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The Honolulu Advertiser
Posted on: Sunday, March 28, 2010

Park extends deadline for Volcano House bidders

Colin M. Stewart
Hawaii Tribune-Herald

The National Park Service has extended the deadline for interested concessioners to submit bids to operate the Volcano House.

NPS commercial services specialist Kim Gagliolo announced in an e-mail that the original deadline of March 16 had been pushed back to June 30.

"Additionally, the National Park Service is currently revisiting elements of the original prospectus and will provide a modification to the solicitation package and notify all interested parties as soon as possible," the e-mail read.

The extension means that the Volcano House will more than likely be closed four to five months longer than originally planned, said Walt Poole, Hawaii Volcanoes National Park concessions management specialist.

The historic hotel and restaurant situated above Kilauea Caldera closed its doors at the beginning of the new year so that contractors could begin a $3.5 million renovation project, including seismic retrofitting and fire suppression upgrades.

The park service's original plan called for a 10-year contract with a new concessioner to begin July 1. The concessioner would then have six months to complete a series of renovations for which it would have to foot the bill. According to the NPS plan, the facility would then be ready to open for business again on Jan. 1, 2011.

"If the new deadline is June 30, then you're looking at another four or five months to the schedule," Poole said.

He would not say why the deadline had been extended, other than to say that the NPS had decided to modify its request for solicitations.

Poole would not discuss the nature of the modifications.

Calls to Volcanoes National Park Superintendent Cynthia Orlando and park press information officer Mardie Lane were not returned as of press time.

Ken Fujiyama, who held the contract at the facility for the last 26 years, told the Tribune-Herald in mid-January that he would not be submitting a bid by the original March 16 deadline. But on Friday, he said that he might reconsider if the park service addressed his reservations in its modifications to the solicitation package.

"Originally, there were too many things in the prospectus we didn't agree on," he said. "If they changed the prospectus to include things we agree on, then it would be acceptable (to make a bid). It didn't make economic sense at the time.

"It's a great property," he added, "but it has to make economic sense."

Fujiyama said there were two main areas of concern for him in the original prospectus.

The first is the prospectus' LSI, or "Leasehold Surrender Interest," stipulation. The LSI would limit the amount of compensation the concessioner would receive at the end of their lease for renovations done to improve the property, Fujiyama said.

"If you put money into improving the property, normally at the end of the contract, the concessioner has the right to get money back that they put in, less physical depreciation. The park limited the amount you could get back," he said.

Secondly, Fujiyama took issue with the fees the park proposed charging its new concessioner. His most recent contract with the NPS, which ended on Dec. 31, required a concessioner fee of 5.5 percent of total revenue. The park is currently asking for 12.5 percent, as well as .5 percent for maintenance.

"Thirteen percent right off the top has to go to the park," Fujiyama said. "For a restaurant to pay 13 percent on the gross ... my goodness!"

Other proposed changes would only add to the difficulty of paying that higher fee, Fujiyama said, including the removal of the Ohia Wing from the contract, which accounts for 10 rooms, and the combining of the facility's two gift shops into a single store.

"One is not enough to handle the amount of people coming in there. If you have a bus dropping off a group, and they have lunch and then head into the gift shop, they have their hands full of merchandise, and all of a sudden the bus is ready to go. They would leave the merchandise behind, because the cashiers can't process them fast enough," he said.

"Basically, you've taken away two revenue sources."

Calls seeking comment from other concessioners who have expressed interest in the Volcano House went unreturned Friday afternoon.