Clubs across the U.S. have been posed with a challenge. Upon reopening, how do they make up for the weeks or months of lost revenue? How do they successfully rebound from a circumstance none could plan for?
There is no single strategy that will work for all clubs and business models. However, there are a multitude of approaches that, when taken together, may help an operator navigate financial uncertainty. This includes identifying new revenue streams and ways to cut costs, building consumer confidence, and being nimble and flexible.
Work Smarter, Not Harder
“As the saying goes, you should never let a good crisis go to waste,” said Robert Brewster, the CEO and president of The Alaska Club, which operates 14 locations in Alaska.
By this, Brewster means clubs need to view the pandemic as an opportunity to take a hard look at their business from the ground up. Are your resources being put to good use? Is there waste built into your business you hadn’t realized? What things can you stop doing that aren’t absolutely necessary?
“[The pandemic] caused me and my senior management team to really dive into the details,” said Brewster. “We were able to eliminate significant expenses we thought were essential but didn’t really turn out to be essential.”
This could include things as simple as trash service, for example. “A lot of our clubs were getting trash pickup three times per week,” said Brewster. “Obviously during the shutdown, we didn’t need trash pickup at all. So we were able to eliminate that expense. But even coming back, there’s not one club that’s getting trash pickup more than one time a week right now. What the pandemic has caused us to do is really reevaluate all the expenses and things that seemed innocuous before. Everything matters at this point.”
Taking a hard look at your business includes evaluating rent and facility costs. Early into the forced shutdowns, many operators were able to secure deferments from landlords for rent. However, this was a short-term solution.
As a more permanent solution, Brewster advised approaching your landlord to renegotiate leases in light of the new economic circumstances. Considering how many retail businesses were also negatively impacted by the pandemic, many landlords are looking to retain their tenants as best as possible.
“Go back to your landlord and ask them to be a partner in being successful,” advised Brewster. “In my situation, I literally did not find a single landlord who was not cooperative in some fashion to address this issue. I think there’s still an opportunity for clubs to go back and say, ‘Hey look, this is my situation. It’s important for both of us that I’m successful and for me to survive this. I’m going to need your cooperation in making that happen.’’’
Cory Brightwell, the CEO of Chuze Fitness, which boasts around 30 clubs throughout California, Arizona, Colorado and New Mexico, added that in addition to facility costs, labor expenses also pose a challenge for clubs seeking to rebound after COVID-19.
“We’re really watching our labor costs,” said Brightwell. “It’s a tough environment because everybody is doubling down on their cleaning and facility upkeep efforts, so that requires more man and woman power. That being said, you have to be very careful and watch your labor costs and find opportunities — even through technology or through adjusting your business model — on how you can streamline labor a little bit in order to help offset the potentially lower revenue we may be experiencing for several months or up to a year due to the virus.”
As an example of potential opportunities, Brightwell referenced virtual fitness. Upon closure, the Chuze Fitness team quickly pivoted to offer live and on-demand classes to its customer base, and it’s something the team plans to continue in a more robust way moving forward.
According to Brightwell, virtual fitness provides the brand with an additional revenue stream that wasn’t readily available previously.
“It’s going to allow us to cater to members who are not fully comfortable coming back into the facility yet or just need more flexibility in their workout schedule, because they might not be able to get in as frequently as they’d like,” said Brightwell. “By being able to log in to our on-demand or live platform, we’ll hopefully be able to reach many more members on a consistent basis.”
Ultimately, the pandemic stressed convenience is a top priority for consumers. As a result, those brands that can pivot by offering virtual experiences or incorporating new technologies are oftentimes better positioned to navigate uncertainty. This was seen in the restaurant industry, for example. Brands that implemented online orders and curbside delivery were better positioned than those that could not.
As a result, in addition to virtual fitness, Chuze Fitness is also looking into additional innovations to serve its customer base.
“We are looking to create a fully customized mobile app experience that allows more functionality for the member right from their cellphone — for example, enrolling in our classes from their mobile phone, or buying a smoothie from their mobile phone for pickup, or enrolling in kids club,” said Brightwell. “Those are some examples we’re working on to streamline and enhance the member experience.”
For Diane Kelton, the president of Baptist Health/Milestone Wellness Center in Louisville, Kentucky, taking the club’s HMR weight loss program virtual throughout the pandemic was an unexpected bright spot.
Prior to the pandemic, the HMR program consisted of in-person check-ins and seminars, in addition to the sale of shakes, meals and snacks. During the shutdown, Baptist Health/Milestone Wellness Center did curbside pickup and continued classes via Zoom. In fact, they even enrolled a number of new participants into the program throughout the shutdown as part of a “Quarantine Blitz” offering.
“We had over 40 people sign up, and we thought we’d be lucky if we got 20,” said Kelton. “That’s been a blessing to have that program going the whole time.”
With this in mind, it’s worth evaluating all of your offerings and considering if there’s a way to complement them virtually. This is especially the case considering fears of a second wave of shutdowns are top of mind for many operators.
“I think there are still so many ‘ifs’ in the whole world, and not just in the fitness industry,” said Kelton. “Obviously there are still some fears of what the virus is going to do. Certainly I think people are going to get back to living their lives, but I think the question for everyone in every industry is how quickly is that going to happen?”
Due to the financial uncertainty many operators are facing, Lisa Gorsline, the president and general manager of Corpus Christi Athletic Club in Corpus Christi, Texas, said it’s important to lean on your leadership team. Be transparent surrounding your gym’s financial challenges and goals, she advised.
“We need to share our financials with our senior management teams,” said Gorsline. “We have to educate them on what the numbers are, where the club is, how we’re doing financially, how we’re rebounding, how we’re being successful and let them buy in to the financial aspect of the club. Let them understand, give ideas, and help move the club forward in a financial sense.”
In addition, Gorsline advised operators to consistently forecast and model so they can plan ahead as much as possible.
“We’re forecasting each month between today and the end of the year, and then as the month ends, we’re looking back and we’re reforecasting, because really nobody knows how quickly we’re going to recover,” said Gorsline. “I’m trying to get a financial forecast so we know how to spend in the future, and what to set aside. I think each business should do that as well, because there’s going to be something in the future we’re not prepared for. I think if we have that extra amount set aside, it’ll help us to have something to fall back on.”
Building Consumer Confidence
Another important component in a club’s ability to successfully rebound post-COVID involves consumer confidence. Are customers confident you have their best interests in mind? And are they confident in your ability to keep them healthy and safe?
“Probably the No. 1 word we use here at the club, and it’s a filter we put every decision through right now, is confidence — whether it’s the way we’re cleaning the facilities, the way we’re marketing the products we’re offering, or how we position ourselves in our advertising,” said Brewster.
According to Brewster, clubs that inspire confidence with consumers and have strong relationships with their members are those that will come out on top after all is said and done.
“We have put the vast majority of our marketing dollars into confidence building in the community,” said Brewster. “I filmed a TV commercial, and it’s all about what we’re doing from the standpoint of cleanliness. We’ve done a lot of radio, as well as social media. But at this point, we’ve focused just on that confidence building — that the clubs are a safe place for you to be.”
According to Clayton Aynesworth, the president and CEO of Castle Hill Fitness, which boasts two clubs in Austin, Texas, the pandemic revealed the importance of “relationship capital” to a business’ viability.
“Relationship capital is the primary capital investment we can rely upon at the moment,” said Aynesworth. “A challenge [the pandemic] has posed reveals the worth of our relationship capital as it was at time of closing. How do we continue to treat this capital with the proper attention?”
According to Aynesworth, protecting relationship capital involves making promises and keeping them. For example, if you state in your marketing staff are committed to cleanliness and sanitization, this has to be supported operationally.
“We need to make sure what we say we will do, is what we are doing,” said Aynesworth. “Our operational efforts are what we can be seen doing and employing on a regular basis. This is a time to form new conspicuous habits.”
Steve Strickland, the CEO of Workout Anytime, which boasts around 180 clubs throughout the U.S., echoed these sentiments — stating it’s vital for clubs to inspire confidence among the public.
“It’s so important the public really understands they have a safe place to workout when they walk through the front door,” said Strickland. “I firmly believe if we don’t operate clubs in a clean, sanitary manner — if the public perceives us as anything other than that — we’re going to be in trouble. If we can deliver on that, the safety and cleanliness, the business will take care of itself.”
According to Michael Feitelberg, the president of The Edge, which boasts five locations in Vermont, building consumer confidence also includes being flexible surrounding member cancelations and requests to freeze.
As many operators are hard pressed for revenue, it may be your gut instinct to stick to preexisting member cancelation and freezing policies. However, Feitelberg explained this could hurt your long-term reputation and viability.
“Understand members are going to freeze or cancel, and we just have to make that process easy for members,” said Feitelberg. “I don’t think we should make it a complicated process. We need to do the things that support the membership base, because eventually those people will come back.”
Gorsline agreed, adding that in times of heightened anxiety and uncertainty, flexibility is paramount.
“We need to work with our members because this is a trying time and we’re supposed to be there for our members during tough and unnerving times,” said Gorsline. “They come to us to reduce their stress and anxiety. We’re rethinking everything and restructuring everything and I think we need to do the same with our members. Try to meet them at their level of anxiety, try to understand what they’re going through, and do everything you can to make them feel comfortable and happy with your decisions.”
Be Nimble and Willing to Innovate
As clubs across the U.S. continue to navigate the pandemic, many operators are stressing the importance of being flexible and willing to innovate as keys to successfully rebounding from COVID-19.
Castle Hill Fitness, for example, used the shutdown as an opportunity to envision a new future for its fitness centers.
“We have put a lot into recreating our physical spaces,” said Aynesworth. “We designed workout pods throughout our buildings. We sacrificed our bigger classrooms during this time of uncertainty.”
As a result, Castle Hill Fitness now boasts 95 individual workout pods throughout its two facilities that contain equipment, sanitizing supplies and air filters. Each pod can be booked for 30 to 60 minutes at a time.
“Don’t be afraid to think outside the box,” said Aynesworth.
In addition, Aynesworth advised being open to inspiration from unlikely sources. “Take it one day at a time,” he said. “Solutions will come from unlikely sources. Often, the latent needs of the stakeholders in your community, if made apparent, will give you suggestions regarding the course of action you should take.”
As an additional rebounding strategy, Brewster said it’s more important than ever to build or join a network of club operators you can lean on to bounce off ideas and problem solve.
“I can’t imagine what navigating the pandemic would have been like without my REX group,” said Brewster. “Having a group of peers is important. Get on the phone, call that guy you met at the IHRSA convention last year or at the Club Solutions Leadership Retreat. I think it’s important for people to really lean on their peers and help each other out. There was no playbook for this before, and everybody out there trying to build their own playbook seems ridiculous.”
Lastly, Strickland advised to stay the course, and be confident in your decisions as you continue to navigate the pandemic and seek to rebound successfully.
“I think as leaders we have to be confident,” said Strickland. “We have to send the right message to our people we are confident with the direction we’re going, and that we believe in them.”
