With the country mired in its current recession, the growing sense is that the economy is not going to get back on track overnight. Companies are going to need to invest time, patience and a little ingenuity to stay afloat or surge ahead.

The club industry is no exception to the challenges of the recession. Last month, Bally Total Fitness, Chicago, filed for bankruptcy for the second time in 17 months. Its filing may not have been due specifically to the recession (considering the company's history of financial issues), but the recession could not have helped. After the bankruptcy announcement, Bally closed several clubs around the country (see related story). Other club companies both large and small closed clubs, made cuts in staff or experienced a decrease in memberships over the course of last year.

January traditionally is the biggest month of the year for health clubs. As the month winds down, there still is optimism that the industry will survive the economic troubles of the country. As outlined in Financial Week magazine, research firm Ibis World lists health and fitness clubs No. 5 among the most likely industries to experience growth in 2009.

"With more people focusing on achieving healthier lifestyles, this industry is expected to increase 2.2 percent in 2009," writes Ibis World. "As Baby Boomers pass through their 40s and 50s, health care costs are forecast to rise dramatically, creating an incentive for insurers to promote preventive practices, like hitting the gym. Corporate fitness programs are also expected to become more popular, further driving growth in the sector."

Steven Schwartz, president and CEO of Chicago-based TCA Holdings, which operates Midtown Athletic Clubs, agrees that all is not hopeless for the industry.

"The health and fitness business will continue to grow," Schwartz says. "It has nothing to do with the recession because taking care of yourself is a good thing."

So there is hope for the industry yet, but for that hope to become reality, club owners must be proactive in their approach to the economy and take it one step at a time.

Making the Cuts

When a country is in the midst of a tough economy, most business owners look first to cut costs. Almost every club owner has had to make cuts over the last few months, and more are likely to come. The important thing for club operators and owners is to make the necessary cuts that will help them turn a profit. Most industry experts say that every dollar saved is a dollar to the bottom line.

"Most general managers and department heads do not love expense management and cost cutting," says Rick Caro, president of New York-based Management Vision Inc. "It's not as much fun. It requires great diligence, great detail, great work over 12 months, not just one or two weeks. If we can find ways to save some dollars, all of it goes straight to the bottom line, without any offsets. We can't say that about increased revenue because often with increased revenue comes some related expenses."

Caro suggests that operators look at every aspect of a club's operations for possible cost cutting — big issues, such as rent, energy costs and staff salaries, and little issues, such as magazine subscriptions. Club owners should weed out magazines that they don't need to offer in their clubs and examine other hidden costs, such as office supplies and copier paper, Caro says.

Towel service may be another area for cuts. For some clubs, this service is a luxury they can't afford to lose, but for others, it appears to be expendable. In November, Elevations Health Club, which has two clubs in northeastern Pennsylvania, discontinued its towel service. Last month, Bally did the same.

Though, when making cuts, club operators must ensure they aren't making too many cuts that affect the value of their club, says Ed Tock, president of Eddie Tock Health Club Sales and Marketing Consulting, Garrison, NY.

"Part of the challenge is not to eliminate things that members have been comfortable with," Tock says. "Some clubs are probably cutting back too much."

However, Tock urges club owners to overestimate the amount of their cost-cutting measures. If club owners plan to cut back 10 to 15 percent, they should really increase that to 20 percent so that when the economy rebounds, the club will have an extra 5 percent in the bank, Tock says.

In terms of staff, operators need to examine which staff members can multi-task, thus providing a reason to let go other staff members, Tock says. Educating staff is a way to cut costs as well. The better educated the staff is, the better chance they will know how to retain members in their club.

Club owners should not scale back their marketing dollars at this time, Tock says, even though the temptation is to spend less on marketing in the peak month of January. Operators need to think just the opposite, Tock says, and expand their marketing efforts during this month.

"January sets the tone for the first quarter of [this] year. The first quarter sets the tone for the whole year," Tock says. "Short-term thinking should not drive your long-term decisions."

Royce Pulliam, CEO of Urban Active, Lexington, KY, agrees that marketing is critical at this time.

"Do not make huge cuts with your advertising and marketing because new membership sales will be as tough as we have seen in years, so get really creative with those dollars you do spend," Pulliam says.

Caro adds: "There's more pressure on marketing and on the sales staff and the sales functions to succeed. If direct mail and newspaper ads aren't working so well, then I want to shift that to some Web site and online marketing, or I want to shift it to some more targeted promotions in the community, or I'm going to shift it to member referrals. But I'm going to work on the referrers in the club who have referred before, not just go after the entire membership. We're going to get smarter in marketing because we have to."

Joe Cirulli, owner of Gainesville (FL) Health and Fitness Centers (GHFC), was lauded for his work at GHFC in an Inc. magazine cover story last year. Cirulli says he's always looking for ways to improve his business, even in the current economic state.

"This is where you separate the good companies from the companies that just survive," Cirulli says. "It gives us a great opportunity, if we do all the right things, to completely outshine our competitors, who may be pulling back in ways that aren't the best places for them to pull back. A lot of people, if they don't really, really plan, they start operating out of fear.

"It will only be a matter of time before [the stock market] comes back," Cirulli adds. "It always has. I don't think it's the end of capitalism. I don't think it's the end of America. I'm still very optimistic."

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