Trunk, Cinnamon Bay VINP Concessions Could Require $6 Million-plus Investment

ST. JOHN — It will cost a new concessioner $2.2 million to buy-out the current operator of the historic Trunk Bay and Cinnamon Bay commercial properties in the heart of the Virgin Islands national park for the next 15 years – in addition to the required expenditure of “not less than $3.67 million and not more than $4.5 million” in improvements to the two world-renowned tourism venues.

Within Virgin Islands National Park the concessioner will manage “commercial services” at the beachfront cottages and campground at Cinnamon Bay and concessions at Trunk Bay, one of the most picturesque beaches in the world and the perennially No. 1 rated beach in the world.

“Revenues under the existing contract ranged between $2.8 and $3.0 million over the past three years and are projected to continue growing,” according to the NPS concession document which based its estimate on the VINP’s “over half-million recreational visitors on an annual basis.”

The “Total Annual Return to the Government” was reported as $72,710 in 2011, $77,548 in 2012 and $78,406, according to the NPS Business Opportunity offering. Under the new contract “the minimum franchise fee will be equal to one and eighth-tenths percent (1.8%) of the Concessioner’s annual gross receipts.”

All offers must be received by the NPS no later than 4 p.m. on Thursday, July 30, in order to be evaluated and considered.

New Concession Facilities, Cottage, Eco-tents
Trunk Bay will get new concession facilities while Cinnamon Bay will get a total makeover of its 40 cottage units with new cottages and new platforms to support 55 new “eco-tents,” according to the NPS Concessions Facilities Improvement Program (CFIP) description.

“The end game is a good experience for visitors,” said Bill Stevens, Chief of Commercial Services, Southeast Region, for the National Park Service (NPS). “It should be a better experience.”

“The Draft Contract requires the Concessioner to undertake and complete an improvement program costing not less that $3.67 million and not more than $4.5 million as adjusted for each project to reflect the par value in the year of actual construction,”

“The CFIP includes construction of 40 new cottage units at Cinnamon Bay, construction for platform upgrades to accommodate the new 55 eco-tents, and construction of new snack shop and gift ship facilities at Trunk Bay.” according to the NPS Business Opportunity document.

“The concessioner must demolish and replace all 40 existing cottage units by the end of the second year of the Draft Contract,” according to the NPS document.

“Given the popularity of Cinnamon Bay, the limited supply of affordable lodging on St. John, and projected Park visitation growth, the Service believes that cottage demand will increase significantly from historical averages due to service and amenity improvements as a result of this new construction,” the document reads.

“The Draft Contract has a term of fifteen (15) years beginning on its effective date, which the Service estimates as June 1, 2016,” according to the NPS offering. “The effective date of the Draft Contract may change prior to the award if determined necessary by the Service.”

There was no indication from NPS officials that the draft contract effective date would be changed.

15 Year Concession
VINP Superintendent Brion FitzGerald announced on April 7 that the National Park Service (NPS) had “issued a prospectus for solicitation of offers for a 15-year concession contract to provide Lodging, Camping, Food and Beverage, Retail, Equipment Rental and Other Services at Cinnamon Bay and Trunk Bay areas within Virgin Island National Park.”

The current holder of the concession contracts is the investment company which bought the lease for the neighboring historic Caneel Bay Resort on the North Shore of St. John in the VINP, “which operates under a retained use agreement with the United States,” according to the NPS Business Opportunity, Contract No. CC-VIISOO1-16.

Paradoxically, the 1970 concession operating agreements for Trunk and Cinnamon which has been extended and transferred for 45 years grants the current holders of the extension compensation for “possessory interests” in real property in the concessions.

“They can transfer the rights,” explained Bill Stevens, Chief of Commercial Services, Southeast Region, for the National Park Service (NPS).
“That has happened several times” with the VINP concession for Cinnamon Bay and Trunk Bay facilities, the NPS official explained.

“The possessory interest is pretty high,” Stevens acknowledged of the required payment to CBI for improvements. (See Sidebar.) “Obviously it makes it difficult.”

Interested Inquiries
Despite the “high” potential buy-in, the NPS does have interest in the contracts.

“We did have some interest,” Stevens told St. John Tradewinds June 26. “We can’t discuss the number.”

“Sometimes it can be indicative,” the NPS official explained of the preliminary response to this bidding process and the potential bidding. “We’ve seen it both ways.”

“It’s really difficult at this time to really be able to assess,” Stevens admitted of the inquiries and exchanges.

Bids usually are submitted close to the deadline for competitive purposes, he added. “Sometimes right on the last day.”

One longtime island commercial operator with experience with the NPS concession process has criticized the bidding system as favoring the current holder of the extended 1970s lease because of the high buyout value placed on the improvements the current operator is entitled to receive compensation for if there is a new concessionaire.

The current concession holder, Caneel Bay Resort owner CBI Inc., will be a bidder, however, a spokesperson has affirmed to St. John Tradewinds.
“It seems to be going fine,” said Stevens of the NPS process.

Thursday, July 30, Deadline
All offers must be received by the NPS no later than 4 p.m. on Thursday, July 30. In order to be evaluated and considered for an award of a concession contract all proposals must meet this deadline, according to Stevens.

The prospectus describes the business opportunity and includes the terms and conditions under which the NPS will award the concession contract, according to the VINP.

“Under this opportunity, the Concessioner will also provide food, beverage and retail services at Trunk Bay where the beach and underwater snorkeling trail provide a breathtaking National Park experience for thousands visiting St. John,” Superintendent FitzGerald said in April.

Persons planning to submit a proposal who have obtained a prospectus from the website are recommended to advise Bill Stevens, Chief of Commercial Services, Southeast Region, NPS, AFC, 1924 Building, 100 Alabama Street, S.W., Atlanta, GA 30303 at (404) 507-5638 or e-mail at bill_g_stevens@nps.gov of their interest so their contact information can be placed on a mailing list to receive future responses to questions or amendments to the prospectus. 

Those receiving a hard copy or who are on the mailing list will be provided with any additional information specific to the prospectus in writing.  The same information is posted to the above mentioned website.