addarrow-downarrow-outlinearrow-outline-downarrow-outline-leftarrow-outline-uparrow-upclosedownloadformat-pdfhelpinfoinfo-outlinelink-external-outlinemenusearchsource-handshakesource-klsource-web

National Parks

National parks around the world have long-permitted private companies to operate within in their boundaries, whether it be to run gift shops or rental concessions. However, as national parks confront challenges related to limited funding, mismanagement and the threat of budget cuts, in some cases national and state authorities are looking to the private sector to take on more of a managerial role.

Under the right circumstances, public-private partnerships (PPPs) have been utilized as a means to tap into private sector expertise and capital. When done right, private operators can take on a public park that is losing money for the government and convert it into an economically productive asset, generating cash for the government in the form of rent payments while still serving the public.

Governments in emerging markets have experienced real success with national park PPPs. In the United States, national park PPPs have underscored the benefit of financial self-sufficiency, with parks operated on a concession basis remaining open despite federal budget cuts that forced others to close.

National parks in developing countries house some of the planet’s most undervalued natural assets and responsible commercialization offers a way to capture their significant economic value. PPPs have offered a powerful policy tool for improving the economic sustainability of parks, enhancing the quality of services, efficiently leveraging investment in conservation and contributing to the core function of protecting biodiversity.

Under a typical concession contract for a national park, the concessionaire will sign a contract allow­ing it to run the park for profit, and then pay the public entity rent in the form of a percentage of fee revenues. For many concession contracts, the private company pays all the expenses associated with operating and maintaining the park and is allowed to keep the customer fees paid at the gate as revenue. Public authorities retain an immense amount of control over the appearance and service level at a privatized facility, and generally have procedures in place for terminating contracts where private companies under-perform on the established standards.

Issues

  • Governing legislation

    A key issue for the authority to consider—even before beginning to structure a PPP—is whether applicable legislation permits it to concession the park’s continued develop­ment, operation, and maintenance to a private operator. The...

    A key issue for the authority to consider—even before beginning to structure a PPP—is whether applicable legislation permits it to concession the park’s continued develop­ment, operation, and maintenance to a private operator. The relevant legislation may prohibit the authority from granting concessions over some or all of the park’s operations. In addition, in some jurisdictions—particularly those that follow the civil law tradition—authorities may be constitutionally forbidden from allowing any non-state entity to manage assets considered to be part of the public domain.

    In most jurisdictions, however, legislation will likely allow some form of private participation in public parks, although the specific operational features of the park that can be concessioned to a private party will vary from jurisdiction to juris­diction and, in some cases, from park to park.

  • Balance of interests

    National parks are a common good that can suffer as a result of too much visitation. The park is at its best when it is kept pristine, but the private sector operator needs to have an adequate volume of visitors to make a profit. These interests...

    National parks are a common good that can suffer as a result of too much visitation. The park is at its best when it is kept pristine, but the private sector operator needs to have an adequate volume of visitors to make a profit. These interests can be at odds and maintaining a balance is difficult. As a result, the government must set out clear regulations and guidelines that ensure the park is maintained and protected, while ensuring a bankable project from the perspective of the operator.

    The PPP agreement can require the private operator adhere to strict environmental and social requirements, in certain cases where the national legislation is weak or outdated. This helps the park’s authorities manage the natural assets at a higher level of performance, while penalties keep the private operator in check.

  • Community inclusion

    It is important to appreciate the potential for public opposition to the involvement of the private sector in natural resources like national parks, which are often viewed as innately public entities. Many projects have faced at least initial...

    It is important to appreciate the potential for public opposition to the involvement of the private sector in natural resources like national parks, which are often viewed as innately public entities. Many projects have faced at least initial opposition based on fears that the commercial interest of private operators would dilute the site’s appeal. This has been a particularly relevant issue for national parks in the United States, several of which are experimenting with the PPP model.  It is important to address community concerns regarding private involvement. An open dialogue regarding protection of the asset can alleviate public mistrust and foster community buy in.

    Local support for national park PPPs can also be bolstered through economic avenues as well, as parks often provide a source of income for local communities. Many national parks are in outlying areas, far from urban centers and often surrounded by poor communities with little access to employment. Bringing local communities into national parks PPPs allows for direct and indirect job creation.

  • Demand risk and structur¬ing the payment mechanism

    Assuming that the governing law permits an operator to manage a park on a long-term basis, the authority can consider a broad concession to the operator to maintain and operate a variety of park services in exchange for a performance-based

    Assuming that the governing law permits an operator to manage a park on a long-term basis, the authority can consider a broad concession to the operator to maintain and operate a variety of park services in exchange for a performance-based availability payment.

    The payment mechanism is also structured to incentivize desired outcomes. For example, authorities could tie the operator’s payment to the level of visitors to the public park, in order to incentivize the operator to perform any promotion-related obligations. The demand risk associated with a visitor-based payment mecha­nism may need to be mitigated, however, if the project is financed, since lenders are unlikely to finance a project if repayments are subjected to the ups and downs of the tourism sector.

    Under these circumstances, shadow tolling arrange­ments similar to those used in the transportation sector can be considered, wherein the authority can pay the operator a performance-based availability payment that could be adjusted based on visitor numbers. This structure permits the operator a level of stable income (subject to appropriate perfor­mance of its obligations), and makes most proj­ects financeable while at the same time ensuring that the operator is motivated to maximize the number of visitors to the park.

    More creative payment mechanism models can also be considered. Payments and deduc­tions tied to specific ecological or sustainability benchmarks may be attractive to authorities— for example, allowing for additional payments or deductions calculated on the basis of increases or decreases in the forest cover, vegetation, or of a particular animal species. Structuring any such mechanisms would likely require great care, given the number of variables involved.

Tools & Guidance

    • 2014
    • United Nations (UN), United Nations Development Programme (UNDP)

    Tourism Concessions in Protected Natural Areas

    Guidelines for Managers

    UNDP has a large portfolio of protected area strengthening projects in more than 100 countries worldwide. Many of these projects promote development of a robust protected area tourism concession system and/or individual concessions, as a mechanism for strengthening protected areas, increasing financing for protected area management and for achieving sustainable and equitable development. Run effectively, protected area concessions represent public-private partnerships that can increase employment and livelihood opportunities in a sustainable and inclusive manner.  By looking for opportunities to work with concessionaires, protected area agencies can do more for conservation and visitors to their protected areas and help produce a...

Projects & Case Studies

    • 2013
    • International Finance Corporation (IFC)

    Handshake Issue #10: Tourism & PPPs

    Handshake Issue #10: Tourism & PPPs examines partnerships that have revitalized both natural and cultural heritage sites, along with the investment climate necessities to position these destinations for long-term success. Contributors also highlight the role of transport and access for developing economies with tourist offerings, focusing on the transformative role of low-cost carriers and pedestrian cities. Tourism does best when governments and private companies work closely together bringing in jobs, supports communities, and improves a country’s visibility on the global stage.

Lessons & Analysis

    • 2006
    • Nico Saporiti
    • International Finance Corporation (IFC)

    Managing National Parks

    How Public-Private Partnerships Can Aid Conservation

    Positive experience with public-private partnerships in nature conservation in Africa shows that they can improve service through professional management and marketing, reduce the need for public subsidies, and mobilize capital for investment in park infrastructure and biodiversity. The best choice of structure for such partnerships depends mainly on the capacity of the incumbent public park agency.

Explore Sectors