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Financial Creativity Leads To Return Of Lodging To Flamingo At Everglades National Park

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Sunrises are a great reason to stay at Flamingo/NPS

After years of rejection, an atypical approach to funding construction is on track to bring lodging back to the Flamingo area of Everglades National Park, a popular destination that has gone without overnight accommodations beyond a campground since two hurricanes pounded the area in 2005.

Instead of concessions companies spending money upfront on facilities and waiting years to get paid back, the National Park Service at Everglades nurtured a $5 million nest egg from visitor fees to pay back a concessionaire's investment in lodging at Flamingo. It's an approach that could prove helpful elsewhere in the National Park System where the service struggles to find companies interested in bidding on long-term concessions contracts.

“Part of the challenge of having long-term concession contracts is that we ask a concessionarie to build facilities on behalf of the federal government, and often it’s at the end of the contract” that the Park Service is able to repay concessionaires for their investment, said Ernest Jutte, Everglades' chief of administration. Now, he continued, “we’re able to have that money, in effect, in escrow at the beginning of the project so we don’t carry a liability at the end of the 20-year contract.”

While the finer details of the lodging that Guest Services, Inc., is expected to bring to Flamingo remain to be settled between the concessionaire and the National Park Service, it's safe not to expect something on the scale of the $78 million vision that park planners raised in 2010, one that called for a 30-unit lodge, two dozen cottages, "eco-tents," and a new marina. Former Park Service Director Jon Jarvis scuttled that idea, viewing it as too lofty for an area overshadowed by storms spiraling out from Hurricane Alley and hot, buggy summers that make Flamingo's occupancy season short and, thus, a company's return on investment incredibly slow to be realized.

What can be expected, initially, are 24 cottages and 20 eco-tents to be ready for business by December 2019. Those numbers could grow to 40 cottages and 40 eco-tents. 

The use of eco-tents is another novel aspect taken by the Park Service at Everglades. With a well-known history of hurricanes passing through the Flamingo area, having an inexpensive structure that can easily and quickly be dismantled and taken out of the path of a storm can reduce maintenance costs while providing a relatively low-end lodging option for visitors.

During the winter of 2012-13 the park experimented with one eco-tent, a somewhat Spartan looking model designed by the University of Miami architecture program that could sleep four and came with a table and chairs as well as a picnic table and fire ring. The nightly cost? A mere $30. Restroom and shower facilities were a short walk away at the nearby campground.

Though officials with Guest Services wouldn't say specifically, the Park Service's ability to sweeten the contract with the promise of $5 million to help pay for the facilities probably made it easier for the concessionaire to decide to bid for the 20-year contract. That incentive means the concessionaire won't have to wait years for revenues to offset its cost for building the facilities.

“We’ve got the $5 million ready to go at the time of the project's completion by the concessionaire," said Mr. Jutte.

At the National Parks Conservation Association, John Adornado III, senior regional director for the organization's Sun Coast Office, was happy to see the Park Service take the creative approach to financing the Flamingo project.

"It took three attempted RFPs (Requests for Proposals) for the Park Service to hit a sweet spot for a concessionaire to bid," he said. "NPCA is excited to hear that Everglades National Park is bringing back overnight accommodations to Flamingo after over a decade without it. Located in the park’s most southern point, with the vast, shallow, and crystal-clear Florida Bay at its tip, local residents and international tourists will again flock to Flamingo and will be able to truly experience all that the Everglades has to offer. From night tours and campfire chats to early morning fishing trips and eating their fresh catch at the lodge restaurant, the visitor experience at the park will greatly improve."

While the financing means relatively little, if anything, to the guests who will book nightly lodging at Flamingo, it should help the Park Service avoid another situation similar to one that transpired a few years ago at the South Rim of Grand Canyon National Park. There, a new concessions contract for businesses on the South Rim was expected to cost the park $100 million, an amount that could have impacted just about all Grand Canyon operations, former Superintendent Dave Uberuaga said in 2014.

That staggering sum stemmed from the many facilities on the South Rim and the investments concessionaire Xanterra Parks & Resorts made over the years, but which it was not immediately compensated for by the Park Service. In that case, Xanterra claimed it had made $200 million in improvements. With Xanterra's contract up, if the company did not win the new contract, the company that did would have had to pay Xanterra that $200 million. In the end, not only did Xanterra win the new contract, but the Park Service paid down that $200 million of leaseholder surrender interest (LSI) fees to around $100 million by borrowing from other parks throughout the agency.

As a result of such sums, the Park Service can encounter problems when it offers contracts for bidding. Companies might not bother when they see how much they have to pay upfront before making a cent. For example, when Delaware North won the concessions contract for Shenandoah National Park, it had to pay outgoing concessionaire Aramark $10.3 million. Too, when the Park Service split the concessions business on the South Rim of the Grand Canyon into two contracts, and Delaware North won one of them, it had to pay Xanterra $41 million in LSI that reflected Xanterra's investments in those operations.

Of course, the South Rim operations are something of an anomaly in the park system, as few other parks outside of Yosemite and Yellowstone have such a large infrastructure portfolio that one concessionaire might control. Still, by saving fee revenues, Everglades officials are getting ahead of the LSI game and have positioned themselves to be ready to pay off the bulk, if not all, of Guest Services' initial investment in returning lodging to Flamingo.

The Washington, D.C.-based company, which also has operations at Mount Rainier National Park, North Cascades National Park, Lake Roosevelt National Recreation Area, all in Washington state, as well as at the National Mall and Memorial Parks in the nation's capital, also will manage all visitor services in Long Pine Key and Flamingo, including campgrounds, boat tours of Florida Bay and Whitewater Bay, a new restaurant co-located with the cottages, and retail operations.

Whether Guest Services settles on an eco-tent similar to this one that was tried at Flamingo during the 2012-13 winter or comes up with a new design remains to be seen/NPS

At Guest Services, Chief Commerical Officer Scott Shepherd wouldn't say whether the $5 million incentive was the key to his company's bidding for the Flamingo contract.

“I think every park opportunity, we have to evaluate on its own," he said Friday. “We’ve had a keen eye on (Flamingo) for a long time. Our organization, being familiar with all the National Park Service contracts in south Florida, all throughout the Southeast, it’s always been an opportunity of interest to us.”

Mr. Shepherd did allow that the Park Service came up with "a very creative solution” to help reach its end goal of seeing lodging return to that area of Everglades.

“It’s very exciting to everyone, including visitors," he said.

The contract still needs to be approved by Congress before it's signed, something viewed as a perfunctory review. Once finalized, Guest Services officials will work with Park Service personnel to finetune the lodging plan, including the types of eco-tents used and the cottage designs.

"There is an eco-tent model that has been employed from a baseline perspective," Mr. Shepherd said, referring to the University of Miami model, when asked if the company was starting from scratch in designing an eco-tent. "But obviously, we’re very early in the process."

Under the terms of the contract, Guest Services will pay the Park Service an estimated 1 percent franchise fee for the first two years, while the facilities are being built and installed, and then at least 9 percent a year for the remainder of the contract. Exact figures will be available once the contract is signed. The secrecy resolves around the possibility that Guest Services offered the Park Service a higher franchise fee percentage to sweeten its bid for the contract, something the company wouldn't likely want divulged were the deal to fall apart.

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