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Weathering the Storm: One Year Later

SLIDELL, LA — If you asked Dion Grossnickle, general manager of Cross Gates Athletic Club in Slidell, LA, what 10 average people think of New Orleans one year after Hurricane Katrina slammed into the Gulf Coast, he'd say that nine of them think things are back to normal. That's just not the case. It will be years before New Orleans gets back to normal, he says.

“In Slidell we have a strong political base, homeowners are more ambitious to get back in their homes, and they've worked hard to get their way of life back,” he says. “Go to New Orleans, and it's a ghost town. [Tourist areas] are fine, but not the homes. People just don't know.”

Many health clubs are still closed. Even though it's been a year, getting construction work completed is still challenging and some insurance claims are still being settled. In addition, membership has taken a hit since few people have returned to the hardest hit areas.

Cross Gates' Pontchartrain Drive location was in one of those areas. The facility is still closed after about 7 inches of mud littered with snakes and debris washed in with the tidal surge that destroyed all of its equipment. Franco's Athletic Club in Lakeview, LA, remains closed, too. Based in a shopping center, the whole area is being gutted after the 17th Street levee broke less than a mile away and covered the area with almost six feet of water for two weeks. Some areas — such as Lakeview — could take years to recover, says Larry Conner, general manager of Franco's.

“We very much want to be back there, but we have to be there when the community is starting to come back,” he says. “Within the next year we'll decide if we'll be able to get in there.”

Franco's lost more than $1 million on that location and $500,000 on its Mandeville, LA, club, which had minimal flooding, fences and trees down, sign damage and damage to the clay tennis courts. Both of Franco's locations had flood and business interruption insurance coverage. The flood claim on the Lakeview facility settled quickly, but the Mandeville club took much longer, Conner says.

“There are so many claims out there that to get to us just took forever,” he says. “Without a strong cash flow we could have never survived.”

In fact, most insurance claims have been settled, although for the most part insurance companies are denying all flood-related claims unless the business carried flood insurance, says Ken Reinig, president of Association Insurance Group. Loss of business coverage can also get tricky because club owners typically think that loss of income means loss of “gross” income.

“In actuality, loss of income or extra expense coverage will replace net profits and pay any ongoing necessary expenses such as leases, mortgages, bank loans, etc.,” he says. “It will not pay utilities, ordinary payroll, contractor expenses, etc.”

Cross Gates' Pontchartrain Drive location didn't have flood insurance and is still working with its insurance company to determine what was caused by flood versus wind. Because flood takes precedence, business interruption insurance doesn't apply, Grossnickle says. Cross Gates' other club on Military Road suffered just under $1 million worth of wind damage and is going through the insurance process, but it's going well, says Grossnickle.

Elmwood Fitness Center, which has locations in Harahan, New Orleans and Metairie, LA, was recently reimbursed for its property damage. The main facility in Harahan closed for about three weeks due to roof damage that caused water damage, the Downtown New Orleans location had a window blown out and the Metairie club had half of its roof blown off. The center is still in discussions with insurance over its business interruption coverage, although Elmwood's parent company Ochsner Health System, a non-profit health care provider, helped its three locations weather the storm financially.

“We were fortunate that our parent company had a strong balance sheet,” says Gary Borgstede, vice president of Elmwood. “As a whole, the company lost $80 million, but we were able to stay true to our mission, and we stayed open and were able to be here.”

Besides financial losses, clubs also lost key staff. Many new businesses have moved into the area to help with the rebuilding, luring away management by offering better salaries, Grossnickle says.

“We can always use more front-line employees, but those people will show up when we need them,” he says. “It's our key employees in management that we're having issues with right now.”

Although Franco's retained about 95 percent of its staff, it did lose a few key players who moved to cities outside of the region. However, after Katrina hit, all staff pulled together and job descriptions didn't matter much, Conner says.

“Teamwork is not just talk,” he says. “You need it, and in those circumstances you learn it quickly.”

Staff at the Reily Student Recreation Center at Tulane University in New Orleans also learned the importance of teamwork. Although many staff couldn't get back in the city due to flooding, those that could did the bulk of work to put the rec center back together, says Chris Maitre, associate director of facilities and fitness for the Department of Campus Recreation at Tulane.

The rec center sustained about $2 million to $3 million in damages but reopened last November. Since Katrina, the rec's budget has remained intact, along with a 2 percent to 4 percent raise in payroll.

“It was definitely a pleasant surprise,” Maitre says. “Tulane University itself cut a number of positions, but we were fortunate that campus rec didn't have those losses either with the budget or personnel.”

Other facilities are surprised with how far they've come in a year. Although much progress is still needed, the clubs that have reopened are doing well, considering the circumstances. Franco's Mandeville location sales are up 150 percent from this time last year. Cross Gates' membership has been gaining every month, and they plan to open a small temporary facility across from its flooded Pontchartrain club in mid-September. Elmwood's membership is up 2,000 members from August 2005. Tulane's Reily Student Recreation Center expects this fall to be as busy as ever. The Tulane rec is also holding a late night party featuring Louisiana culture such as zadeco music, local foods and “Creole ambience,” so freshman don't forget about New Orleans culture, Maitre says.

Hurricane Katrina has also, oddly enough, brought competing clubs together. Instead of fighting each other for members, affected clubs have turned to each other for support, advice and understanding.

“It shows you where the important things are and brought the community together and the clubs together,” Conner says. “We don't look at each other as competition. We're a lot closer.”

Lessons Learned

  • Know your insurance policies and what's available to maximize losses

  • Identify essential personnel and make sure they have some capability to inspect premises after an event

  • Designate a meeting location for non-essential personnel 48 hours after an emergency

  • Have a plan of action to move all equipment to a second-floor location in the case of an event

  • Transfer mission-critical software to laptops assigned to staff, so you can be back live as soon as possible

  • Consider getting more property coverage and loss of business income protection

  • Back up all computer files, along with a complete inventory of your facility including serial numbers, model numbers, etc. to validate for insurance purposes

  • Have emergency contact for all staff, including secondary e-mail addresses (in case your account goes down) and relatives' phone numbers

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