Xanterra Parks & Resorts was awarded a 15-year contract Thursday to continue managing the bulk of lodging and dining concessions on the South Rim of Grand Canyon National Park/El Tovar Hotel, NPS photo
Xanterra Parks & Resorts on Thursday was announced the winner of bidding for the bulk of lodging and dining operations on the South Rim of Grand Canyon National Park.
That decision marked the end of four rounds of draft concessions proposals floated by the Park Service and more than a year of contentious relations between the agency and Xanterra, which has operated Grand Canyon concessions for decades.
“We are pleased to continue our long relationship with this important park partner, and we look forward to working together to implement some exciting improvements to services on the South Rim," Grand Canyon Superintendent Dave Uberuaga said in a release announcing the decision.
Xanterra officials were pleased to continue the company's longstanding presence on the South Rim.
“We are delighted to continue operating visitor facilities and services at the South Rim of Grand Canyon National Park and look forward to working with the National Park Service to provide legendary and sustainable hospitality to the travelers who visit the Grand Canyon,” said Andrew N. Todd, Xanterra's president and CEO. “This contract includes some exciting developments within the park, and we are eager to get started.”
The release did not mention the franchise fee Xanterra would pay to the Park Service over the length of the 15-year contract. Grand Canyon officials initially had sought a 14 percent franchise fee, then dropped it to 10 percent when that proposal did not attract any bids, and then dropped it again to 8 percent.
What the final number is would be key to how soon Grand Canyon would be able to repay $50 million it borrowed from 88 other units of the National Park System and the agency's Washington, D.C., headquarters office a year ago to afford a $100 million buy down of the financial interest Xanterra had built up over the decades in the South Rim's concessions infrastructure.
The buy down was envisioned as a way to make the South Rim concessions' contract more affordable to a wider range of companies. How many companies submitted bids after that buy down was not immediately known.
Many key national park concessions long have been managed primarily by four companies -- Xanterra Parks & Resorts, Delaware North Companies Parks & Resorts, Forever Resorts, and Aramark Leisure.
Xanterra long has been involved with operations at Grand Canyon, Yellowstone, Zion, Death Valley, and Crater Lake national parks; Delaware North has run lodging and dining operations at Yosemite National Park, and recently acquired the contract at Shenandoah National Park; Forever Resorts has operated the Grand Canyon Lodge on the park's North Rim, as well as lodgings and other services in such parks as Mammoth Cave, Isle Royale, Badlands, and Big Bend; and Aramark has operations in Olympic, Mesa Verde, Denali, and Glacier Bay national parks, and earlier this year won the Yosemite concessions contract over Delaware North.
As each year of operations passes, the companies make investments into the properties, investments that can amount to multi-million-dollar sums, or, in the case of Xanterra at the Grand Canyon, roughly $200 million. And when concessions contracts come up for bid, those sums can cost winning bidders if they oust the incumbent -- when Delaware North won the contract for Shenandoah, it had to pay Aramark $10.3 million -- or they can dissuade other companies from bidding.
The large investments some concessionaires build up long have been seen as impediments to more competitive bidding for contracts. To break, in essence, such strangleholds, Congress in 1998 rewrote the Park Service's concessions business by passing the Concessions Management Improvement Act. In short, this measure aimed to reduce preferential right situations, institute franchise fee distribution changes, mandate new competitive bid requirements, and increase accountability and oversight. These changes seemed to take hold most recently at the Grand Canyon, where in August 2014 the Park Service awarded roughly half of the South Rim's concessions business to Delaware North. Delaware North, however, had to pay Xanterra $41 million in "leaseholder surrender interest (LSI)" fees that reflect Xanterra's investments in those operations.
The new contract awarded to Xanterra takes effect Jan. 1, 2016; the company currently is running the concessions under a one-year contract issued while Grand Canyon officials worked on negotiating the longer pact.
The South Rim contract is one of the largest in the Park Service in terms of revenue and lodging inventory. The services to be provided under the contract have generated an average of approximately $66 million in gross revenues annually, according to the Park Service. New services required under the pact include a re-constructed Maswik South Lodge, improved food offerings including food trucks, and other improvements to operations and services.
Maswik South currently is comprised of motel-style rooms in six two-story buildings accessed from outside walkways and stairwells. The building will be replaced by a new LEED® “Gold” lodge building featuring 120 rooms and a quick service restaurant.
This historic lodging and hospitality contract covers lodging, retail and food service in the historic Grand Canyon Village including the El Tovar, Bright Angel Lodge, Thunderbird and Kachina Lodges, Maswik Lodge and Phantom Ranch, as well as retail and food service at Hermits Rest. It will also continue to include transportation services such as bus tours, taxi service and mule rides.
Comments
Delaware North has done amazing positive improvements with the Yavapai half of the park. Thank you for bringing them in. The Yavapai lodge now has a great place to eat, a very nice coffee/snack shop, a tavern, and an improved registration desk.
Am I missing something or did NPS just pay Xanterra $100 million to continue its operations at Grand Canyon National Park. If NPS had just accepted Xanterrra in the first place it could have continued without paying down the LSI. Xanterra can now use the interest on the $100 million to pay any increased franchise fee for the next 15years. Further, Grand Canyon doesn't even get to keep the increased franchise fee since it has to pay back the other parks it borrowed from. Someone in the NPS headshed isn't paying attention or doesn't have much business sense and just put Grand Canyon National Park and several other parks in jeopardy of reduced operations in the coming years.
However, the LSI the next time the bid comes up should be $100 mil lower then it would otherwise be. But I agree, something needs to be done differently to lessen the LSI impact on the bidding process.
Yes it will be $100 mil lower but in 15 years Xanterra will likely build up many 10s of millions more in LSI. Just $5 million per year in investment will put the LSI sell over $100 million next time around and $10 million/year would put the LSI over $200 million. Add to that the increased historic value of the properties and you've got numbers which will likely never be paid off unless congress steps in. The best part about it for Xanterra is that it can increase its LSI with the $100 mil it got from the NPS last year as sort of a 15 year improvement slush fund. The NPT article goes on and on about all the great investments Xanterra is planning to increase its LSI making it harder and harder for any other company to step in. This is not the way Mather invisioned monopolies working in the national parks.
The concessionaire needs to be compensated for his investment, otherwise, there will be no investment. That compensation will either have to come from the NPS through lower concession fees or direct buydowns, or from the new concessionaire. I think where the current process is flawed is in the LSI calculation. It should be based on an appraised value rather than the sum of investments as the latter does not account for depreciation or poor investments.
Yes they do need to get compensated but if the NPS had been smart, and not driven by greed to get additional revenues outside of congress, I believe it might have been possible to negotiate a deal where the cost of any infrastructure investments would have offset the franchise fee it was obligated to pay. That way the NPS could have, over time, maintained ownership and control of much of the park infrastructure for over night lodging, camping, food services, guiding, museums etc. If budgets continue to stagnate or decline, the remaining services and infrastructure (law enforcement, entrance stations, interpretation, resource management) could potentially be given under contract to the concessionaire as well. The NPS has done a fine job over the past few years of increasing fees to ensure that such a take over is economically feasible for a concessionaire.
for all sorts park functions to maof be accomplished (maybe more efficiently), under NPS control will be at risk for being assumed byare now at risk for being taken over by the conceNPS has raised fees to a point that privFurther, given the current rash of fee increases all accross the NPS, I predict it won't be long before concessionaires in NPS, it won't be long from everything from extreme Under the current fee authority/structure (basically allowing the NPS to charge whatever it wants) and with declining budgets, it is pretty obvious that it won't be long Taken to its logical conclusion, if the congress continues to cut funding for the NPS, NPS will be left with no choice but to turn over more and more of its functions to a concessionaire.
The concessionaireresources its charged to protect. Not only are bad investments rewarded/compensated but prices the concessionaire can charge are controlled, so the retrun on investment may not be as lucrative as it could be. As I see it as the concessionaire invests more and more and congress cuts the NPS more and more, the concessionaire will own more and more of the park facilities. The concessionaire already runs the campgrounds, it could very easily take care of and operate the entrance stations, visitor centers, security etc. if it were able to retain all or part of the entrance or special amenity fees now collected by the NPS. Unfortunately, they may be able to run those services much more efficiently than the NPS ever did.