WASHINGTON, DC — Now that Donald Konz is back at the helm of Sport & Health Co. as CEO, he plans to make some changes, which will grow this $80-million company by 50 percent in the next few years, he said.
Konz and Jonathan Adler, who becomes president and COO, teamed with a group of real-estate developers and investors to purchase Sport & Health's 26 clubs for $75 million. The deal was announced in early January. The ownership group is called Sport & Health Holdings LLC.
“By adding to the size of facilities and streamlining marketing and sales, we expect each club to do better revenue,” he said.
Konz plans to spend as much as $25 million to enlarge and improve current locations.
“Some of the current locations are so good that we couldn't replicate them,” he said. These clubs are located on high-club in renovations, he said. He has also earmarked $2.5 million for new exercise equipment.
Another growth strategy involves “filling in” locations in the DC area where the company is not yet represented. Securing property for these new locations shouldn't be difficult considering the majority of the other owners are local real-estate developers and investors, he said.
“We still think that DC is as good a market as anywhere in the country,” he said. “It's certainly as affluent and growing as well as anywhere in the country, so that would lead you to believe that it's a great market.”
Others apparently share Konz's view of the DC market. Eden Prairie, MN-based Lifetime Fitness has already moved into the area while California-based LA Fitness and Chicago-based X-Sport will open clubs there soon. While Konz said that his company is mindful of these new players, Sport & Health attracts a different market than most of these clubs.
The company will face these new competitors without one major member of the old management staff. Mitch Wald, former CEO, has left the company and was hired as the COO at Maryland Athletic Club & Wellness Center. The company also eliminated the vice president of sales position because of a change in organizational structure. Up until now, programmers and group exercise employees reported to their corporate level vice president, said Konz, but now programmers, group exercise and sales people will report directly to the club managers.
“It gives the club managers more authority to make decisions at the club level to reflect each of the club's idiosyncrasies,” he said.
Many of those idiosyncrasies stem from the fact that while all the clubs are mid to high-end, Sport & Health clubs attract varying demographics depending on their location.
“We're more opportunistic. We build a club in a good market — good older market, good singles market or whatever. We don't have a formula. That has led to some confusion about our brand and our image,” Konz said.
He intends to address the brand-imaging problem by focusing the club's marketing on its high-end image — regardless of its age niche.
Whether or not that strategy will work remains to be seen, but Konz developed his plans as someone who is uniquely familiar with Sport & Health Co.'s “good, bad and ugly” sides. In 1973 Konz founded Courts Royal Clubs, which merged in 1980 with the Arlington Tennis & Squash Club, which in turn became the Sport & Health Co. He served as the company's president and CEO from 1997 to 2003.
After just a month back at the company, Konz is having fun again. The fitness industry is more his cup of tea than the investment business, he said.
“I can't tell you how thrilled to death I am to be back,” Konz said.