For many health club operators, expanding during the recession might have seemed impossible, but not for Jim Worthington, president and owner of Newtown Athletic Club (the NAC), Newtown, PA. (Watch videos of Worthington discussing his club's expansion and plans for the future.)
The reaction by many club operators to a recession, Worthington and his business partners reasoned, would be to decrease staffing levels, service levels and reinvestment in their facilities, so they decided to do the opposite.
“There were things we did that were the right things to do when this recession came,” Worthington says. “We realized we were going to have to fight for every member that came through our door. It wasn’t going to be like the old days when if 100 people came in your door and you signed up 30, you’d be fine because the amount of people looking for health clubs would be less.”
Worthington secured a loan from his bank and began renovating the NAC. He spent about $7 million to enhance his 135,000-square-foot club and the 60,000-square-foot sports performance annex. The enhancements included a lobby and café renovation, an expansion in the babysitting area and a $5 million, 12,000-square-foot fitness center addition that opened in February.
But Worthington is not finished. In October, the NAC will open a $2.5 million 40,000 square-foot fieldhouse that will replace the existing sports performance training annex.
By May 2013, the NAC will open a $6 million, 4.5-acre outdoor resort-style family pool complex with four pools, which include an adult-only pool, a zero entry pool, a lazy river and a splash pool/spray pool. Worthington plans for the heated pools to be open from 8 a.m. to 10 p.m. from the first of May through October.
“I will tell you that this concept we are doing with this outdoor pool [complex] is something that is going to get some notice nationally with some clubs,” he says, adding that the design for the complex came after visits to resorts and hotels around the country. “To the extent of what we are doing, I don’t think it’s been done.”
No More Room
Once these two projects are complete, the 20 acres on which the NAC sits will be built out with no more room for expansion, Worthington says. However, growth will not stop there, as he plans to focus on increasing revenue in each department and focus on medical wellness in hopes of increasing his club’s revenue from an estimated $11.5 million this year to $14 million in a short amount of time. So far, the changes have helped increase first quarter revenue from $2.4 million in first quarter 2011 to $2.8 million in first quarter 2012, he says.
But the revenue increase cannot be attributed to the physical expansions alone. Worthington also added staff and beefed up marketing during the recession. The NAC went from a marketing department of one full-time person and one part-time person to five full-time employees. Those staffers started marketing each of the club’s profit centers—salon, personal training department, party division, and food and beverage, among others—as separate businesses in which the marketing person was compensated for revenue increases. The result was an increase in revenue for each department, including 30 percent growth for the spa business.
Worthington also hired full-time salespeople from outside the industry and paid them on commissions and incentives, but the sales manager was paid based on net gain of members.
The sales efforts, along with a member referral program in which members received $150 for every person they referred who joined, resulted in 70 percent of new members coming from referrals and a net gain of 850 membership units from April 2011 to April 2012, he says.
The growth has caused Worthington to consider capping the NAC’s membership, which has created even more urgency for people who want to use the pool complex to join, since only NAC members can do so, he says.
Worthington is well aware that not all club operators were able to expand during the recession. He credits his club’s ability to do so to the NAC’s strong business model, which has helped establish a good relationship with its bank and the ability to secure necessary loans.
“The club itself fully supports any loans that we do, so that makes it double easy for the banks [to lend to the NAC],” Worthington says.
That good standing with financial institutions also helped Worthington open the 50,000-square-foot Horsham Athletic Club in Horsham, PA, in April 2011. And in April of this year, the company purchased 10,000-square-foot Fitlife Performance Training in Ivyland, PA, from Josh Tyler, who will manage the NAC’s sports performance training program when it moves to the new annex this fall.