What Bay Club’s Acquisition of Leisure Sports Signifies for the Industry

In mid-November, The Bay Club Company announced its plans to acquire five properties from Leisure Sports, Inc. — marking its expansion into the East Bay in the San Francisco area, and Portland, Oregon.

According to Kevin Klipfel, the COO of The Bay Club Company, the acquisition was a major win for the brand as it seeks to grow in key marketplaces throughout the West Coast.

“We feel [the Leisure Sports properties] are a great collection of clubs — from both a physical plant and product perspective,” explained Klipfel. “A lot of our members already live out in the East Bay, a lot of our staff live out in the East Bay, so they’re very excited about having clubs in their backyards. It’s a very exciting time for us as an overall company.”

According to Rick Caro, the owner of Management Vision, Inc., this news is an exciting development for the fitness industry as a whole, as well. “In this industry we haven’t had a lot of consolidation,” he said. “What’s exciting here is you’re seeing an example of a company that’s trying to grow through buying assets, versus building them.”

In fact, growth through acquisition is key to The Bay Club Company’s current short-term strategy, said Klipfel. In particular, the brand has its eye on founder-owned, individual assets in the fitness, sports and hospitality categories.

“What we’ve tried to do is set up a company that’s in a position to buy assets from founder-led businesses, similar to Steve Gilmour’s Leisure Sports clubs, and the business he’s been running for 40 years,” explained Klipfel. “[We want to] create a legacy for those types of clubs — where they can be proud of being able to fold into a luxury, club membership business like Bay Club. And for us to take good care of the assets, continue to improve and invest in the assets, and really be that place for the founder-led businesses.”

According to Caro, this is something single-club operators and other founder-led clubs should be paying attention to. “A lot of club operators don’t have a succession plan or exit strategy in place,” he said. “It’s exciting to see an operator like Bay Club interested in properties like Leisure Sports, because it represents another path operators can take when they want to retire or exit their businesses.”

As Caro explained, it might not be fun to think about succession planning — but it’s necessary.  “There is nothing wrong with having an exit strategy,” he said. “It doesn’t mean you’re not successful. In fact, it can mean the opposite and give you a chance to succeed — because many operators are not thinking that far into the future.”  

According to Caro, another important development in the fitness industry is KKR’s acquisition of The Bay Club Company in August 2018. He explained that up until now, many global investments firms have shied away from investments in high-end fitness brands.

Looking ahead into 2019, Caro sees the industry continuing on a trajectory toward more consolidation and growth. “I’m excited on behalf of the industry,” he said.

Klipfel echoed this sentiment, referencing Bay Club’s recent acquisition of Leisure Sports as a positive development. “We’re excited about what this means for us as a company, and for the health club industry as a whole,” he said.