Hilton Head beach chair rental contract is worth millions. Just one company bid on it

More than three decades ago, the Town of Hilton Head Island awarded one company the town’s sole contract to rent chairs, umbrellas and other beach items on its beaches. In the past 32 years, the town has renewed the years-long contract multiple times and the company has brought in millions, most recently generating $6 million in revenue in 2023.

The town awarded Shore Beach Service the contract again in July, slated to expire in December 2029 . Despite the potential to earn millions in revenue, Shore Beach Service was the only company to submit a bid on the proposal. It has had rental rights since 1992.

Before the town put out the proposal in March 2023, at least one local business owner said he wanted to bid, but couldn’t because of contract terms he said were biased toward Shore Beach Service. The new contract doesn’t change Patrick Coughlin’s biggest gripe: the bundling of services. Although the town separated trash collection into another contract, it still tied together life-guarding and equipment rental services, barring businesses solely wanting to provide chair, umbrella and other beach item rental services.

The town did change other concerns with the contract: It switched the start date from the busy season to mid-winter and the franchise fee so that the town receives about $150,000 more than it did previously, according to Deputy Town Manager Josh Gruber.

Why didn’t the town unbundle the contracts?

Town staff discussed the unbundling of services and decided against it to “focus on making sure lifeguarding services are in place,” according to Gruber. He said it would cost significantly more for the town to hire its lifeguard staff, as many other municipalities do.

“There’s other businesses that could form to provide those services,” Gruber said. “It’s not that (Shore Beach Service) is receiving any type of exclusive access.”

Shore Beach Service’s operations manager Mike Wagner also said there are benefits to one company providing two services: It increases efficiency and lowers costs to the town. The company has kept Hilton Head beaches safe without major issues or lawsuits over its decades of service. It navigates shark sightings , rip-tide currents and heat warnings all in support of Beaufort County’s $3.1 billion tourism industry .

No matter, Coughlin said he believes the company has an unjust monopoly on the equipment rental service.

“They tied it together with lifeguarding so nobody else could bid,” said Coughlin, who owns multiple tourism-related businesses on the island, including the Pirates of Hilton Head cruise.

Franchise fee

It’s “the sweetheart deal of a century,” Coughlin said of Hilton Head’s previous agreement with Shore Beach Service.

In the last contract, Shore Beach Service paid the town 1% of all revenue and received money for certain services, such as trash collection fees and staffing for some beach control supervisors.

Under the 2024-29 contract, Shore Beach Service will still receive money for billable services, but they pay the town 3% of their revenue. Once Shore Beach Service pays the town $213,745, they don’t have to pay any franchise fee, meaning Shore Beach Service has more to gain if business booms. The service would have to make about $7.12 million in revenue to reach that point.

“Never say never,” Wagner said. “But I don’t see it happening anytime soon.”

This contract is a “win” for the town from a cost perspective, Wagner said.

“I definitely don’t benefit,” Wagner said. “We’ll end up netting from the town less than we have in the past.”

In 2023, the town paid Shore Beach Service $406,462 for billable services, according to the town budget. This year there are fewer billable services: The town has a $136,136 yearly contract with i2Recycle for beach trash and recycling services.

“The goal had been to reduce the cost of those services because those are billed directed to the town,” Gruber said. “And look at offsetting that through the revenue that’s generated from the franchise fee operations.”