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What to do When a $55 Million Rec Center Moves in Next Door

Steve Krum and Wayne Westwood discuss what to do when a $55 million tax-exempt facility moves into your market.

Q: "I manage a club in Wyoming in a town of about 30,000 people. In April 2010 we had a $55 million Recreation Center open and we have lost approximately 25% of our membership. Even though we have been very proactive up to this point by upgrading our facility and defining our fitness niche in our community, it has just been very difficult to compete with a $55 million facility that charges significantly lower membership dues than we do. We are contemplating lowering our dues by $5.00/month. Our normal single membership is now $42, but over 60% of our memberships are classified as corporate which we charge only $37. We are thinking it may make sense to lower the other 40% of our members down to $37. Even though we would lose a little revenue, our hopes are that we will get more people in our doors. Not only have we lost members but our sales are down significantly because of this new facility."

A: I’m sorry to hear you are dealing with this, I too have experienced this twice over the last 8 years. In one of the cases we did what you are thinking, it was tough to reduce existing dues, but in the long run I believe it made us more competitive in the market.

We were also able to get the facility to reduce some of the services that competed with us and we got them to stop an expansion to their weight room. We did that by meeting with them and stressing the negative impact they were having on us. I believe they wanted to avoid any negative press and or feedback.

Wayne Westwood, CCM President 
Comprehensive Club Management  

A: Recreation Centers fall into our category of unfair competition for exactly the reasons you mentioned. Not only do they charge significantly lower membership dues, they seem to have unlimited access to capital and they do not pay some of the taxes that we do as private operators.

However, attempting to compete with them on price is a losing proposition and a vicious cycle. You will never win a price war. Your path of differentiation in your community is the right one. Continue to look to service, staff, programming and member experience as the reason to join your club. 

Partner with some other small businesses in your community to provide additional services that help your members with the biggest commodity in today's world: time. For example, maybe a car wash business can set up in your parking lot and wash member's cars while they work out. Or if you have a nearby restaurant that could post a "member's special" menu with a phone number so someone at the noon hour could get their workout in, then call from your club and it would be ready to go when they arrive.

When competing with low-end clubs, YMCA's, or rec centers, adding value to what you provide is the answer.

Steve Krum, VP of Facilities & GM
Spectrum Clubs


This post is a part of our weekly Best Practices series. We post a new question and answer every Monday morning. If you have a question you'd like our Industry Leaders to answer, submit your question today.

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