A Glacial Shift

By Beacon Staff

The details of how Glacier National Park’s longtime hospitality partner lost the bidding war for a new concessions contract to the behemoth concessioner Xanterra Parks and Resorts are still emerging. And while managers of the veteran concessioner, Glacier Park, Inc., are understandably shocked and disappointed – having submitted a robust proposal and enjoyed a decades-long home field advantage – industry insiders say the shift comes during a sweeping transition within the beleaguered National Park Service.

At a time of continuing budget cuts under sequestration, the concessioner’s role in keeping the national park system viable has never been more important, said Derrick Crandall, counselor for the National Parks Hospitality Association, the national trade organization of concessioners working in the park system. The clarion call rings particularly true as the parks agency eyes deep-pocketed hospitality outfits that may be better suited to help offset federal budget cuts that have chewed into visitor services through sequestration, leading to maintenance backlogs, limited operating hours and even campground and park closures.

“I would say there is more reason for the park service to think in terms of a changed relationship with the concessions community now than there ever has been before,” said Crandall, who in his role at NPHA represents both companies. “Am I surprised? Yes. I am surprised, because I think GPI put together an excellent bid and holds other advantages as well, like the four hotels blanketing the park, which are synergistic to their business. The fact that Xanterra won means they put together a very unique, very innovative and exciting proposal.”
The terms and details of the 16-year contract have not yet been released publicly, but Crandall speculated that the company, which holds the primary concessions contracts for Yellowstone National Park, the nation’s oldest, as well as Zion, Death Valley, Grand Canyon and Mount Rushmore national parks, likely made an aggressive and generous offer.

The contract to run the park’s lodging, food and beverage, retail, transportation and other visitor services has been held by Glacier Park Inc. (GPI) since 1981, when the Hummel brothers of Arizona sold the family-run institution to Greyhound Food Management and a contract was renegotiated. The bidding process to award a new contract began in December 2012 and was the first official rebidding process undertaken since the contract was awarded to GPI 32 years ago.

In reviewing the proposals by bidders, a National Park Service selection committee considers five sets of criteria and assigns a numerical score to each field, ranging from franchise fees to facility maintenance, food services and transportation and lodging.
“It’s like a test. And on this particular test, Xanterra scored higher,” Crandall said.

“They had the best offer,” Glacier Park spokesperson Denise Germann said. “We will move forward and we anticipate a smooth transition.”

In addition to having had an advantage as the incumbent bidder, GPI already has an estimated $22 million in possessory interest in Glacier Park, giving it a competitive advantage over companies facing a larger initial investment of some $33 million, which can be difficult to recoup during a short operating season.

And with properties outside the park but in close proximity to its boundary, including The Lodge at St. Mary, Glacier Park Lodge in East Glacier, Grouse Mountain Lodge in Whitefish and Prince of Wales Hotel in Waterton, Alberta, GPI has enjoyed the advantage of diverting overflow guests from its five lodges within the park, which are full for much of the summer season, to its other facilities.

Now owned by Viad Corp., more than 60 percent of GPI’s business exists outside the park, and the Canadian government recently awarded the company a 42-year contract to manage visitor services at Waterton Lakes National Park. GPI will continue to own and operate those properties.

But the National Park Service Concessions Management Improvement Act of 1998 was designed specifically to discourage companies from holding never-ending contracts, thereby making the bidding process more competitive and inviting other companies to bid for the contracts more frequently.

Joseph K. Fassler, the chairman of GPI who serves on the board of the NPHA, couldn’t say what gave Xanterra the leverage to prevail, but he suspects it boils down to resources.

“Not knowing what they proposed and knowing exactly what we proposed, we were shocked,” he said. “We don’t know what they saw, but they saw something in Xanterra. It usually comes down to money. It’s not supposed to be an advantage but it is.”

Money is precisely what the park service is lacking, having been forced to endure deep budget cuts that have sunk funding for national parks 13 percent below 2010 levels, while the construction budget has declined by nearly two-thirds over the last decade.

As a result, places like Yellowstone and Glacier national parks have been forced to close visitor centers and campgrounds, shorten hours and seasons, and eliminate ranger positions. Given that climate, the National Park Service is eyeing alternative funding measures to supplement its budget, Crandall said.

Last month, the U.S. Senate Committee on Energy and Natural Resources held a three-hour session to discuss how concessioners can help develop an alternative model that augments revenues and improves the quality of visitor services at a time of diminishing resources.

At the hearing, National Park Service director Jon Jarvis testified that the agency is willing and eager to explore ways in which the agency’s partnership with concessioners can help offset the budget deficit.

“The National Park Service is open, of course, to ideas that could supply added funding and appreciates the work of the Bipartisan Policy Center, the National Parks Conservation Association, and the National Park Hospitality Association to help identify and promote a wide range of ideas,” he said.

There currently exists a $12 billion backlog in maintenance projects, about $7.5 billion of which is described by the NPS as critical. Roads and related infrastructure constitute almost 50 percent of the entire backlog, while concessioner-operated buildings account for about $1 billion of the maintenance backlog.

Lake McDonald Lodge. – Lido Vizzutti | Flathead Beacon

According to Crandall, the National Park Service is actively looking to cut barriers that are blocking efforts to reduce the backlog.

“The park service has never had this kind of scrutiny, this kind of pressure, and they are looking for ways to turn this train around. It is going to take them a little bit of time because, suffice it to say, 2014 will not be a kind year to the budget of the park service,” Crandall said. “There will be continued cuts and perhaps closures. That is where the National Park Service is headed right now and they are obviously interested in a concessions operator that can invest in needed infrastructure, maintenance, attract more visitors, and pay a higher franchise fee that will become increasingly important.”

“As we see revenue fees dry up the concessioner will become very significant,” he added.

Xanterra is owned by Philip Frederick Anschutz, one of the wealthiest billionaires in the nation (Forbes estimates his net worth at $7.6 billion). He also owns the Denver-based Anschutz Exploration Corp., the company that until last year was drilling exploratory wells along the 400,000-acre swath of land that abuts Glacier Park’s eastern boundary, on land occupied by the Blackfeet Indian Reservation.

Anschutz halted drilling and shut down the exploration project on Blackfeet lands one month before the deadline for prospective bidders vying for Glacier Park’s concessions contract was due, saying the decision had nothing to do with controversy over the competing interests and everything to do with an unproductive oil play.

Critics of the Anschutz-Xanterra connection say the competing interests are unacceptable – an online petition asking the park to select another concessioner has gathered 5,500 signatures – but the company has since surrendered all leases not within a spacing unit for a producing well. The company says it will reclaim drilling sites and access roads of non-producing wells.

Crandall dismissed the argument that Anschutz bid on the park’s concessions contract in order to establish an inside route to oil and gas activities on nearby lands.

“Phil Anschutz purchased Xanterra because he likes being a partner with the National Park Service. He has no Machiavellian kind of a scheme to try to use his operations in the national parks to somehow advance his activities outside the park,” Crandall said. “I would say look at the scale of dollars. They make a whole lot more with oil and gas activity than running tourism enterprises in Glacier National Park. He didn’t get to be billionaire by being dumb. You don’t make enough profit renting rooms and dishing out huckleberry pie in Glacier National Park to in anyway compare with the money you make in the oil and gas industry.”

Jan Knox, chief of concessions at Glacier National Park, said the 1998 legislation set forth a range of criteria that the selection panel reviews when awarding such a contract and Xanterra came out ahead in the ranking.

“Under each of the principle selection criteria we ask questions,” Knox said. “In some cases, they might score better if they can show that a more robust maintenance staff will take better care of resources in the park, or that they have the ability to maintain historic structures. We ask them about their ability to meet the requirements of the facilities that are unique to Glacier.”

Pending a congressional review period, the new 16-year visitor services contract with Xanterra will begin in January 2014.

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