Key Challenges Facing Club Operators

For Gym Operators

Key Challenges Facing Club Operators

The health club industry has continued to grow in various ways since the end of the recession.

Clubs have expanded in a variety of ways. New clubs and club concepts have emerged. Clubs have been re-investing in their physical plans and equipment, as they did prior to the recession. In fact, many are doing so in greater numbers. Optimism for the fitness industry has grown again. Yet challenges still remain for operators.

This post was written by Rick Caro, President of Management Vision, Inc. and 42-year veteran of the club industry. For more information, check out "About the Author" at the bottom of the page.

 

Old Challenges Are Still Here

Perhaps the old marketing concept of segmentation surfaced as it had never done so before. Simply, clubs had to be reminded of the need to differentiate themselves. In the past, this was often done simply by pricing. Now, even pricing has its nuances. In a major metropolitan area, there might be different levels of pricing:

  • High: Over $125/month
  • Low-High: $100-$125/month
  • High-Middle: $80-$100/month
  • Middle: $60-$80/Month
  • Low-Middle: $40-$60/month
  • High-Low: $20-$40/month
  • Low: Under $20/month

In other markets, these same categories might be present, but with different numerical definitions.

However, it's not just pricing that differentiates clubs. It might be programs or a specific program led by a highly regarded instructor. It might be a panoply of services to meet the needs of all members of a family. It might be a medical or corporate affiliation, or a focus on a specific part of the local community. For many, it was a wake-up call for many that a club could no longer be “all things to all people.”

The obvious challenges continue to highlight a weakness in the recruiting of new members. Old marketing techniques are not as effective, assuming clubs are tracking them. Some techniques that worked before are still working but at lesser levels, while some are not producing leads at all. When new marketing vehicles are tried, they are taking more time. Even with some success at the old traditional methods (member referrals, soliciting former members, direct mail campaigns), the lack of predictable results stands out. So clubs’ abilities to forecast new joiners specifically each month has become more tenuous.

If the new joiner efforts are more challenging, then the importance of maintaining or even increasing member retention becomes paramount. This implies better new member launches to integrate these new joiners into regular usage patterns, and identifying low users and activating recovery programs to “save” them before they become future cancels.

It also highlights the importance of increasing dollars earned per member. Ancillary revenue from non-dues categories is critical, especially if clubs are not succeeding in their member acquisition and retention levels. This triggers the need to increase the penetration rate of the overall membership into pay-for-service programs or services. It means that clubs need to identify former payers of such services and re-initiate them back into those past programs. It also means that clubs may need to increase pricing and profit margins of such programs.

New Challenges

Club executives have not been known for being successful cost cutters. In times of uncertainty and where profitability is not growing rapidly, an overall campaign is needed to review every line item. The process should go down to each department (housekeeping/cleaning, repairs, child care, group exercise, programming, retail products, personal training, back office, etc). Each line item has to be researched, sourced anew and questioned. This is especially true of all items that do not directly effect the membership (business insurance, credit card costs, fire alarms, dues and subscriptions, health insurance, medical supplies, bank fees, printing, etc). The old adage is paramount: $1 saved on expenses goes directly to the bottom line.

A range of other challenges in a wide variety of areas should also be noted: the need to train current staff, to attract better staff, to create fresh new programs and services, the need to be able to access capital, the need to grow the business and the need to be able to plan for the future. All are critical for long-term success.

Clubs learned lots of lessons during the recession. The ease of access for new competition has been highlighted in recent years. Club leaders need to plan their future more systematically and address their various challenges directly going forward.

Author Information

Rick Caro
Rick Caro's picture

Rick Caro is President of Management Vision, Inc. and a 42-year veteran of the club industry. Management Vision, Inc. is a consulting company specializing in market analyses, club valuations, expert witness testimony, club finances and club transactions; it is reachable at mgmtvision@gmail.com.

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