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Executive Excellence

Having successfully completed a management buyout, the executive vice president of the Bay Club Company is now focusing on expansion.

CBI: The Bay Club Company portfolio is unique and impressive—24 locations on 10 of what you describe as “campuses.” Help us to imagine what one of your typical facilities looks like.

LISA GRAF: Sorry, but there really isn’t a “typical” facility, and, as you’ve observed, that’s one of the things that makes Bay Club unique. So, too, is our campus concept. A campus is a group of clubs that are situated near one another, and that, together, encompass four different quadrants, or types of activity—family, fitness, sport, and hospitality.

CBI: Still a little bit hard to picture. Can you give us an example, and explain your pricing strategy?

LG: Our Santa Barbara campus includes our uptown, downtown, and Goleta facilities, all of which are located on the beautiful Central Coast. The downtown club is a charming boutique facility, located next to the historic Canary Hotel, that offers state-of-the-art equipment, world-class amenities, and the latest group fitness classes; members also can enjoy outdoor yoga on the hotel’s rooftop. The uptown club offers many of the same things, but sits in the historic arts district in the heart of Santa Barbara. For those seeking a mind/body experience in a relaxed and comfortable setting, the Goleta club offers such option as hot yoga and Power Vinyasa yoga.

CBI: And with respect to pricing …. ?

LG: A single club membership provides a member with access to one club; an executive membership, to all of the clubs composing one campus; and the Club West membership, to all of our clubs in California. Actual prices vary by location, and also are tailored to each individual’s or family’s needs.

CBI: I hesitate to ask this now, but is there a typical Bay Club member, a fairly uniform demographic profile?

LG: No, there isn’t a typical member, either. We do know that the decision-makers in most of our members’ families are moms. So many of our decisions are shaped by our desire to help those women balance family, fitness, sport, and their social lives. Interestingly, a substantial portion of our executive team consists of moms. But, while a good percentage of our members are married and have children, we also attract young professionals.

At the moment, much of our strategy is family-focused, but, as we introduce more amenities and some country clubs, it will skew more toward the sophisticated-adult experience. Again, having different facilities within a short drive time of one another allows us to serve several different demographics … and to serve them very well.

CBI: Two years ago, in 2013, you embarked on a major rebranding, with the intention of bringing all your facilities together beneath the umbrella of a single brand. Why did that seem necessary?

LG: The rebranding was designed to grow the business. Each unit had its own name and identity, but, having decided to expand, we thought it wise to bundle the clubs together—to consolidate our identity in the market, and to offer more cross-club utilization for members. Reducing the public’s confusion about who we are, and what we offer, has improved consumers’ understanding of the brand and their awareness of our locations, and increased membership sales. Since we went through this exercise, we’ve grown from 10 to 24 clubs. Annie Appel, our executive vice president of marketing, played an integral role in our rebranding efforts.

CBI: Then, last year, you and your management team oversaw what was perhaps the most dramatic change in the company’s nearly 40-year history—acquiring the company with the assistance of York Capital Management, LLC. So, who owns what?

LG: York is the majority equity partner, and management owns 20%. And when I say “management,” I’m referring to more than 100 people—general managers, club managers, and individuals with director-level positions.

We regard employee equity as an important recruiting and retention tool. It’s certainly unique in the fitness industry, and it’s been a great way for us to attract and hold on to the talent we want. I can’t disclose the specific percentages we award, but our culture is one that rewards people for their contributions to what we deliver in the marketplace, and for wanting to grow their careers with the Bay Club. It’s a great way to incentivize our associates.

CBI: In the past, you’ve said that you’re modeling what the tech industry has done—appropriate, perhaps, since your corporate offices in San Francisco are just 50 miles from Silicon Valley. Are the campus and equity concepts part of that?

LG: Yes. In the tech industry, many companies have created campuses that attempt to integrate work, eating, exercise, and relaxation. The Bay Club Company has taken the same approach by offering employee ownership and bundled clubs, which give staff a sense of connectedness, and give members access to the wealth of amenities beneath the Bay Club umbrella.

CBI: Have there been any key management changes since the management buyout?

LG: The Bay Club is still in growth mode, so we’re taking steps to strengthen the organization, including our senior executive team. We’ve added Leanne Kamekona, who serves as executive chef and vice president of food and beverage; Chris Reiss, as COO; Mark Koorenny, as general counsel; and Bobbi Quick, as executive vice president of operations for Southern California.

Leanne brings the hospitality expertise she acquired at St. Regis Princeville, the La Quinta Resort & Club, and the Rancho Las Palmas Resort & Spa into the Bay Club’s social sphere.

Chris and Mark both came from top-tier law firms that we were doing business with, and put us in a great position to handle the “block-and-tackle” work associated with growth, e.g., better due diligence to ensure that every opportunity is a good fit, considered from every angle.

Bobbi, a 24-year veteran of 24 Hour Fitness, helps us attract the top talent we want, and does a great job of running the Southern California region.

CBI: Growth mode—obviously. Last year, you acquired the prestigious StoneTree Golf Club, in Novato, California, and, this year, purchased 11 Spectrum Athletic Club facilities. We’d love to hear your growth plan.

LG: We’ll continue to expand and push the boundaries of fitness and hospitality into the East Bay area, and search for swim, tennis, beach, and golf properties to partner with in Southern California. We also plan to move into the Seattle, Washington, and Denver, Colorado, markets. We don’t have a specified number of clubs that we want to build or acquire. We don’t want to just roll out boxes. What we do want to do is make sure we pursue deals that mesh with our strategy, and with our demographic and socioeconomic targets.

CBI: Elaborate on that a bit, if you would.

LG: We’re looking at properties that work with our “four-quadrant” strategy. The possible components could include outdoor pools, tennis courts, a base fitness operation, golf, water sports, food and beverage, retail, and family amenities. We might not acquire all of that in one property, but could provide it with a collection of clubs composing a campus.

Our latest acquisition illustrates the process. It’s a 36,000-square-foot fitness space in San Francisco’s Santana Row, Silicon Valley’s premier shopping, dining, living, and working destination. It’s located in a large, high-end, mixed-use development, and rounds out our Bay Club Silicon Valley campus to include three locations: Bay Club Santa Clara, Bay Club Cupertino, and, now, Bay Club Santana Row.

At this point, we’re constantly sourcing deals, looking for the right fit.

CBI: Given the Bay Club’s upscale positioning, what are your plans for Spectrum? Do you intend to rebrand and upgrade these facilities?

LG: Yes. All of the Spectrum properties will become Bay Clubs. We’re investing millions of dollars to rebrand and upgrade these facilities, introducing, wherever they’re needed, things such as spa amenities, food and beverage, and family-oriented offerings.

A lot of what we do in terms of upgrades revolves around social use. For example, one item that we’ve been adding consistently is an Active Lobby, a lounge where members can mingle post-workout, with access to complimentary coffee, charging docks, a community workstation, and complimentary WiFi. These enhancements will be available either within the individual club or as part of a campus located within a reasonable drive time.

CBI: What’s next for The Bay Club Company?

LG: The careful, planned expansion that I’ve described. You’ll continue to see innovations and developments
at our existing clubs, as well as acquisitions, including ones involving destination properties in, for instance, Carmel, Tahoe, and Palm Springs.

We’ve refined our playbook based on the response we’re receiving from our shifting membership. As we upgrade our membership, we’ll upgrade our properties. We intend to offer a tiered structure that begins with base fitness and moves up to the country club category. We view every opportunity as a brand-new one, and we’re open to any and all ideas. We’re obviously prudent in terms of due diligence, but we’re on our toes—versus on our heels—so we can act on growth.

We’ve really just begun.

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