11 For IHRSA ’11!

Industry leaders report upbeat results in a downbeat economy and turn to IHRSA to learn what’s in store for the future

Is the recession really over? What kind of results did clubs post last year? What lies ahead for the next 12 months . . . and beyond?

These are just some of the questions that will be eagerly discussed and debated when thousands of club owners, operators, managers, and suppliers from throughout the world convene in San Francisco, March 16-19, for IHRSA’s 30^th Anniversary International Convention and Trade Show.

IHRSA, it seems appropriate to recall, was founded three decades ago in the midst of another challenging economic downturn with the goal of sharing information, experience, best practices, friendships, and new ideas—to the advantage of all.

To get the discussion going, CBI has asked 11 leading club owners and industry suppliers to share their numbers for 2010 and their outlooks for 2011.

Most agree that an economic rebound is still, at best, months away.

Still, all report a gradual turnaround in their business, the result of a series of courageous decisions on their part. They have cut costs, streamlined management, enhanced existing products, added new ones to the pipeline, improved their program mix, created nondues profit centers, and, even, raised dues and expanded their facilities.

Their hard-won success has come from digging in to determine how they could work “smarter and better” to be prepared for the upturn…when it inevitably arrives.

Tom Behan, owner, Bay Tennis & Fitness, Harbor Springs, Michigan

“We offer both memberships and passes that nonmembers can use to purchase individual classes. In 2010, we gained members overall; however, some people cut back on the number of months they purchased, rather than committing to an entire year. The number of passes sold to nonmembers was up, and we scheduled more personal-training sessions. In addition, we cut payroll, which meant that management was forced to wear more hats. Our tennis lessons improved by 20%—even with one less tennis pro—and our adult leagues and children’s clinics were well-received. As a result of all of these things, our profitability actually rose.

“I don’t see the economy turning around anytime soon. As a result, we’re going to fight for every dollar by keeping our programs fresh and offering a lot of classes. Our outlook for 2011 is the same as it was for 2010, except that, this year, we’re going to run a new 12-month TV ad campaign—the first since we opened in 2006.

“We’ll focus on what works and over-deliver on quality and cleanliness. We’ve hired a membership/marketing person to increase memberships, cultivate a more ‘fuzzy feeling’ in the community, and hold on to the clients we have.

“One or two members of our team will likely attend the IHRSA convention in March for the seminars and to purchase at least six pieces of equipment. Clients like to see something new every year.”

Gail Fast, vice president, L&T Health & Fitness, Falls Church, Virginia

Despite a lackluster economy, Fast says she feels “lucky,” thanks to a decision she made eight years ago to increase her health-promotion programs and services. “We’ve worked hard to expand our client base to include not only our fitness-management clients, but also insurance companies, brokers, and third-party administrators. We can deliver our health-promotion programs—onsite health screenings, health fairs, health-risk assessments, and health coaching—nationwide, which benefits brokers and their clients.”              

Due to rising healthcare costs and healthcare reform, Fast is experiencing increased demand for all of L&T’s services. “In 2010, we added fitness-management clients in the Mid-Atlantic region and opened new locations for existing clients. We’ve projected a 9% increase in total revenue and hope to exceed that.”           

Fast is very optimistic about this year, as well. “As more organizations recognize the benefits of prevention programs and come to appreciate how easily and cost-effectively they can be implemented, the industry will grow. We’re well positioned for that growth, and we’ll continue to expand. We’re projecting a 6%–8% increase in revenue for 2011.”

As for IHRSA conventions, she finds them “reenergizing,” as does her staff. “The combination of great speakers, engaging sessions, and the amazing trade show make IHRSA the perfect opportunity to see what the industry has to offer. We’re never disappointed!”

Frannie DiNatale, general manager/COO, The Arena Club, Bel Air, Maryland

DiNatale couldn’t have better news: Last year was the best one ever for The Arena Club.             

“In seven years, this business has never produced the membership numbers, revenue, or EBITDA (earnings before interest, taxes, depreciation, and amortization) that it did in 2010. At the close of the third quarter, we were holding at 20% EBITDA, a 9% growth in membership, and a 75% retention rate. Our EBITDA was up 3.5% compared with the same period in 2009, which was also a strong year for us.” 

Why the stellar performance? Two-and-a-half years ago, DiNatale began implementing a plan to automate her systems and eliminate redundancies. She also cut her payroll by hiring fewer, more qualified managers at a slightly higher wage. She emphasized service training, and reinvested in her fitness and aquatics facilities. “We’re committed to reinvesting 5% of revenue in our facility annually.”

This year, DiNatale intends to focus on providing the best service possible. She projects a 5% increase in revenue, and will strive to maintain a 20% EBITDA margin. “Our goal for 2011 is a 5%-9% growth in membership.”

She hopes to be at the IHRSA convention if attending doesn’t conflict with the marathon she’s planning to run. “I look to IHRSA for new industry ideas and trends that are a good fit for what we’re doing.”

Leslie Shinners, general manager, Freedom Aquatics & Fitness Center, Manassas, Virginia

Shinners has promising news to share, as well. “Between mid-2007 and March 2010, our membership declined by about 15%. However, since then, our numbers have been increasing slowly, but steadily, which is very encouraging. Our profit centers—personal and group training, instructional programs, and summer camps—have been attracting increased participation. The revenue from them has kept us afloat, and, as a result, we’ve been able to maintain satisfactory profitability for the last three years. 

“We’re rebuilding our membership numbers by increasing our focus on retention from the moment a person joins. We’re projecting a 5% increase in memberships in fiscal 2011, over fiscal 2010.” 

Now that things are improving at her club, Shinners is looking forward to attending the IHRSA convention and trade show in 2012. “Going to IHRSA reenergizes our staff and gives us new ideas. That’s true of all our employees—even those who don’t attend. We look to IHRSA, in particular, to learn about best practices and new retention strategies.”

Barry Walsh, managing director, Health Escape, Dublin, Ireland

Barry Walsh has managed exceedingly well, despite an Irish economy that’s still plagued by sagging consumer confidence, a 13% unemployment rate, and higher government taxes. “The outlook isn’t likely to improve in 2011,” he observes.

Still, his membership dues were stable in 2010. “Our EBITDA actually grew thanks to our cost-control efforts, and because we were able to negotiate a reduction in our rent and service charges.”

Walsh has also expanded his club by 10%, taking it to 33,000 square feet, by leasing the building next door. “Now, we’re one of the largest, as well as one of the most expensive, clubs in Dublin. Our annual dues are €900 ($1,239), and our monthly dues, €79 ($109).”

While Walsh is being challenged by “low-cost” club business models, he says their impact has been minimal. “They demonstrate to consumers how professional and focused we are. We’ve always maintained a strong customer focus and are constantly training our team of professionals.”

Walsh plans to grow his membership by 8% in 2011, and by 25% by 2014, providing the economy improves. “We’ll continue to innovate and identify ways to improve on what we deliver—inspired by what we learn at the IHRSA European Congress and IHRSA’s upcoming annual convention and trade show.”

Paul Byrne, president, Precor, Inc.

“We’ve seen moderate growth in North America and good growth, internationally. We gained market share worldwide in 2009, according to data from FISA (Fitness Industry Suppliers of North America). We introduced new bikes in 2010 and have plans to launch more additions to our line in 2011.

“I think we’ll be in this ‘muddle-through’ economy for awhile. Unemployment, business and consumer deleveraging, and a weak real estate market will continue to act as head winds. Innovation, operating efficiency, and a strong balance sheet will be key to navigating these difficult times.

“We’ll be at this year’s IHRSA convention, just as we have been every year since the mid-1980s. The show provides a convenient forum for us to meet with our top customers and, also, to convene the Precor staff from around the world. Beyond just exhibiting, we regard our membership in IHRSA as a contribution to the industry. The financial participation of the major suppliers helps fund the association’s education arm, which benefits club operators of all sizes.

“We’ve kept our innovation pipeline full and are looking forward to unveiling some exciting new products at IHRSA ’11. The IHRSA trade show, the industry’s largest, is the best stage there is for new-product introductions.”

Lindy Brown, executive director, Refinery, Champaign, Illinois

“Last year was an interesting one for our club, which has been in operation for about six years. For the first time, we’ve felt some of the effects, both positive and negative, of aging. We’re still the newest club in our area, but no longer the ‘new kid on the block,’ which means that we have to work to keep things fresh.

“In 2010, our membership numbers held steady, increasing in some months, decreasing in others, with a 2%-4% loss, overall. However, even with slightly fewer members, our revenue has increased by about 1%, year-to-date. We raised monthly dues by $5 for about 50% of our members. Our program and personal-training revenues increased slightly, as well.

“While I don’t foresee a huge turnaround in 2011, I do anticipate the same consistent results. However, we do plan to make some changes. We’ll focus more on membership integration and retention, which will generate additional nondues revenue. We’ll trim our expenses by cutting our hours of operation, reducing staff hours. We’ll watch our energy consumption, and we’ve cut our advertising budget, placing greater emphasis on cross-marketing and member referrals.”

Art Hicks, president and COO, CYBEX International, Inc.

“We began to see sales momentum pick up in the second quarter of 2010. While there’s still a conservative attitude in most of the market, some segments are expanding, and some customers are upgrading their equipment.

“We’ve been targeting markets on which we haven’t focused, historically, and these efforts are beginning to pay off. Still, the economy needs to improve for us to return to a true sales-growth mode, and there’s no telling when that will occur. However, we’re making significant investments in sales staff, marketing, and product development to maximize our sales success both during the coming year and over the long-term.

“It’s great to see that IHRSA has really expanded trade-show participation by non-U.S. fitness facilities. The upcoming show will be an important time for us to connect with our key existing, and potential new, customers. It will also provide a valuable opportunity to showcase a number of new and exciting products, including our new functional-training line of equipment, the new displays of all of our cardio items, and our new ‘heavy iron’ line.

Jan Middelkamp, CEO,  HDD Groep, Waalwijk, the Netherlands

“We help clubs in the Netherlands, Belgium, and parts of Germany achieve long-term success by providing them with Les Mills group-fitness programs and our new personal-training concept, Los Angeles Personal Training (LAPT)…In the Netherlands, 2010 was difficult for many fitness providers because of greater competition and the increased popularity of budget clubs.

“Our 2010 revenues will exceed 2009’s by 10%, the result of the growth of our Les Mills programs and the launch of its new dance class, ‘Sh’Bam.’ We also experienced 250% growth with LAPT. Because many clubs are losing members, fees are down, and they’re looking for secondary, nondues income. Many have started to utilize our LAPT system as a profit center.

“In 2011, we believe that many European clubs will switch from an all-inclusive business model to relying more heavily on profit centers. As a result, both individual and small-group personal training will increase. Clubs will also implement fee-based group fitness. For us, that means delivering profit-center concepts, such as Gravity and VIPR, and we’ll also introduce new Les Mills programs.

“As for IHRSA, we support it 100%. We’ll be attending the convention and trade show in March, and we’ll be bringing our customers. We look forward to networking and to building more great relationships!”

Florence Auld, owner, The Women’s Club, Chantilly, Virginia

“At The Women’s Club, we had a positive net gain of 8% in dues-paying members. We had our third-best year ever, with nondues representing 42% of total revenue.

“Because I knew that 2010 was going to be challenging, to obtain those results, I set a goal of focusing on programs that would yield substantial growth, and I eliminated services that robbed us of time and energy. I also eliminated tanning, even though it was a lucrative profit center. It just didn’t fit with our core values. While I had some upset members, we gained respect because it demonstrated that we’re serious about their health.
“We were also very lenient with members who lost their jobs, allowing them to come to the club until they found another position. While no one took advantage of the policy, it increased customer loyalty.
            “Overall, I view the economy the same as I would a competitor—it forces you to work smarter and better.
“As for 2011, our 20-year lease is up, so I'm looking at relocating or doing a renovation. Part of that upgrade will involve buying new equipment at the IHRSA trade show in March.”

Cliff Buchholz, owner, Miramont Lifestyle Fitness, Fort Collins, Colorado

Last year, while challenging, was also successful, reports Buchholz. Despite fierce competition, he opened a fourth location, expanding his brand in Northern Colorado. His membership base grew by 13.1%, and his EBITDA increased by 26.5% over 2009.

“But the real reason for those impressive numbers is a two-year effort to build our ‘Culture’ on the foundation of our ‘Purpose,’ guided by our ‘Values,’” he explains. “The data speaks to the success of that effort."

Buchholz expects business to be slow in 2011, but foresees a turnaround later in the year. “Although membership will remain stable, our nondues revenue will increase as long as we offer value for the consumer with our vast programming. We’ve also just opened a new Urgent Care medical center to facilitate our wellness programs.”

In addition, he intends to cut expenses and monitor margins. “Our three-year goal is to reduce debt and generate 50% of our revenue from nondues sources.”

As always, Buchholz will attend the IHRSA convention in March. “I was a member of the National Indoor Tennis Association before it joined with the National Racquetball Association to create IHRSA in 1981,” he points out. “IHRSA motivates my staff with new ideas, trends, and networking, and we expect it to provide a sense of direction for the future, following three years of recession.”