Xanterra Parks & Resorts, which operates the El Tovar Hotel and many other concessions on the South Rim of Grand Canyon National Park, is suing the Park Service over its handling of concessions contracts there/Xanterra Parks & Resorts.

Xanterra Parks & Resorts, which operates lodges and restaurants in some of the most iconic national parks in the system, on Wednesday announced it was suing the National Park Service over its handling of concessions contracts on the South Rim of Grand Canyon National Park.

The Denver-based concessionaire accused the Park Service of acting arbitrarily and capriciously when it decided to split into two the concessions contracts for lodges, restaurants, and other visitor services on the South Rim of the Grand Canyon.

'œWe have no option left but to take legal action and request an injunction to stop the implementation of these contracts in the hope that we can prevent the eviction of 224 of our employees, many of whom are long-time residents and families with deep roots in, knowledge of and passion for the Grand Canyon,' Xanterra President and CEO Andrew N. Todd said in a prepared statement. 'œXanterra has exhausted every avenue in an effort to correct this situation in an amicable and commercially reasonable manner before it became a crisis for so many families and the community, but the NPS has chosen instead to ignore the obvious problems created by its arbitrary decisions.'

Park Service officials had no immediate comment on the lawsuit.

The litigation arose from the Park Service's efforts at the Grand Canyon to make its concessions contracts more competitive. 

Many key park concessions long have been managed largely by four companies -- Xanterra Parks & Resorts, Delaware North Companies Parks & Resorts, Forever Resorts, and Aramark Leisure. Xanterra long has been involved with operations at Grand Canyon, Yellowstone, Zion, Death Valley, and Crater Lake national parks; Delaware North has run lodging and dining operations at Yosemite National Park, and recently acquired the contract at Shenandoah National Park; Forever Resorts has operated the Grand Canyon Lodge on the park's North Rim, as well as lodgings and other services in such parks as Mammoth Cave, Isle Royale, Badlands, and Big Bend; and Aramark has operations in Olympic, Mesa Verde, Denali, and Glacier Bay national parks.

As each year of operations passes, the companies make investments into the properties, investments that can amount to multi-million-dollar sums, or, in the case of Xanterra at the Grand Canyon, roughly $200 million. And when concessions contracts come up for bid, those sums can cost winning bidders if they oust the incumbent -- when Delaware North won the contract for Shenandoah, it had to pay Aramark $10.3 million -- or they can dissuade other companies from bidding.

To break, in essence, such strangleholds, Congress in 1998 rewrote the Park Service's concessions business by passing the Concessions Management Improvement Act. In short, this measure aimed to reduce preferential right situations, institute franchise fee distribution changes, mandate new competitive bid requirements, and increase accountability and oversight. These changes seemed to take hold most recently at the Grand Canyon, where earlier this year the Park Service awarded roughly half of the South Rim's concessions business to Delaware North. Delaware North will, though, have to pay Xanterra $41 million in "leaseholder surrender interest (LSI)" fees that reflect Xanterra's investments in those operations.

When Grand Canyon in August released the prospectus for the remaining concessions on the South Rim -- lodging at El Tovar, Bright Angel, Phantom Ranch on the canyon floor, and the mule rides into the canyon, as well as the Thunderbird and Kachina Lodges, Maswik Lodge, retail and food service at Hermits Rest, retail service at Hopi House and Lookout Studio, and transportation services such as bus tours and taxi service -- it was the second time it floated the contract. Failing to find any bidders the first two times, the Park Service agreed to pay down the LSI fees by $100 million with hopes of making the 15-year contract appealing to companies other than just Xanterra. Still, it leaves another $57 million that would be owed Xanterra if another company wins the contract.

In its release Wednesday, Xanterra claimed it was caught by "surprise" in August 2013 when the Park Service decided to split the South Rim concessions operations in two.  

"Operations carved out of the primary contract and added to the smaller contract included certain lodging, retail and food services at Yavapai Lodge, Desert View, Camper Services and Trailer Village RV campground," the company's release said. "NPS immediately put this new expanded smaller contract out to bid, awarding it to Delaware North, a competing concessioner, effective January 1, 2015 (conditional upon a required period of review by Congress). This decision to modify the primary Grand Canyon contract and pay down a portion of the LSI by the NPS was made unilaterally by the NPS and Xanterra was not consulted on the decision."

Xanterra officials also took exception to the Park Service's decision to boost, to 14 percent of gross receipts from 3.8 percent, the franchise fee concessionaires must pay at the South Rim.

"Xanterra believes this will result in a cumulative negative cash flow for any concessioner over the entire term of the larger contract and represents a wholly unfeasible economic proposition," the release added. "It appears the reason for such a drastic hike in the contract'™s franchise fee is the NPS decision to use $25 million in park funds and another $75 million borrowed from other national parks to 'buy down' Xanterra'™s LSI. This decision will in turn, by NPS'™s own admission, result in cutting budgets of its staff, implementing hiring freezes and furloughing of NPS employees at a number of national parks. Additionally, the NPS recently announced its intention to raise visitor entrance fees at many parks across the country.

"... Additionally, many key projects at both the Grand Canyon and other parks will necessarily be deferred, adding to the agency'™s existing multi-billion-dollar accumulated maintenance backlog," the release added. "The net result of these decisions is the mismanagement of agency funds, the further degradation of integral park facilities and a diminished experience for Park visitors."

Xanterra officials maintained the Park Service's actions would "lead to reduced visitor services at national parks around the country," adversely impact more than 200 of the company's employees at the Grand Canyon, and create an imbalance of available guest lodging and force Xanterra employees to move into "dormitory-style rooms and uninsulated, non-winterized cabins, units that are normally closed during the winter months due to extreme weather conditions."

The new approach to handling concessions on the South Rim, the concessions giant said, cast immense uncertainty on the outcome of bidding for the larger of the two South Rim contracts, which is expected to be issued in Febraury.

"The larger contract prospectus as currently drafted does not afford the winning bidder a 'reasonable opportunity for net profit in relation to capital invested and the obligations of the contract,' as explicitly required by federal law," Xanterra officials charged. "The primary factors in this regard are the unfair distribution of housing between the two contracts and the exorbitant 14% franchise fee proposed in the larger contract.

"Even if there were time to make alternative out-of-park living arrangements by the planned February 1, 2015, start of the new larger concession contract, the impracticality and high cost of relocating these displaced employees 70 miles away in Flagstaff, Arizona, or spending upwards of $20 million to purchase land and build new facilities immediately outside the park converts the proposed concession contract into an untenable, money-losing proposition," the company said.