NPS seeks proposals for Grand Canyon North Rim business operations
A new contract that would take effect in 2024 is being sought for business operations on the Grand Canyon National Park’s North Rim, including lodging, and it could lead to higher day-to-day rates.
Under the current proposal, the successful bidder could price the bulk of available accommodation – 187 cabin rooms – at whatever the market would bear. Price caps would be set by the National Park Service on the remaining 10 motel rooms and 40 inn rooms.
The overall contract covers accommodation, catering, retail sales, bus interpretation tours and a gas station on the north shore. It also necessitates the operation of a new free visitor shuttle between the Grand Canyon Lodge and the general store located near the campground. Additional services, such as equipment rental and guided walking tours, are permitted, but not required.
A similar North Rim dealership prospectus released in early 2019 was hijacked by COVID.
North Shore Accommodation
The picturesque Grand Canyon Lodge designed by Gilbert Stanley Underwood was built in 1927-1928 by Utah Parks Company, a subsidiary of the Union Pacific Railroad. The original two-story pavilion burned down in 1932 and was replaced six years later by the current one-story pavilion which retains the rustic design of the original. Utah Parks Company has also built lodges in Zion, Bryce Canyon, and Cedar Breaks. The railroad donated the resort’s facilities to the National Park Service in 1972. Private concessionaires of Grand Canyon Lodge include TW Services, Xanterra Parks and Resorts (formerly Amfac), Forever Resorts, and current operator, Aramark Destinations.
Although commercial operations on the North Rim are not on the scale of the more commercialized South Rim (much of the commercialization of the South Rim took place before the Grand Canyon became a national park in 1919), This is a major NPS contract with the National Park Service estimating 2024 revenues ranging from $17.8 million to $18.8 million. Hosting is expected to provide about half of that revenue, which is expected to grow by $3 million in 2027.
While most NPS contracts are for 10 years, the North Rim contract is for 15 years. The longer period is partly intended to compensate for the considerable expenses required of the operator for the improvement program of the facilities of the concession. During the first four years of the contract, the concessionaire is required to spend nearly $17 million of its own money on a variety of projects, the costliest being a full rehabilitation of the two existing motel buildings. Interestingly, the basement of one of the motel buildings is to be converted into a 10-room hostel, with each room having four beds.
Additional projects include the reconfiguration of the lodge lobby, remodeling of the lodge’s kitchen, deli and restrooms, and major remodeling of four staff dormitories. The concessionaire will also be required to acquire passenger buses that will be used for interpretive tours and the new shuttle service between the main lodge and the general store.
Accommodation at the North Rim includes a total of 237 rooms spread across a series of cabins and two motel buildings. No rooms are in the lodge’s historic main building. North Rim guest rooms are generally filled to capacity from the time the lodge opens in mid-May until it closes in mid-October. According to the prospectus, NPS plans to replace the water and sewer systems, which could allow the season to be extended by a few weeks at each end.
Core vs. Non-Core
As of 2017, the National Park Service has designated its accommodation facilities as either core or non-core. The first category establishes a price target for accommodation in the park based on the cost of comparable accommodation outside the park. For example, an accommodation concessionaire in Grand Teton National Park could ask the park to approve accommodation rates similar to those in nearby Jackson.
It is especially difficult to locate comparable accommodation costs for isolated national park units like North Rim. Accommodation of the fleet classified as non-essential allows the concessionaire to charge what the market will bear. In other words, non-essential accommodation takes into account demand and supply and sets the price of guest rooms to generate maximum revenue for the concessionaire and the park which almost always takes a share via a franchise fee.
According to the North Rim prospectus, when the new contract takes effect, all North Rim accommodations other than motels and hostels – in other words, all cabins which comprise the majority of accommodations – will be classified as non-essential. . Park superintendents may apply rate caps for base or non-base accommodations, but are encouraged not to apply such caps to the latter unless the concessionaire is deemed to be abusing the process.
The prospectus lists a mobile franchise fee to be paid by the concessionaire to the park. For gross receipts up to $15 million, the rate is 7%. Revenues of $15 million to $25 million will require a 10% fee. Fees for annual revenues over $25 million are set at 20%. Bidders can improve their chances of winning the contract by offering to pay a higher franchise fee. Revenue from NPS projects in 2027 will range from $21 to $22 million. He also estimates that an initial investment of $5.5 million will be required for items such as inventory, personal property and working capital.
Notification of intent to submit a proposal must be received by NPS via email by 4:00 PM MST by December 12, 2022. NPS intends to announce its selection around July 1, 2023 and award the project contract around November 1, 2023.