Club operators often find themselves asking whether or not it's time to renovate. The answer seems like it would be obvious. Sure, if you have not renovated in a number of years and if you have money available, then it's time to renovate.
However, even when club owners are in the financial position to renovate, they often choose not to because they think that the value of a renovation should not be a priority. Why? Because some club owners lack the understanding or confidence about the true value of a renovation and what such an investment could achieve.
It may be more costly in the long run not to renovate. The health club environment is rapidly changing. What used to work to “get by” with outdated club interiors no longer will work today. So, the question is, should a club operator be proactive or reactive?
I say that being proactive is better. I've seen a clear trend during the economic downturn of recently renovated clubs faring far better than those in need of a renovation. A bad economy makes bad clubs get worse quicker.
Here are some points to consider when thinking about renovations:
If a club is in poor or average condition, you should not spend more on marketing to attract more people into your facility just to find that they are underwhelmed by how it looks. Putting off renovations leads to fewer sales, which leads to fewer profits, which leads to putting off renovating even further. It's a circle that some club operators can't find their way out of until it's too late.
Club owners with older facilities in good markets are just one competitor away from being too late with their renovations. A new club operator is going to discover your market and come in to build a facility that is nicer and newer than yours. So many club owners find out too late that they should have acted sooner to update their clubs.
And remember that one of a club's biggest competitors is other activities, particularly TV. Anyone born in 1960 has since watched 50,000 hours of television. That's 1,000 hours per year or 2.7 hours per day. And now, many people spend considerable time on the Internet, too. Your facility must be able to compete with TV and the Internet by providing members with visual stimulation while they are at your club. You must give them an exciting reason to keep coming to your club, and you must keep them constantly stimulated, inspired and entertained. Because people love their TVs, when you renovate, you should add large flat-screen monitors throughout your club in addition to including entertainment options on your cardio equipment.
All renovations are not created equal, even if you spend the same amount of money on them. When you renovate, concentrate on areas that will get the most bang for your buck. Making bad decisions on past renovations might have caused you to spend too much on areas that had no effect on sales. These areas can vary depending on your market, but a good architect can help you figure that out.
A properly planned first renovation phase can increase cash flow and help fund the next phase of your renovation. You should look at all the strengths and weaknesses at your facility, the competition you face and the funding you have available. Only then can you decide what to spend your money on first. You may wonder whether you should buy new equipment before you renovate. If your equipment is really old, then buying new equipment becomes a major priority. However, if your facility is run down, newer equipment brings in few new people, so funding for both equipment and renovations is probably the best plan.
Depending on the scope of your renovation, you may rapidly increase the amount of a renovation that you can depreciate out. However, before the government will allow such accelerated depreciation levels, it requires that you work with a certified cost segregationist engineer. In addition, club owners who renovate to become more energy efficient can get good energy credits and rebates from utility companies.
Bruce Carter is the president of Optimal Fitness Design Systems International, a club design firm that has created about $650 million worth of clubs in 45 states and 26 countries.