ABC Financial Answers Questions from March 25 Club Industry Town Hall on the Coronavirus Crisis

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ABC Financial CEO Bill Davis participated in the March 25 Club Industry Town Hall, "How Suppliers Are Helping Health Clubs Through the Coronavirus Crisis." So many questions were submitted for the town hall that time did not allow for all to be answered. Davis and his team have responded to many of the unanswered questions below. Some of the submitted questions were combined into one if they were on the same topic. 

How Suppliers Are Helping

Q: The conversations that I've had, particularly with European fitness operators and suppliers, are that the coronavirus's unpredictability necessitates reactive, almost day-to-day strategies rather than anything that looks too far into the future. Do the members of the panel believe that in this ever-changing landscape, it is possible to have a viable long-term strategy and, if so, what would be their top tips to ensure that suppliers and operators alike can survive right now and thrive once this passes?

ABC Financial: The coronavirus pandemic has indeed required a shift in thinking, with a focus on immediate impacts to your cash flow and the best actions to reinforce the stability of your business. While we don’t know the length of time that it will take to reopen and then return to normalcy, what we can do in the interim is view the decisions that we make today through the lens of how they are expected to affect our club businesses as they reopen. 

Q: How are suppliers helping club operators during this time? What assistance are you offering (regarding payment for equipment received, financing plans/offers, payment deferrals, delivery of equipment ordered, cancellation of orders, equipment discounts, providing extended terms to current customers)? How can vendors still reach out to gym owners with relevant content while remaining respectful of their circumstances? What is the best way for these suppliers to actually connect with all operators?

ABC Financial: For ABC, out motivation is to aid clubs and their member base and their revenue streams. With ABC’s transaction-based model, clubs that have chosen to close and stop billing will not incur any cost. Our teams are taking a proactive approach to conversations with our clients and standing at the ready to provide a consultative answer as we’re needed, which is all rooted in our deep conversations with our client clubs. We're continuing to serve our clubs by handling technical and member support. In some instances, ABC has become the main channel of communication to their members. When we are speaking with the members, we reassure them that their clubs are doing the right thing and that they are motivated to retain members—in doing so, we are helping to lift some of that burden from club operators.

Billing 

Q: What is the best way to handle all the cancellation requests during this time?

A: If you’re planning how to react to freeze and cancellation requests, many clubs are communicating “don’t worry, we’ll take care of you.” This depends on your price point and agreement type. For example, if it’s month to month and you’re continuing to bill, we are seeing an increase in requests to cancel or freeze.

Q: Is there an easy way to change over all my clients’ membership fees to a simple month-by-month downgraded fee?

A: The real challenge lies in the variability of your membership. You need to think through open- versus term-memberships, all the various dues and incentives currently in place. As we’ve looked at this option—say, moving everyone to a low monthly temporary fee—getting some revenue versus none may seem like the solution. And ABC systems are capable of moving members to a new membership type. But for some members, this is a big savings, for others not, and we’ve even seen instances of the lower fee still being higher than what some members are paying today. So, yes, it can be done, but that doesn’t mean it’s a great solution for all the members. And this still has the same issues of re-opening and moving members back to their agreement and how to address term and proration of dues when we move beyond the pandemic.

Outlook for the Industry

Q: Is there a framework for recovery after COVID-19? What challenges and changes do you think we will face in the next six months?

ABC Financial: A factor to consider will be the member expectations of your clubs when they return. You’ve seen the many great examples of streaming content and virtual training options that the creative people in our industry have delivered. This is the point in our industry’s history where integrating content will be expected. Just as Netflix adds seven million subscribers in this quarter, how do we, collectively as a fitness industry, continue to ensure your club is the hub of their wellness and fitness? How can technology or a club management solution reinvigorate club operations—how can it integrate and deliver that frictionless experience? ABC is planning for this now so we can build the tool set while you concentrate on your business.

There are already talks of reimagining an environment that incorporates social distancing going forward. This is more than the deep cleaning of equipment or spacing out machines and unveiling a new layout. Beyond a higher standard for cleanliness, consider what this new normal will mean for your members. We should be thinking about where to place spray bottles, towels, soap dispensers and water fountains at the gym. How to update door access control systems so it’s touchless, giving members the ability to use mobile phones that are already in their hands. We should also consider points of sale and setting limits so that your staff can minimize the requirement of signatures and or touching a screen. This goes deep. It’s a consideration of how the club works and how many people are touching various items within the facility.

There’s a report released by Visa that outlines the impacts in various industries. There’s an anticipated 90 percent loss of sales in many metro areas for dine-in restaurants and a projected loss of 3.9 million jobs in the hospitality sector. The downstream effects of the reduced buying power of those employed in at-risk sectors will be felt in fitness. You also see the quick service restaurant category (fast food delivery like DoorDash and Uber Eats) have experienced significant growth. Could the inactivity from social distancing combined with high caloric intake and a renewed interest of maintaining a healthy lifestyle mean a New Year’s-like rush when clubs reopen?

Q: Do you feel the current increased online/digital workout behaviors will impact the full-service fitness clubs and studios once the pandemic ends? If so, can you possibly share some thoughts on how you'd recommend a streaming service as an additional revenue stream?

ABC Financial: There’s a significant opportunity, which some club operators are already considering, to reimagine a new member experience post COVID-19. Enhanced capabilities, in-home training and more will make extending the member experience beyond brick and mortars a must. For example, recently we heard an example of a gym renting equipment to members so they can workout at home. We expect this will be the inflection point in history where expectations evolve, more than likely, forever. Leverage the opportunity to train and retool your workforce and help them prepare for this new normal as I mentioned before.

Q: What technological advances will be adopted by the fitness industry to move us forward in this new norm?

ABC Financial: The time to think about the improvement is now, for all aspects of your club. You might already be considering ways to reimagine your facility, but what about getting your staff ready? A large club chain shared with me that they are hosting daily stand-ups for their employees and using that as an opportunity for engagement, training and development. We are also in discussion with other clubs about how to clean up and streamline certain processes that would enable them to open the door faster. 

From a perspective of a club management solution provider, the longer-term view on technology development will be closely tied to the new normal expectation of member experience. What the member experiences in their daily life outside of the club becomes an expectation of the interaction with the club. From sales and onboarding to daily interactions, the technology-enabled interactions will rapidly become smoother and expand their end-to-end capabilities. 

Timeframe 

Q: How long do you anticipate it taking to rebound and get back to full speed after we get to the other side of this crisis?

ABC Financial: It is hard to predict as a country like China is just getting back to normal, yet locations like Hong Kong are seeing a second wave of impact. It really depends on how we, as citizens, adhere to the social distancing and how quickly we are flattening the curve.

Member Engagement/Retention

Q: Of your communications to your members, what has had the greatest positive impact so far for them as it relates to the club-member relationship during this time? How can we best service our members during this difficult time? With the fitness center closed, how can the center be used in an act of goodwill for the community?

ABC Financial: We’ve seen incredible transparency in the communication that clubs are using to appeal to member base. While it can take many forms, appealing to members as a small business and a community stakeholder is common, as is sharing the sentiment that “we’re all in this together." Establishing a real value in members continuing to pay their fees in support of the capabilities of the club, even through this period of physical shutdown, is achievable.

We’ve seen a frequency of communication to not just members but also staff and the community at large that has been really remarkable. There’s been a tremendous amount of community outreach, whether that means offering up facilities and staff or asking high-risk members of the community to reach out and connect. It’s an important part of not just staying connected but also utilizing your staff in a positive way.

Revenue Generation/Cost Savings/Funding Questions

Q: How can we save money during COVID-19? Where can I get funding for my business? And do you know if the government funding will be available to our business?

ABC Financial: We see the best-prepared clubs are creating several cash-flow scenarios with different ranges of outcomes rooted in financial analysis. With full command of expenses and cash outflows, your ability to react to new realities over the upcoming weeks and months becomes more tangible.

To help meet shortfalls, you should be examining your short-term financing options including small business loans. You may not need capital relief today, but you should consider taking advantage of current lending leniency and starting conversations and processes with lenders now. You can’t predict how easy it will be to open a line of credit in the future. The United States Small Business Administration (SBA) has published helpful resources online to help guide you through the options, and we also recommend contacting your local SBA office to establish communication early.

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