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Everyone's talking about...: Sweating your assets
With online businesses and out-of-club fitness on the rise, how can facility-based operators respond? How can we get maximum value out of our buildings?
How much of your club is earning you money? Are the parts that turn a healthy profit having to subsidise other areas? With health clubs experiencing increased competition from lean online businesses, it’s time to stop turning a blind eye to those areas of your facilities that aren’t currently pulling their weight.
This situation is exacerbated by the “enormous change” going on in the industry, according to Rob Gregory, owner of Lifetime Health. He points to the polarisation of mature markets into low-cost and premium sectors, and the impact of digital solutions, as putting ever more pressure on club-based operators to make the most of their assets.
So what does all this mean for anyone running facility-based businesses? Will we start to see smaller clubs, with facilities being pared back? Will swimming pools be deemed too expensive to operate? Will cafés be seen as a luxury? With consumer trends showing that people increasingly don’t want to pay for services they don’t actually use, has less become more?
Could operators make larger clubs more profitable by sub-letting space to tenants whose offering complements that of the club, and who could drive additional footfall? Should we find ways of engaging those who are taking fitness into their own hands: for example, offering specialist training for cyclists and triathletes who haven’t considered a membership?
And how about those empty areas of the club that are just being used as storerooms or corridors: could a bit of reshaping bring unused spaces to life and turn them into income-generators?
Finally, if we are to remain facility-based, how can we make better use of technology to support that offering, making the club a vital, physical hub of a broader offering that also encompasses out-of-club activities? We ask the experts.
Baard Windingstad,
CEO,
Evo Fitness
“Evo Fitness clubs are around 420sq m (4,500sq ft), and 85 per cent of the space brings in yield. Too many clubs think they are centre of the universe and provide too many facilities. We believe working out is just one part of life, and that people generally want to be in and out as quickly as possible, so we design clubs accordingly.
Pools and wet areas can be a great selling point, but then people find they don’t have time to use them and start to see their membership as a waste of money. Our selling point to members is that they don’t pay for expensive facilities they won’t use.
Technology is part of this concept and is the heart, the brain and the soul of what we do. It helps us offer a high quality service but with minimal administration costs, leading to steady membership with a higher yield. For example, we track members’ activity outside the gym and aggregate all their exercise data; they don’t want to leave as they would lose this data. Members can also manage joining and leaving online, not only lowering admin costs but also removing a major barrier to joining in the first place.
Some clubs are too big today. I think focused, high quality services at favourable prices are the future. Bring down the size, maintain quality and focus your business. This is the ‘Ego’ age: customers only want to pay for what they use themselves.”
Dennis Pellikaan,
Co-owner and company director,
Pellikaan
“I believe there’s still scope for large-format facilities. We run clubs of around 5,000–6,000sq m and like to offer variety. We believe in a total concept aimed at families and are looking to become a one-stop shop – a place people can come for social, sports and medical services (see HCM April, p32).
However, we do need to get as high a yield as possible and have chosen to do this by sub-letting to other businesses. We can then promote these offerings as part of our overall brand. This works for us in two ways: it means we can create a higher yield for the space, and it means we can offer additional services to our members, all run by experts in their field.
One partnership that’s working very well for us is with an after-school childcare provider. This is a very competitive market in Holland, but our partner, Kinderstad, has found that the use of our sports facilities has given them a USP. For us, it means we have been able to double the number of children’s activities on offer, which is of great benefit to our members.
Other ways of getting maximum yield from the building is by cutting down the outgoings. With big buildings, we have high energy costs, but by working with a German consultancy we’ve managed to cut our energy bills by 15–20 per cent.”
Rob Gregory,
Owner,
Lifetime Health
“In order for club operators to maximise yield from their bricks and mortar assets, it’s important to understand the utilisation of different areas of the club: whether there’s unused capacity and where capacity is limited by bottlenecks. But it’s difficult to translate this understanding into a hard metric, such as revenue per square foot generated in different areas of the club.
Two ways of increasing yield that I particularly like are offering casual usage on a ‘per visit’ basis (it’s simple to do and a source of new membership) and virtual classes. Another under-utilised strategy is to allow members to charge purchases to an account that’s settled at the end of the month – I’ve rarely heard of an example where this hasn’t increased revenue. Use of technology is a component of all three options.
But the focus on the physical building is a limiting paradigm. Clubs must make better use of all their assets: staff, brand, content, members, IT infrastructure, digital capabilities, partnerships, competencies in service delivery. Operators also need to be more focused on the online opportunity.
No-one can be complacent, but there will always be a place for larger clubs, particularly where they offer more breadth of facilities and services.”
Sean Turner,
Chief digital officer,
Holmes Place
“Traditional multi-club models are being challenged by the polarisation of the market, digital health and the emergence of high-quality niche concepts. The ‘one size fits all’ approach is shifting to an increasingly personalised, customer-centric focus involving a more engaging member experience – a shift that’s necessary for large clubs to remain successful, as a positive member experience constitutes a valuable USP.
Large clubs with dedicated floorspace are evolving their gym-space allocation to favour open areas for group training and PT over traditional strength and cardio zones, boosting customer engagement and product yield. A trend toward the merging of the healthcare and fitness industries may also create lucrative profit-share opportunities and added-value client packages as space is converted and dedicated to health and medical services.
Technology has emerged as a major element in enhancing the member experience: successful premium operators have used such tools to add value inside and outside the club, while budget operators leverage technology to support their highly efficient, low-cost, value operations. Technology needs to enhance the member experience – if the technology is not adding value for the member, don’t do it.”
