of the winning bidder.
The minimums included in a prospectus allow potential bidders to estimate a park operation’s potential profitability and decide whether a bid is justified. Bidders can improve their chances of winning a contract by offering more than the minimum requirements. If a prospectus fails to attract interest, most likely because bidders consider the terms too onerous, the original prospectus will be extended or altered to make the concession a more attractive business opportunity.
For example, a revised prospectus for a lodging facility on the Blue Ridge Parkway was issued after the NPS agreed to absorb a portion of the dollar amount a bidder would be required to pay the exiting concessionaire. Reducing the amount to be paid by bidders (the NPS had to come up with the difference) improved the commercial viability of the lodge.
The goal is to gather in money for the NPS while allowing the concessionaire to operate a successful business, all while making sure park visitors have an enjoyable experience at a fair price. Park facilities operated by concessionaires are generally owned by the National Park Service, and prices charged for lodging, food, gifts, services, etc. are subject to approval by the respective park superintendent. Larger parks typically have concession specialists to take care of the details and make recommendations to the superintendent, who almost certainly has bigger fish to fry (ie., snowmobiles in Yellowstone.).
There are exceptions to NPS ownership, typically for properties located on private land within a park or on private land just outside a park. For example, three of the four lodging facilities associated with Death Valley National Park are on private land within the borders of the park. The Inn at Furnace Creek, The Ranch at Furnace Creek, and Panamint Springs Resort are each privately owned and operated lodging facilities. Only Stovepipe Wells is NPS-owned and operated as a concession.
Apgar Village Lodge on the west side of Glacier National Park is privately owned and operated. Two other lodges closely associated with Glacier, Glacier Park Lodge and Prince of Wales Hotel, are owned by Glacier Park, Inc. Operations for these facilities are not offered for bid or subject to the same oversight as facilities owned by NPS.
Except in unusual circumstances concession contractual agreements are limited to ten years. A year or so prior to expiration, a new prospectus is issued and the process begins anew. Contracts requiring an unusually large amount of capital on the part of a concessionaire may include an extended time period of 15 or more years, but these are rare. In some instances, such as when no bidders emerge, new or existing concessionaires may be offered extensions or temporary contracts that last only a year or two, at which time the NPS will issue a prospectus with a longer term.
No concession system, including that currently used by the National Park Service, is perfect. Application requirements can be so complex that all but the largest businesses find it prohibitive to compete or even submit a bid. Thus, a relatively small number of companies, including Xanterra Parks & Resorts, ARAMARK Parks & Destinations, Forever Resorts, and DNC Parks & Resorts control a substantial portion of the major national park concession business.
Concessionaires often become frustrated by contract restrictions and the time required for NPS decisions and approvals. Imagine waiting months for NPS approval of the flooring you wish to install as part of an historic cabin renovation. Approvals for lodging rate changes sometimes don’t come until spring when many travelers have made reservations for the season.
Disgruntlement with concession arrangements have resulted in some companies with concession contracts also acquiring properties that can be operated without NPS restrictions outside park entrances.
Other shortcomings exist. Prospective concessionaires may be reluctant to invest significant capital in facilities when a contract is limited to ten years. Thus, the recent Yellowstone prospectus that included a requirement for $135 million in facilities improvements was issued for a period of 20 years, double the normal term.
Another disadvantage of limited contract lengths is that maintenance may receive scant attention during the final years of a contract, especially when the existing concessionaire has little interest in bidding for a renewal. Even existing concessionaires interested in continuing at a property may be reluctant to spend substantial sums on maintenance when their bid may well prove unsuccessful.
Reluctance to spend money near the termination of a contract results in an increased amount of deferred maintenance for a new concessionaire. Tight federal funding has created financial issues for concession projects as well as park staffing, maintenance, and other operations.
Lack of funding is a particular problem for parks with commercial facilities requiring extensive renovations to remain or become operable. A park with a dilapidated commercial building may have insufficient funds to make the facility usable by a concessionaire. In addition, potential concessionaires are unlikely to consider committing the required funds to make the facility usable when the contract term is ten, or even 15 years.
Another potential problem arises when the facility is a nonstarter as a commercial enterprise because the original business is no longer viable.
Consider the abandoned bathhouses in Hot Springs National Park. To overcome the funding issue, some parks have resorted to a different type of business arrangement in which contracts are issued for extended periods of 50 or more years. Parks have also adopted the philosophy of adaptive reuse in which park facilities are renovated through private funding, but for uses other than those for which the facilities were originally utilized.
Although the uses are expected to be compatible with a park’s mission, there appears to be fairly wide latitude in interpretation of the mission. Thus, an abandoned gas station becomes a store, an abandoned store becomes administrative offices, and an abandoned bathhouse becomes a brewpub.
Long-term leases have been used for lodging facilities in Cuyahoga Valley National Park, San Francisco Maritime National Historical Park, and Golden Gate National Recreation Area. However, there is no park for which extended contracts are more important than Hot Springs National Park in Arkansas. Commercial operations in what some claim as America’s oldest national park (initially a federal reservation) will be the subject of tomorrow’s article.
Tomorrow: Want a fresh brew with your bath?