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Learn about concession operations in national parks, including contracts, necessary services, leases, and economic feasibility considerations.
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Concessions Dr. Sid Stevenson Kansas State University Former Concessionaire Steamboat Lake State Park Clark Colorado
CONCESSIONS A concessions operation is a way of providing commercial visitor services such as food, lodging, and retail through a third party (concessioner) within a park. These services, provided through the use of concession contracts, must be necessary and appropriate for visitor use and enjoyment. Concession contracts are generally valid for 10 years or less but can extend for as many as 20 years. Concession contracts specify the range of facilities accommodation, and services types the concessioner agrees to offer. The rates the concessioner can charge for these services are approved by the National Park Service and must be comparable to those under similar conditions outside the park. As of 1998, Three (3) levels of concession operations NPS Commercial Services
Commercial Use Authorizations Commercial use authorizations (CUAs) are granted to private businesses to permit small-scale commercial activities. CUAs may be issued to authorize services that: Are determined to be an appropriate use of the park; Will have minimal impact on park resources and values; and Are consistent with the purpose for which the unit was established, as well as all applicable management plans, park policies, and regulations.
Leases Leases can be issued for NPS land or certain structures that are not subject to authorization through a concession contract, commercial use authorization. Leased property must be used for an activity and in a manner that is consistent with the purposes established by law for the park. For example, an NPS property such as a restaurant that is more frequently visited by non-park visitors can be leased to a third party. Leases are issued for rental rates that are at least equal to the fair market value of the leased property. Leases can be issued for up to 60 years in order to provide a viable leasing opportunity in light of investment requirements and other relevant factors.
Examples of essential visitor services • lodging • ski areas • horse stables or liveries • canoe liveries or float trip guide services • marina operations, golf course pro shops • convenience stores sales or snack sales • showers, camping, interpretive services
Necessary and Appropriate Unless a concession operation meets these criteria ...and is consistent with preservation and conservation of the area...it is not considered by the National Park Service
Necessary • Adequately meeting the needs of the visitor/ public • is a management decision and must be made on a park by park basis after due consideration of all analyses and data by planners and mgmt.
Appropriate • compatible with the park’s natural, historic and/or recreational resource(s)...recognizing the purpose of the established area.
NPS Concession Planning check list • 1. Legislative/regulation/policy background • 2. Review of plans (GMP, DCP, EIS, etc..) • 3. Environmental concerns (endangered species) • 4. Cultural concerns (historic preservation) • 5. Demand analysis (market analysis) • 6. Economic feasibility study • 7. Operating conditions (facility analysis) • 8. Other constraints (budget, opposition, location)
Related to Economic Feasibility, there are special conditions faced by NPS and other concessioners • Short seasons (90 day peak) • High cost of materials, supplies, and labor • outdoor operations face weather hazards that can reduce demand • water level fluctuations • exclusive use is a bonus • reduced or no property tax is a bonus
Concession Bids Public Law 89-249 (Oct 9, 1965)…Revised National Park Service Concessions Management Improvement Act of 1998 (16 U.S.C. §§ 5951-66, Public Law No. 105-391) • Authorizes the Secretary of the Interior to negotiate concession contracts for public accommodations and services administered by the National Park Service without advertising or competitive bidding.
Important contract elements • Franchise Fee (revenue to the government) • Term • Possessory Interest or ownership clause • Financial security, accounting • Charges to the public • Performance standards and compliance • includes hours of operation, etc.. • renewals and or terminations
Franchise Fees • Should approach private sector rate if conditions are similar (high volume and low risk of cancellations due to weather, exclusive use, etc..) Building rental can be either separate or a part of this fee • Should always be a % of gross receipts but a variety of options exist • flat rate plus %, graduated scale, etc..
Franchise Fee options • Flat Rate • good when gross is either hard to measure or risk is high • Flat Rate plus % of gross • lessens risk to concessioner, helping profit • % of gross • Accelerated % of gross • the more you make, the more you pay
Possessory Interest • is defined as being all incidents of ownership except legal title, which shall remain with the government. • Involves the right of the concessioner to be compensated for such structures, fixtures, or improvements he constructs or acquires on public property
Term • To assist in control the government typically wants a shorter contract duration • To allow the amortization of debt over a longer time period, the concessioner typically want a longer contract. • should depend on the level of investment, risk and other market factors • a longer term with fee changes is an option
Financial Security, Accounting • Involves: • Bonding (insures against embezzling) • Insurance (with gov’t listed as a co-insured) • maintaining a one to two ratio of equity capital to borrowed capital • could involve a clause requiring any new bidder to purchase existing concessioner’s property for fair market value • an audit should be conducted periodically (2yrs
Charges to the Public • Reasonableness should be judged by comparison with other enterprises of comparable character under similar conditions in the region. • due regard should be given to significant factors (ski or resort area prices, isolation, etc.)
Performance standards • Satisfactory performance and contract compliance will be measured by inspecting: • quality of service rendered to the public • price charged the public • neatness of employees and premises • compliance with safety standards • compliance with nondiscrimination policies • compliance with EPA and health standards
Terminations and or renewals • Renewals • excellent performance on the behalf of the concessioner should result in some system of reward; i.e....renewal options, or some other tangible benefit • are less expensive than re-bidding contracts • Terminations • should be used after several warnings of non-compliance with contract stipulations
Concession Leases Similarities • Balance of Visitor Services and Resource Protection: • Operating and Maintenance Standards; • Dedicated Maintenance Funds; • Market Based Assessment of Services; • Annual Review of Operations including Rate Review; • Fee Structure based upon “Opportunity for profit.” and value to BLM and Public: Quality visitor services and asset and natural resource preservation.
Concession Leases Differences • Preference in Renewal • Term length • Fees: Readjustments allowed at joint discretion every five years • Return to Agency: are fair market • values being achieved?
Return structure BLM/USFS - Franchise Fee percentage of 3% or gross revenue with appropriate revenue adjustments USACE - 2.0 to 2.1 of gross revenue below $200k with appropriate revenue adjustments • NPS - 3% below $250k, 3 to 5% up to $500k of gross revenue • USFWS - 5% minimum of off gross revenue Market Observation - 3 to 5 percent appears supportable
Advantages to the government of concession operations • expertise offered by professional operators • government is not competing with private enterprise • more flexibility in purchasing, resulting often in cheaper prices • a self-employed vendor is more efficient and motivated than an hourly employee
Disadvantages to the government of concession operations • loss of control to a 3rd party • concessioner’s objectives are different than those of the government agency • concessioner can adversely influence agency policy
Alternative to ConcessionsEnterprise Funds (self operation) • Advantages over typical general fund operations • flexibility • equity • accountability • Advantages over concessions • control • marginally feasible ventures are covered
Enterprise Fundsperceived profitability • Many agency managers view self operation because of its perceived profitability....often however, this is simply not the case. • Efficient concessioners with contracts guaranteeing reasonable revenue to the gov’t can generate more revenue than self operations where the agency has all of the expenses and no tax benefits. Often profit is due to a highly motivated entrepreneur.
