By Emily DeCock
South Dakota News Watch

The South Dakota Game, Fish and Parks Commission voted Thursday to approve a contract between Custer State Park and Xanterra Travel Collection, a move that commissioners said will help the park keep up with growing visitor expectations.

Concessionaires are private companies that contract with the state to offer services that parks don’t provide, such as food, lodging and retail.

It’s a blow to U.S. Hotel and Resort Management, a wholly owned subsidiary of Ramkota Companies Inc., which has been the Custer State Park concessionaire for 20 years. Ramkota is a Sioux Falls-based company that operates 11 properties around South Dakota, including in Rapid City, Aberdeen and Pierre.

The concessions contract approved Thursday is for 10 years. Xanterra will pay the state an annual franchise fee of 20.85%, compared with the current 14.4% paid by U.S. Hotel and Resort. The minimum franchise fee set in the prospectus was 19.6%.

The franchise fee approved was not the highest of the four offers, but Xanterra still offered the park the best deal overall, Sean Blanchette, business administrator for the GFP division of parks and recreation, said during the commission meeting, which was live-streamed.

The selection factors that commissioners gave the most weight included facility management and enhanced visitor services, which Xanterra scored the best on. Additionally, Xanterra will provide an assessment of the park’s 175 facilities and will identify additional year-round services and facilities. 

“They are going to undertake a year-round performance feasibility analysis of all the structures that they’ll be operating in, so that’s one piece of the puzzle, is can those facilities truly operate on a year-round basis?” Blanchette said.

The other part of that, he said, is if Custer State Park has a market for year-round tourism. Xanterra has also committed to conducting a market analysis to understand potential markets, needs and where marketing resources need to be deployed. 

“They’ve also demonstrated to us that they have the marketing capabilities, really that they can allocate towards this effort to help drive that use and create that market for year-round use,” Blanchette said.

The contract covers lodging, food and beverage, retail, rentals and guide services across four resort systems.

Commissioner Dean Kirkeby commented on the size of Xanterra and asked if there are provisions written into the contract that would require the concessionaire to use local products or services.

Blanchette said there is language in the contract that Xanterra will commit to sourcing restaurant ingredients locally where it can. He said Xanterra will continue to build on relationships locally that it already established with its operation at nearby Mount Rushmore National Memorial.

“They already do source stuff locally. They’ve committed to that in their proposal, and we’ve written it into the contract,” Blanchette said. “They have active presence in the Hills in the local area, and they’ve developed relationships with vendors, with contractors and are part of the local economy.”

Blanchette also said there is an active effort to retain existing resort employees by Xanterra.

The contract will be signed in the next few business days.

GFP said it’s looking to the future

Xanterra is a national concessionaire, based in Colorado. It has contracts with some of the nation’s largest national parks including Yellowstone National Park, Glacier National Park and Mount Rushmore National Memorial.

In the commission’s Sept. 10 and 11 meeting, commission Chair Stephanie Rissler said the needs and expectations of Custer State Park visitors are growing.

“This concessionaire needs to be able to take us to the next level and meet those needs,” she said at the time. “We’re not talking about what the park looks like today. We’re talking about where Custer State Park needs to be in the next 10, 15 and 20 years.”

Annual visitation at Custer State Park grew steadily from fewer than 1.9 million visitors in 2015 to more than 2.3 million in 2025.

Outside Magazine listed the park as the No. 1 in its list of the 18 best state parks in the U.S. Paste Magazine ranked it as one of the top five off-the-grid state parks that deserve national attention.

The South Dakota Game, Fish and Parks Department declined to comment beyond the meetings. But Secretary Kevin Robling said Monday at the Downtown Sioux Falls Rotary meeting that there was “clear separation” in the selection of Xanterra over Ramkota.

Xanterra scored better on its proposal and interview in the “rigorous” request for proposal process, he said.

The commission focused on the future rather than the past when deliberating which concessionaire would get the bid, Robling said.

He acknowledged Ramkota’s positive impact on Custer State Park over the past 20 years but said when looking at the park over the next 10 or 20 years, Xanterra could elevate the visitor experience a step further.

“We want to make sure we get it right. I feel like we got it right,” Robling said.

GFP commissioner Kevin Nyberg also spoke at the meeting.

“As an outsider looking at it, everybody really favored Regency (Ramkota). But when it came down to the process, the scores, the interview, as the secretary mentioned, it was looking at the future,” he said.

Ramkota ‘obviously very disappointed’

U.S. Hotel and Resort first signed a 10-year contract with Custer State Park in 2007, which was then renewed for two more five-year contracts.

Josh Schmaltz, the CEO of Ramkota whose office is at the State Game Lodge in Custer State Park, said the decision to go with Xanterra caught him off guard and he’s “obviously very disappointed.”

“I have been here since day one when we took over as the concessionaire 20 years ago,” he said. “I could have been in Sioux Falls. We have three hotels in Rapid City that I could have officed out of, but this is where I wanted to be.”

Rissler said in the September commission meeting that she believes the department and evaluation team fairly looked at all proposals before deciding which company to go with.

“They (U.S. Hotel and Resort) have built a strong foundation, but as a commission, we have to look to the future, and I hope that we can come out of this feeling content,” Rissler said.

Commissioner Julie Bartling said in the September meeting that the decision is not a criticism of the past but a thank you for what’s been done.

“I’m just generally appreciative of all that they’ve (U.S. Hotel and Resort) done, and I look forward to what’s out there for Custer State Park,” Bartling said.

State law requires in-state preference ‘if all things are equal’

Four concessionaires competed for the contract: Xanterra, U.S. Hotel and Resort, LIV Hospitality and ExplorUS. Xanterra is the largest of the four companies.

South Dakota has a law on the books that says preference should be given to South Dakota businesses or qualified agencies when awarding a contract “if all things are equal, including the price and quality of the supplies or services.”

Schmaltz said his team stays local as much as it can, working with Custer and surrounding businesses regularly.

“Any time that we can go local, we are 100% local. We’re a homegrown South Dakota company. We are 100% ESOP (Employee Stock Ownership Plan) with South Dakota employees,” Schmaltz said. “I mean, it all stays here.”

“This is something that was always very personal to us. I’m a West River, South Dakota, raised, from Harding County. All of the other three people on my team. There was Aberdeen, Parkston, Yankton. I mean, these are all South Dakota people. It wasn’t just a business. It wasn’t just a business opportunity. It was something that we have just been a part of for so long, and I’m very proud of what we’ve been able to do. Unfortunately, it didn’t go our way.”

The selection process

Blanchette outlined the selection process in the Sept. 10 GFP commission meeting.

The current contract ends Jan. 31. The commission started preparing for the request for proposal a year ago, he said.

The draft contract was written over the winter months in preparation to issue a prospectus that was issued on March 10 and expired on June 5. Here were the requirements of the prospectus, as outlined by Blanchette:

• Maintain and provide all the current required amenities and services at the four resort complexes in Custer State Park: State Game Lodge, Legion Lake Lodge, Bluebell Lodge and Sylvan Lake Lodge
• Minimum franchise fee of 19.6%, which is the minimum annual fee that the concessionaire must pay to Custer State Park to operate on the premises
• A 5.5% component renewal reserve, which is money the concessionaire will reserve to help maintain facilities over the term
• Finally, a minimum 3.4% personal property reserve to improve and upgrade the personal property that the concessionaire will use

Also within the prospectus, companies were asked to respond to five different selection factors. These were questions on how each company would approach facility maintenance, visitor experience, operational experience, financial capabilities and each company’s proposed franchise fee.

Blanchette said all four companies’ proposals met the criteria and requirements as outlined in the prospectus.

Written proposals and interviews were reviewed by 12 staff from GFP. It involved three commissioners on the selection committee as well as representation from the Department of Tourism.

“The team was deliberately selected to provide subject matter expertise, as well as oversight and objectivity, transparency and sure integrity into the process,” Blanchette said.

On Aug. 10 and 11, a smaller team oversaw the interview process held in Sioux Falls. All four companies received four hours to present and interview.

Blanchette announced that the selection committee selected the proposal submitted by Xanterra Parks and Resorts to be the next concessionaire at Custer State Park at the September meeting.

The selection was then approved by the commission. Contractual negotiations have been held with Xanterra, and a final contractual document was approved during Thursday’s commission meeting.

Schmaltz acknowledged that there is always risk in the business, as everything is on a contractual basis. He said some decisions made at Custer State Park didn’t “make sense” financially for the business, but they made them anyway.

“If it made the park better, there really wasn’t any discussion. We just did it. As I look back, I can can be very proud of the things that we did.”

“It’s a little hard right now to know that the things that we’ve done, we don’t get to enjoy them from a business standpoint. But again, nonetheless, we can be very proud of what we did,” Schmaltz said.