The National Park Service recently released its long-awaited prospectus for the primary concession business in Glacier National Park. The existing contract commenced in 1981 and has been on an annual extension since 2005.
The proposal covers the park’s five lodging facilities along with their associated food, beverage, and retail operations. It also includes the retail operation at Two Medicine, operation of hiker shuttles and iconic Red Bus fleet, plus various other smaller businesses including ATMs, public showers, public laundry facilities, and vending operations.
Overall, these concessions generated more than $18 million in revenue during 2010, an increase of nearly $2 million compared to the previous year.
The prospectus calls for a 16-year contract that the Park Service estimates will require of the winning concessionaire an initial investment of nearly $33 million, two-thirds of which is for the possessory (ownership) interest of existing concessionaire Glacier Park, Inc. (GPI). The possessory interest is mostly investments made by GPI on the eastern side of the park, according to Jan Knox, Glacier's concession specialist.
The $33 million initial investment at Glacier compares with an estimated $45 million initial investment for the 20-year Yellowstone contract that recently closed. As with all current NPS contracts, the possessory interest will automatically convert to leasehold interest for the winning bidder.
In addition to requiring $22 million for possessory interest, the initial investment includes personal property owned by GPI ($5 million), the first year’s deferred maintenance ($1.4 million), personal property improvements ($2.5 million), support facilities outside the park ($ .75 million), miscellaneous improvements ($ .2 million), and other pre-opening expenses ($ .5 million). As an aside, an appendix to the prospectus includes an amazing 702 pages of deferred, recurring, and preventative maintenance items. The appendix of personal property is 43 pages long and ranges from a 4-slice toaster at Swiftcurrent to an upright piano at Rising Sun.
Lodging facilities included in the contract include Apgar’s Village Inn, Lake McDonald Lodge, Rising Sun Motor Lodge, Swiftcurrent Motor Inn, and Many Glacier Hotel. Apgar Village Lodge on the park’s west side is a private inn-holding that is independently operated and not included in the concession contract. Two historic lodges closely associated with the park - Glacier Park Lodge and Prince of Wales Hotel - are outside the park, privately owned by GPI, and not NPS properties.
The Red Bus fleet is owned by the National Park Service but maintained and operated by the concessionaire. The prospectus requires that the new concessionaire rehabilitate at least 15 buses during the first 12 years of the contract. In addition, the remaining 18 buses are to be replaced beginning in 2025 with alternative fuel vehicles at a cost of at least $4 million.
Any concessionaire at Glacier faces several important issues. Maintenance of these old and wonderful hotels is never-ending. Many Glacier Hotel and Lake McDonald Lodge are approaching their 100th birthdays, and all the problems associated with being nearly a century old.
Perhaps most important, the short season makes it difficult for a concessionaire to recover the initial investment. Many Glacier Hotel, the park’s most popular lodge is open only from mid-June to mid-September. The season for Rising Sun Motor Inn near St. Mary is even shorter. Another issue is the marginal condition of Going-to-the-Sun Road that is a constant headache with continuous maintenance problems and frequent closings due to weather or rock slides. Of course these issues impact any concessionaire, including GPI.
A new concessionaire faces additional hurdles. For example, GPI owns and operates two large lodging facilities, St. Marys Lodge on the park’s east side, and Grouse Mountain Lodge in Whitefish on the park’s west side, that provide the company with economies of scale.
Because rooms at the park’s five lodges are often full for much of the season, potential guests can be diverted to one of the company's other properties. This allows GPI to leverage its park operation to benefit its other properties. Other businesses are unlikely to enjoy this advantage. Consider also that GPI already owns large support facilities outside the park, including storage room for the Red Buses and laundry facilities for servicing the lodges.
A new concessionaire would be required to purchase or rent facilities for these purposes, most likely from GPI. The NPS estimates this cost at three quarters of a million dollars, funds that GPI isn’t required to spend. Unknown to us, it also owns the two motel buildings at Lake McDonald that we always thought were a part of the lodge.
The site visit to Glacier by potential bidders took place in mid-September. Proposals by bidders must reach the National Park Service Intermountain Regional Office by March 14.