Paula Neubert is optimistic about the future of her club, Greenwood Athletic Club near Denver. Considering that Colorado has the 48th worst economy in the country and membership numbers have been down at Greenwood since 1999, one would think her outlook would be a bit grimmer.
But looking at revenue figures, Neubert has reason to be positive about the club where she is general manager. Greenwood grosses $9 million to $10 million a year and in 2003 ranked fifth on the Club Industry Top 100 list for independent clubs and 58th out of all clubs (the rankings are based on revenue).
Perhaps most surprisingly, only a little more than half that revenue comes from membership dues. Nondues revenue programs constituted 40 percent of revenues for the club last year. This year's budget is for 52 percent to come from membership and 48 percent from nondues programs.
“Our nondues programs have kept our income level maintaining,” Neubert says. “With our focus on nondues, we've put ourselves in an optimistic place right now.”
Facing a tough economy for several years and increased competition for members, clubs have found revenue from nondues programs to be more important than ever. By bringing in money from several areas of a club, cash flow and profitability are better and a club doesn't have to be as reactive to membership cycles, says consultant Karen Kirby of Health Style Services.
“The truth is, everyone needs to be increasing nondues revenue,” says Kirby. “If you aren't thinking about this every day, you are crazy.”
Besides the revenue they bring in, the most important part of nondues programs is that they make a facility a club, says Roger Furman, general manager at La Camarilla Racquet and Fitness Club in Scottsdale, AZ, where 60 percent of revenue comes from membership dues, 20 percent to 25 percent come from private and group personal training and tennis lessons while the remaining 15 percent to 20 percent come from alternate revenue sources.
“Everyone has weight machines,” Furman says. “We feel we need something here to keep members happy, to develop a long-term relationship with them. All these revenue areas are things that make you a club. If you aren't doing this, you are missing out.”
Kirby agrees saying that research shows that the more that members are involved in a club and the more needs a club meets for members, the longer they will stay. And as all club owners know, retaining a member is cheaper than attracting a new one.
However, nondues programs also can attract new members, says Joe Cirulli, owner of Gainesville Health & Fitness Center in Gainesville, FL. If a club's nondues programs or services successfully meet the needs of deconditioned individuals, then the club can attract populations that have never worked out before bringing in additional revenue, Cirulli says. His club has nondues programs to attract people with arthritis and another for people needing help with spinal fitness. Soon, the club will be introducing a nondues weight management program.
Despite those programs, Cirulli's mainstay is his personal training program. Cirulli's club makes $1.4 million to $1.5 million each year on personal training, which is often the biggest nondues revenue generator at a club. However, clubs need more than personal training to rack up the nondues revenue. Not all members can afford the $60 per session for a personal trainer, but they may be willing to hand over some cash for other programs.
Children's programming may offer the second greatest potential for nondues revenue behind personal training, says Kirby, because parents will spend money on programs for their children that they won't on themselves.
That's certainly the case at Elmwood Fitness Center in New Orleans. The club developed programming for children partly to negate parental excuses for not working out, says Ken Kachtick, general manager at Elmwood.
Elmwood Fitness Center has a separate 18,000-square-foot, fully staffed Kidsports facility for birthday parties, summer camps, childcare and play areas. Elmwood's Y2Kids program for children between six and 12 years old allows children to work out on children-sized exercise equipment. The program brings in between $5,000 to $6,000 per month.
About 400 children are involved in Elmwood's gymnastics program and 300 children in various swimming programs and lessons. Elmwood is also home to a Tumble and Cheer program, which involves a couple hundred cheerleaders.
“These are programs that don't make mega bucks, but they are better than breaking even,” says Kachtick. Even better, children's programming brings in ancillary revenue from parents who hang out at the facility during the programs, eat at the restaurant, buy items at the pro shop or take a class of their own.
Sometimes, parents even participate with the children. The Y2Kids program offers cooking classes that parents must attend with their children. The club's auditorium, which holds 52 people, often is filled for the classes at $10 per person.
Children's programming is also a big hit at La Camarilla. Besides childcare, the club offers a year-round children's fitness program organized by age up to high school. Once a child reaches the high school level, he or she can participate in sports-specific programs.
Summertime sees a demand for the club's three summer camps: summer fitness camp, tennis camp and sports camp. During the school year the fitness camp and tennis camp also keep children busy after school. La Camarilla's new pool allows the club to offer private and group swim lessons through a partnership with a swim instructor who also coaches the club's junior swim team.
At Greenwood, special programs, birthday parties and summer camps net $100,000 per year. Summer camps alone make $65,000 of that.
Physical therapy often is another source of nondues revenue for clubs. The Gainesville club offers rehab options, but Cirulli cautions about offering physical therapy in hopes of nabbing the patients as members once they have finished physical therapy. Insurance companies pay for so little physical therapy anymore that few patients are fully rehabilitated by the time their insurance runs out. It's difficult to get a still healing patient to join a health club if the physical therapy they still need isn't covered by insurance.
Most people join a health club to lose weight so it's no wonder that they would be willing to pay extra for a weight management program. La Camarilla offers a 10-week weight management program, called Why Weight? that is designed to help members with their weight and fitness goals. The popular program costs $180 for members and $200 for nonmembers.
Pilates is still hot and as a nondues revenue source it's even hotter. Greenwood's Pilates studio nets $500,000 a year, which beats its budget by $11,000.
No longer as chic-chic as Pilates, tennis nonetheless can bring in some added revenue at the right club. La Camarilla nets about $400,000 a year in private tennis lessons and programming. One of the club's most popular tennis programs is an inner club tennis program.
“We play against other clubs in town,” says Furman. “The relationships that develop within that program are great. The members take a lot of pride in their club. It's not a big money maker, but very seldom does anyone leave our inner club program.”
Some clubs are turning to more unique sources for nondues revenue. La Camarilla in the desert oasis of Scottsdale, AZ, offers scuba and snorkeling classes in its pool, often accommodating four to six people in the class.
“It's not a big revenue generator, but it's a fun thing and parents can take it with their children,” says Furman. The participants take a certifying trip to Mexico once the class is over.
La Camarilla hosts high school tennis championships. While the club only earns $300 for use of the facility, the exposure the club gets to tennis parents from around Phoenix is beneficial, says Furman.
The Elmwood Fitness Center has an indoor and an outdoor restaurant. The restaurants average $100,000 per month with about a 30 percent or more profit, Kachtick says. Elmwood's Kidsports snack bar, which is just a small window by the swimming pool, brings in about $10,000 per month, going up to about $17,000 per month in the summer.
For clubs with extra space, leasing out that space offers another revenue source. Greenwood brings in about $300,000 a year from leases to 11 tenants, says Neubert. Some of the leases are based on a dollar amount per square foot and some on percent of income.
Greenwood leases space to a day spa, a café, two pro shops (one in the fitness building and one in the tennis building), a travel agency, a physical therapy business, a hair salon, a shoeshine service, a company called Muscle Activation Techniques, and a golf company.
La Camarilla also brings in extra cash by leasing space to a hair salon, a nail salon, a massage and skin care company and a sports physical therapy business.
In addition to offering access to your space, offering access to your members can prove profitable. 24 Hour Fitness puts up advertisement panels in various areas of the club, such as the restrooms or workout areas. The company has a contract with an outside company to sell the panel space.
“We are making a lot of money off of this,” says Bryan Andrus, vice president of information technology/business development at 24 Hour Fitness. “We get advertisers like Starbucks, GM, Proctor and Gamble, ABC Family — very large scale. They are interested in reaching our industry.”
Andrus cautions that club owners must research which companies to partner with for these panel agreements because not every company can deliver what they promise over the long term.
The panel company also offers sampling opportunities.
“We get paid money in exchange for the product to be handed out to our members at a minimum of 8 cents to 10 cents per piece handed out,” says Andrus, which amounts to hundreds of thousands of samples and a large bundle of cash.
“That gives you a scale of what advertisers are willing to spend in our industry and what you can make,” Andrus says. “Even a small operator should be able to make a few hundred a month off of access to their members.”
Those samples would come in handy at the social events that La Camarilla hosts in its bar and lounge area. Once or twice a year, the club hosts a happy hour for seniors. They also do socials for mixed double tennis events. None of these alone are big money makers, but they make enough that when added together it makes sense, and they keep members busy with events that other clubs may not offer, says Furman.
The club also hosts private parties for various groups, including charities. The club doesn't charge the charities to hold the parties at the facility, but they make money off the bar.
La Camarilla also is the neighborhood site for elections, hosting municipal, state and federal voting booths in the lounge area. The election commission pays the club a small fee to use the facility, but the bigger payoff is getting neighbors into the facility to see the inside.
“I've never had an election when someone hasn't asked for more information about the club,” says Furman.
Don't overlook the miscellaneous or small things a club can do that bring in money but don't take a lot of effort. La Camarilla offers dance lessons, energy drinks and bars, a soda machine, water, a bar, childcare, racquet restringing services, locker rentals. Elmwood will soon open a testing lab where members or pro athletes can come in to get their fitness level tested.
All these programs are successful to one degree or another for the clubs mentioned, but how do club owners define success? That varies by club. Some define it as keeping members happy and returning without a huge monetary expenditure on the club's part. On the other hand, some define success as seeing profits in the double digits.
“If they can't roll it out at net 20 percent, then why roll it out?” Kirby says of some companies' thinking.
Neubert defines a successful program by the number of participants and the responses on the evaluations handed out at the end of each program.
Elmwood sees success as a program that at least breaks even knowing that it may actually make more money than realized because of revenue brought in by parents or members using the restaurants, pro shops or other services, says Kachtick.
Developing nondues revenue programs beyond personal training can take a lot of time and planning, but the upfront work can be worth it. A club owner should start by talking to and surveying members to find out which programs they want and need rather than latching on to the latest thing at other clubs.
A club owner must then find a champion to take on the program.
“You can get something that you'd swear wouldn't go and you get an enthusiastic person to run it and she'll sign up 100 people,” says Kirby.
Before planning the program, the club owner must decide the reason for offering the program — is it to have the best program in the area or is it to simply offer a program that members want? The decision will affect staffing and financial input into the program. Once that has been decided, plan out the program well, being conservative with estimates and being fully aware of overhead and potential, says Kachtick.
Charges come next. Club owners wanting to charge for a special group exercise program, such as Pilates or yoga, must investigate whether that program is already offered in the market, and if so, how much? Kirby cautions against offering these programs for free initially to attract participants because once it's offered for free, a club owner can't ever charge for it in the future.
“You can't go from free to a price,” Kirby says. “You can go from $5 to $10, but you can't go from free to a price.”
Regardless of how much a club charges for a program, members won't pay it unless the class is unique enough from the free group exercise programs and is taught by an expert, says Kirby.
Once a club owner has the program in place, its success often depends on its promotion. A club needs a well-coordinated ad/promotion/marketing campaign. All the infrastructure must be set up prior to launch so the club can actually deliver what it promises.
Getting staff onboard with the program is vital, says Neubert. Staff must know the specific goal of the program, how to sell the program and what the commission or payment will be for the staff.
“Every staff member has to know about it, be on board with it, promote it and market it,” says Neubert.
Regardless of how much effort a club owner puts into a new program, he or she must be willing to give a program time to grow since few programs make money right away, says Kachtick.
“You start out small and you grow it,” he says. “You grow your reputation.”
And if the club is still in its infancy, nondues programs may be something that should wait until the core business is solid.
“Make sure your core business is as good as it can be,” Cirulli says. “[Club owners] start going on these tangents of other things to do before they have their core business nailed down.”
Nondues businesses grow by pulling from the membership. If little membership exists from which to pull, nondues revenue programs are a mute point. And that would be something to be very grim about in this competitive day and age.