Yes, the Government Can Turn Even the Grand Canyon Into a Money Pit

Grand Canyon National Park has
unrivaled views, and a steady flood of tourists eager for a look,
and for a place to get a bite and sleep while they’re visiting. So
why can’t the National Park Service (NPS) get companies to bid on
taking over the hotels and restaurants at the rim—facilities that
you think would be gold mines for anybody with a bit of business
sense?

Could it be because the NPS wants the new concessioner to assume
tens of millions of dollars of debt to the last vendor, while
keeping less of the proceeds than its predecessor? You bet.

“We were ignoring a debt that was accruing in the park,” Grand
Canyon Superintendant Dave Uberuaga
told Fronteras. The NPS currently owes Xanterra, a longtime
concessioner descended from the old Fred Harvey company, $157
million. That’s actually an improvement. When the park started

unsuccessfully soliciting bids, the amount of the Leashold
Surrender Interest—the sum owed to Xanterra for capital
improvements it made to aging facilities—was actually $198 million.
DNC Parks & Resorts picked up $41 million of that as part of a

smaller contract at the park, leaving the NPS to figure out
what to do with the rest of the debt it had allowed to
accumulate.

Under a 1998
law, contracts must now (with some exceptions) be put out to
bid every ten years. But if a concessioner loses a contract, it’s
owed the value of capital improvements to be paid by the United
States government or the successor company.

Xanterra has managed facilities
at the park for decades, paying the government 3.8 percent of gross
revenues for the privilege. But it also shouldered the cost for
improving the facilities in anticipation of being
compensated…eventually. The contract is now up for rebidding, and
the company doesn’t seem very interested in continuing its
relationship with the NPS (neither Xanterra nor the National Park
Service responded to questions by press time). In fact, nobody
seems interested in the current terms—none
of the bids received adhered to the NPS’s specified
conditions.

So Grand Canyon National Park sweetened the deal by paying $100
million of the money owed, with
much borrowed from other parks so that the new concessioner
would “only” have to pay $57 million. But the
new solicitation also specifies that the lucky “winner” will
have to pay a minimum franchise fee of 14 percent for the 15 year
life of the contract, making the arrangement rather less lucrative
than the one Xanterra had for so long, unpaid debt aside.

And there just might be some concern that the NPS won’t be any
better in the future about paying debts owed to
concessioners—especially since it just ran up a hefty tab to other
parks that want their money back. The park
estimates annual gross revenue for the contract at $66.1
million, which you’d think would mean a chance at healthy
profits. But if 14 percent of that goes to the government, the
properties have to be maintained and improved, and you’re starting
off with a big bucket of red ink…

The Grand Canyon may be the biggest damn hole in the world, and
a popular one at that. But the federal government has managed to
make a huge tourist draw into a money-loser.