Temporary contract at Grand Canyon's South Rim would avert shutdown of hotels, restaurants

FLAGSTAFF, Ariz. – A temporary contract for services at the Grand Canyon’s popular South Rim will ensure that mule rides and the park’s most iconic hotels and restaurants remain open to millions of visitors, the park’s superintendent said.

A new 15-year contract worth up to $1 billion for services at the South Rim is up for bid for a third time after previous bids didn’t meet the park’s terms. That contract won’t be awarded before the current one held by Xanterra Parks & Resorts expires Dec. 31.

Grand Canyon Superintendent Dave Uberuaga said park regulations allow a temporary contract to be awarded to a concessions company for up to a year to fill the gap. Park officials have yet to award that contract.

“We don’t want the interruption of visitor services to occur, and this provides that tool,” Uberuaga said.

The National Park Service has had trouble getting concessions companies to bid on the extended contract. The deadline in the latest bidding round has been extended four times. Proposals now are due Nov. 19.

Uberuaga said prospective bidders have balked at paying more than $150 million upfront to Xanterra for improvements it made to the facilities over the years. The Grand Canyon reduced that figure to $57 million by borrowing money from within the Park Service that it will repay by postponing projects or cutting funding for things like cave monitoring, parking lot lighting, a children’s nature program, and preventative search and rescue, and with concessionaire fees.

Still, the Park Service hasn’t gotten the response it wants.

In the latest amendment to the contract proposal Friday, the Grand Canyon lowered franchise fees from 14 per cent to 10 per cent for the first five years and 12.5 per cent for the remaining years, and allowed for increased lodging rates. Grand Canyon also said it would re-allocate employee housing if requested by the winning bidder and Delaware North Companies Parks & Resorts, which was awarded a smaller contract with some services now in the contract held by Xanterra.

“We think increasing the profitability for any potential bidders is the best strategy for encouraging competition,” Uberuaga said.

Xanterra has submitted a bid for the new contract, but the Park Service won’t say whether other companies are vying for the contract.

Profitability has been a main sticking point for Xanterra, which sued the National Park Service last month alleging the new contract gives an unfair advantage to Delaware North and would result in a money-losing operation. Xanterra is seeking to keep the contract bidding process from moving forward and the Delaware North contract from going into effect in January.

Xanterra notified its nearly 980 employees last week as a precaution that they would be laid off Dec. 31 if the company doesn’t get a new contract, temporary or extended. Jon Streit, general manager of Xanterra South Rim, LLC, said losing their jobs would also mean they’d be looking for new places to live. A majority of Xanterra employees live in company housing.

About 125 Xanterra employees perform services that have been transferred to the Delaware North contract. Glen White, a spokesman for Delaware North, said Monday that those employees are encouraged to apply for open positions and will be given first consideration.

Streit said the uncertainty over whether Xanterra will continue operating at the South Rim has prompted some of its employees to seek work elsewhere.

“We have a huge concern for what happens with our staff,” he said. “This is their livelihood. This is not just a place where someone comes on a whim. We have employees here year-round, and we also have concerns for the guests.”