The National Park Service in late September issued a prospectus for the operation of lodging, food service, and retail in Zion National Park in Utah. The Zion concession has been held by Xanterra Parks and Resorts, Inc., since the company, then called Amfac Parks and Resorts, acquired TW Recreational Services in 1995. The new contract has a beginning date of January 1, 2025.
The Zion prospectus is relatively uncomplicated, at least in comparison with concession contracts for parks like Grand Canyon, Yellowstone, and Yosemite that have multiple concession locations. Zion houses a single lodging complex that includes food service and retail. Lodging is comprised of two motel buildings with 82 guest rooms plus 15 cabins structured as duplex or quads with a total of 20 guest rooms. All lodging is in a single location. The prospectus authorizes the concessionaire to offer tram tours, trailhead shuttles, bicycle rentals, guide service, and interpretive walks, but none of these is required of the winning bidder.
The National Park Service estimates the cost of personal property, inventory, and working capital, and start-up costs will require an initial outlay of $4.7 million. In addition, the concessionaire will be required to spend an estimated $1.4 million on deferred maintenance during the first two years of the contract. This covers several items including acquisition of an emergency generator, a new EV charging station, and creation of a beverage bar.
According to NPS projections, the concessionaire in 2025 can expect to generate between $19.4 and $20.4 in revenues, half from lodging, 30 percent from food and beverage, and 20 percent from retail. Rooms in the motel units are expected to rent for $228 to $239, not much more than in 2017 when we last visited. However, all cabins are to be classified as non-core, meaning the cost of a cabin stay will be what the traffic will bear. If available rooms are scarce on a particular day, the concessionaire has the option of raising the daily room rate. The prospectus does not offer an estimate for cabin prices, which are likely to be expensive during the peak season of May through July. In all likelihood, travelers can probably expect that cabins will be renting for more than motel rooms, a reverse of pricing during our visit in 2017.
It’s been a while since we have looked over a national park lodging prospectus. One thing that surprised us about the Zion prospectus is the size of the franchise fee — the percentage of revenues collected by the concessionaire that must be paid to NPS. According to the prospectus, NPS will require 12 percent of the first $5 million of revenue, 25 percent of the next $15 million of revenue, and 30 percent of all revenues above $20 million. With a 2025 forecast of just over $20 million in revenues, the concessionaire will have to turn over to the government nearly 22 cents of every dollar it takes in. In addition, the prospectus requires 5 percent of revenues to cover repair and maintenance and 3 percent of revenues as a component renewal reserve (for non-recurring expenses such as major plumbing or foundation work). With the addition of these fees the concessionaire will be saying goodbye to about 30 percent of revenues.
Notices of an intention to submit a proposal is required by December 20, 2023. A one-day site visit will take place on October 18, 2023.
David and Kay Scott are authors of “Complete Guide to the National Park Lodges” and “Exploring the Oregon Trail: America’s Historic Road Trip” (Globe Pequot). Visit them at blog.valdosta.edu/dlscott
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Comments
The reason for the high franchise fees is that there is little cost to the concessioner and little additional benefit to the visitor in charging more for "non-core lodging" (what the market will bear) than for core lodging. The latter has long priced using comparable lodging outside the parks. The non-core method went into effect in 2017. In my recent experience, market pricing of non-core lodging in Yellowstone at Old Faithful Inn raised the room rate substantially over what it would have been with the old comparable-rate pricing. There's no additional cost to the concessioner in charging what the market will bear, but the visitor ends up paying more, with little or nothing in the way of increased value (and, in my experience, with less value). The park service argues it should receive an "equitable" share of the increased revenue resulting from market pricing of non-core lodging. The most efficient way to collect that money is to charge a higher franchise fee to the concessioner. Everyone wants to feed at the trough.