Ask Paula Neubert, president and general manager of Greenwood Athletic and Tennis Club, Greenwood Village, CO, about the importance of ancillary, or non-dues, revenue, and she doesn’t bat an eyelash.
“We wouldn’t be here if we didn’t have non-dues revenue,” Neubert says. “We place as much importance on our non-dues revenue as we put on our membership revenue.”
Greenwood is not alone in emphasizing the need to generate revenue from streams other than membership, according to results in the 2011 Club Industry State of the Industry survey. Survey respondents work at commercial health clubs, nonprofits and university rec centers, among other facility types.
The average amount of annual revenue from membership dues, including initiation and enrollment, is $1.7 million, according to the survey. After that, the categories that generate the highest average annual revenue among respondents are personal training ($596,240); tennis/racquetball/squash ($305,334); physical therapy, including rent and operating revenue ($211,108); chiropractic services ($154,200); weight loss/nutrition programs ($151,238); aquatics programs ($129,106) and children’s programming ($128,074).
Greenwood Athletic, a high-end, 153,000-square-foot multipurpose club, does quite well on membership revenue alone, considering it has 7,000 members and about 3,000 memberships at an average dues per membership of $162 per month. Greenwood expected a 3 percent increase in 2011 from the $11.5 million in total revenue the club generated in 2010, which placed it at No. 62 on Club Industry’s Top 100 Clubs list last year.
Although total 2011 revenue figures for the club have not been compiled, Neubert says personal training was the club’s biggest source of ancillary revenue last year, generating $1.8 million. Tennis was not far behind at $1.6 million, including memberships. (The tennis club and the athletic club are two separate facilities at Greenwood.) Thanks to a new studio, Pilates generated $570,000 in 2011, an increase of $17,000 from the previous year, Neubert says. Youth programs also generated $436,000 last year, and $500,000 is a goal for this year.
Although most clubs would like a 70 percent/30 percent split between their membership dues revenue and ancillary dues revenue, Greenwood has about a 60 percent/40 percent split, Neubert says, with a goal of a 55 percent/45 percent split.
“When we look to bring in non-dues revenue, we’re looking to bring in millions in non-dues revenue,” Neubert says. “The way that we run our club and the expectations of our membership—because of the price that they pay and because of the lifestyles that they live elsewhere—they demand and expect higher levels of everything else.”
The cost of the extra perks that members expect, which include bigger towels in the shower, consumable supplies in the locker room, newspapers and magazines, are covered by the club’s non-dues revenue, not membership revenue, Neubert says.
Lloyd Gainsboro is the co-owner and director of new business development at Dedham Health and Athletic Complex, Dedham, MA. The 240,000-square-foot club finished just ahead of Greenwood last year on Club Industry’s Top 100 Clubs list at No. 61 with a reported $11.7 million in total 2010 revenue. Gainsboro says his club produced about $12 million in 2011 total revenue.
About 20 years ago, Gainsboro and his wife, Roberta, the CEO and co-owner, expanded the club to create revenue through physical therapy services, camps and its summer club, which includes a separate membership. The summer club features a zero-depth wave pool that produces three-foot waves and also includes two waterslides and a lap pool.
“We decided we wanted to build a year-round business,” Gainsboro says. “You’re restricted in terms of what you can pay your employees if you have a business that basically has an eight-month life. Your income goes down even if you’re on monthly dues because you’re not selling as many new memberships (during the summer). We bought some land behind us, and we studied the ability to do a summer program—and one that was different than other programs.”
Physical therapy generates 29 percent of the club’s total revenue, Gainsboro says, and that’s from collected fees, not from bills. The club partners with New England Baptist Hospital and is affiliated with the Jocelyn Clinic, which benefits people with diabetes. The medical services at Dedham also include orthopedics as well as X-ray and MRI machines. The club, which includes a physician referral program, has 52,000 patient visits per year, Gainsboro says.
The summer club and camps generate about 12 percent of gross revenue, Gainsboro says. Twelve weeks of camp generate about $600,000, and the summer club generates $800,000. Dedham generates more ancillary revenue, about 3.3 percent, through swim lessons at its indoor swimming pool.
Dedham is adding a 3,200-square-foot third floor to the facility this spring for a new laser tag game and sound and light show that will be used for birthday parties and camps, he says.
“We continually invest in our property and our business,” Gainsboro says.
According to the survey, food, beverage and supplements generated an average of $76,181 annually among respondents, and the pro shop produced an average of $53,463. Like Dedham, Greenwood leases space for its café and pro shop to outside vendors.
“We know fitness, and we can do fitness very well,” Neubert says. “We’re not in the apparel industry.”
Pete Abraham of Pete’s Sportswear Inc. is, in fact, in the apparel industry and has owned and operated pro shops in health clubs for the past 33 years. He operates the three pro shops—which he refers to as active wear boutiques—in the former Sports Club/LA clubs in the Los Angeles area that were purchased by Equinox last year. Equinox will operate its own pro shops in those clubs starting April 1, Abraham says.
Club operators have to decide if a pro shop is helping them get and retain members, Abraham says. They also should consider the type of shop they want to operate in their clubs, the number of members in the club and whether those members can afford the store’s merchandise.
“Do you even have a shop or do you just allot the merchandise to a wall space with some fixtures sticking out?” Abraham says. “If you have a big club, then you might have room to actually put in a store. But if you don’t have a lot of room, then you have to rely on, more or less, wall space.”
In addition to workout wear, the basics are always a necessity at a shop, Abraham says. If the club has a swimming pool, earplugs, goggles, caps and basic swimsuits are good to have in stock. So, too, are headphones, head bands and batteries for workouts, he says.
“[Operators] can promote their merchandise somehow in their newsletter or email blast, talking about how they have the basic items at reasonable prices,” Abraham says. “My store in west LA, we have a very high-end clientele, and right next door is The Sports Authority. We have the same prices they do. There’s really no reason for [members] to go over there.”
Nanette Pattee Francini, president and founder of The Sports Club Co., which sold the clubs to Equinox, has had The Shop by Pete’s Sportswear in her clubs for 33 years. Francini says the shop was an invaluable part of the company’s urban country club/lifestyle concept.
“Generating substantial revenue, The Shop also served all of our members’ needs and was a warm, welcoming spot where members gathered,” Francini says. “The Shop was truly unique in that it was so diverse in merchandise, from shoes to toothpaste to workout wear and Advil. Pete also continually introduced popular new fitness brands like Vibram Five Fingers shoes and Rogiani leggings to name a few, which our members loved.”
2011 Average Annual Fitness Facility Revenue by Category
General membership dues (includes initiation and enrollment)
Physical therapy (rent and operating revenue)
Weight loss/nutrition programs
Small group training
Food, beverage and supplements
Facility rental for events
Mind/body classes (yoga, Pilates, other)
Group exercise class fees
Source: 2011 Club Industry State of the Industry Survey