Grand Canyon Loaned $49.6 Million

Park Service struggling with concessionaire contracts

Dec 2, 2014
Outside Magazine
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Xanterra, the country's largest park concessionaire, has operated the Grand Canyon since 1905.    Grand Canyon National Park/Flickr

Grand Canyon National Park is struggling to lock down a new 15-year concessionaire contract for the South Rim. To do so, the park has had to scrape together $200 million to pay down decades of investments by the current contract holder, Xanterra, America’s largest park concessionaire. This week, 88 other national parks provided open-ended loans to close a $49.6 million shortcoming, according to the National Parks Traveler.

Breaking a concessions monopoly is notoriously difficult, which partly explains why Xanterra has operated at the Grand Canyon since 1905. When a new company takes over a contract, it must reimburse the former concessionaire for any unredeemed investments in lodging, visitor services, and infrastructure, called leasehold surrender interest (LSI). Xanterra’s LSI amounts to $200 million, an intimidating sum for prospective bidders. So Grand Canyon National Park had to raise that sum itself, leaning on fellow National Park Service (NPS) units and the national office for $75 million.

Thus far, the search for a replacement concessionaire has been extremely challenging. The NPS originally hoped a bidder would help to buy down Xanterra’s interest; now it has fronted the full $200 million. The NPS initially asked for a 14 percent franchise fee (up from 3.8 percent under Xanterra’s contract); officials later dropped that percentage to entice bidders, and may do so again, writes the Traveler.

On top of all this, Xanterra filed a lawsuit in October claiming that changes in NPS policy would lead to the arbitrary eviction of 224 Xanterra employees. And in November, the company filed a motion for an injunction to prevent the NPS from following through with new concessionaire contracts, according to the Denver Post. Xanterra is arguing that unless the court intervenes, services at the South Rim will go into disarray after December 31, when the current concessions contract expires.

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