Interview with Howard Brodsky, CEO of Health & Racquet Club, New York


As the New York Health & Racquet Club celebrates its 35th anniversary, CEO Howard Brodsky comments on changes in the industry, changes to his New York-based company and his plans for expansion throughout the Northeast.

Q: How has New York Health & Racquet Club (NYHRC) changed during its 35 years of existence?
A: In the 1970s, 1980s and early 1990s New York Health and Racquet Club had no competition. It had the celebrities and models because there was no place else to go. I got here 4 ½ years ago. The company was stale and had been for four to five years. We had the Silent Generation (people born 1925-1945) and then Baby Boomers, but to see a Gen X in this club—it didn’t happen. So we had to attract them while not alienating the Baby Boomers and the Silent Generation. We did that with music and classes. So now you can walk into the club and see someone who is 21 years old working out with someone who is 80 years old.

Q: What has the company done in last 35 years that you are proud of?
A: We have loyal employees who work very hard. We’ve been able to groom talent and keep them. I think that’s what I’m most proud of—the people. We did go through tremendous changes when I came here five years ago. I’m also proud of the financial results we’ve had. We went from losing money to making money.

Q: What are your member and revenue numbers?
A: We have 32,117 members. Revenue in 2006 was $41 million. Five years ago it was $20.4 million. We added two clubs, but even if you pulled them out, the increase was significant.

Q: Beyond the two new clubs, what accounts for the revenue increase?
A: Increasing net members, dollars spent per member. Increasing personal training from about $4 million in 2001 to $11 million in 2006. That’s through margins and being careful with the expenses and bringing in the right people.

Q: How many employees do you have?
A: 650 full and part time.

Q: How have your clubs’ look and feel evolved in the past 35 years?
A: One of the obstacles that we’ve had is that some of our clubs are more than 35 years old. They aren’t designed like a lot of the facilities we design today with an open look and feel. So we have to overcome that. We have a club on 13th street in the East Village in Manhattan. We have Crunch, Equinox, World Gym and others around us there, but our club continues to do well. It’s all about the people. The general manager knows your name. The locker room attendant knows your name. I take great pride in that—that we find people who are welcoming and smiling, and if you think that doesn’t matter, well it does. A lot of our clubs don’t have the physical plant to attract people; we do that with our friendly staff.
Every club we have is in a different market in Manhattan. Our club in East Village has a different look than the more corporate clubs that we have. We try to match the club and the staff with the market we’re in. Every club we design and renovate will have a different look and feel. I think that’s great for our members that they can visit one of our other clubs and get another look and feel.

Q: What changes do you foresee for your club in the next few years?
A: We are always changing our programming. We have programs for Baby Boomers, seniors and 20-year-olds. As far as expansion goes, we are looking to expand. There are a lot of areas in Manhattan that are open. Also Long Island, Connecticut, West Chester County, perhaps New Jersey. I’m going to be careful. I know what is happening in the real estate market. In two to five years, we will see a lot of clubs up for sale. We have had no debt in 35 years and never plan on taking on any debt. We own all our buildings. The real estate market is out of whack here. We are going to be patient. I am talking to some companies about acquisitions. I’ve learned to be patient, to do things right. Some of the clubs that have opened here have done so too quickly.

Q: Isn’t the New York market a bit overbuilt??
A: It’s not overbuilt yet, but there are some companies that are building clubs now with rent that is way too high. It might be a beautiful club, but in five years, can they afford to do a renovation? I think there are some clubs that are moving too fast.

Q: How has the industry evolved over the past 35 years??
A: As the industry has become more professional, you have more professionals joining the industry. For someone 25 years ago to be a sales professional, it wasn’t considered a real job. We have five sales consultants who have been with us for more than 25 years. They love their job and the business. More professional managers have gotten into the business. More corporations are involved. Big conglomerates are getting involved in the business. That’s great for the industry. It’s sad for the mom and pop clubs because it’s harder for them to compete.

Q: How has NYHRC kept up with the changes in the industry?
A: I look at outside companies and what they are doing—Starbucks and Enterprise. I try not to follow the industry trends. I try to follow trends from outside the industry.
One of my favorite stories is about the barista at Starbucks and how he came up with Frappuccino, which is one of the biggest sellers at Starbucks. It’s all about getting feedback from club-level people. I’m a big believer in ideas coming up the chain.
Another company that impresses me greatly is Enterprise Rent-a-Car. The service is impeccable. I can’t tell you how well they do financially, but the managers are young and they are attentive. When I walked into an Enterprise on a Sunday, I was treated like gold. The way they were trained was great; the way they made people feel was great.

Q: What are the biggest issues that the industry is dealing with today?
A: To the owner, it’s don’t leverage yourself and pick real estate carefully. Don’t rush to expand. To the managers, it’s you should never settle for mediocrity. You have to have the equipment and the location, but everyone has that. You have to have the people. Too many are just settling. To me, it’s never settle.

Q: How do you find enough qualified employees?
A: It’s our biggest challenge. We have someone dedicated to that. We have people posting ads all the time, not in the normal places but in places like Craig’s List. I drive my human resources director very hard. Manager trainees, maintenance people, sale consultants—these people are put through a rigorous process. We are rarely left without someone, but we only have 10 clubs.
If we are in a pinch, our general manager moves to the front desk, which is where they should be 80 percent of the time anyway. The general manager shouldn’t have an office. I did a survey one time where I asked the people what their general manager’s name was. Those who didn’t know, things changed at those clubs. The general manager has to be front and center, the heart and soul of the clubs.
When I got here five years ago, we had some great people and some not so great people.
If I send e-mails at 3 a.m., they are answered right away. I have sales people who wait up for sales leads. They put their Blackberry on vibrate and wake up when I buzz them.
I think we treat our employees really well. In return, I ask for loyalty and hard work.

Q: Are you competitive salary and benefit-wise with other club companies?
A: We are competitive with other club companies in the industry. As other companies become more corporate, we maintain a family atmosphere. There’s no huge chain of command to get things done.

Q: How has technology changed your company?
A: To me, our biggest source of quality leads is our Web site. It’s all about where you are being seated. Every time I go to a Google or Yahoo search, I want to be in the top five [search results]. I get every Web lead that comes in within 30 seconds. I distribute the leads to the people in the clubs. If people are going to fill out information on a Web site, they don’t want to wait 24 hours to get a response. Using the Web site to create business has been huge for us. We get about 15 leads on a weekend day to 40 leads on a weekday. We’ve converted about 29 percent of those into sales.

Q: How does that compare to the conversion rate of walk ins?
A: Walk ins are probably higher. We are creating a prospecting system that will roll out in about six months. Referrals are always the best. Referrals are by far the best because they already have a friend that works out there. Cold calls are harder. Whether we advertise on TV, radio, print—it directs them to our Web site. It also gives phone numbers, but the Web site is the best way to track the leads.

Q: How have you dealt with evolving technology? Do you offer things like online personal training?
A: I know there are some companies that have started with online personal training. I’m a believer that it’s the relationships and the hand holding that makes personal training so successful. It’s the day-to-day contact. I don’t think a pod download or going on the Web for online programming is going to do it.
I’m shocked at the lack of technology that manufacturers have developed at this point. At the last IHRSA show, I was shocked that there weren’t more iPod holding stations or charging stations on equipment. We are always looking at different technologies, but we don’t want to jump on board too quickly. We study the new technologies, watch them and test them and then we roll them out. The greatest technology right now is the simplest one and that’s the TV on the equipment.

Q: So clubs that don’t have a TV on each piece of equipment are behind?
A: I don’t think they are behind yet, but they may be soon. They should at least offer some equipment with them (TVs). We have plasma TVs in some clubs, but over time, each club will have equipment with their own TV, iPod docking station, ability to download, surf the Internet while working out. I think manufacturers are going to perfect that. I don’t think it’s perfected yet.

Q: What do you think about the obesity issue?
A: With diabetes, sleep apnea, high blood pressure—it’s a big issue. Maybe the industry needs to put together a campaign.
I am worried for the health of that population that they will too quickly pass up exercise and nutrition and use pills and surgery instead. There’s no history there (with pills and surgery). We know exercise and diet works. This society is just way too dependent on drugs for a quick cure. Diet and exercise are so big in the media right now. I’m hoping that population doesn’t take the easy way out.
Everyone will get a wake up call—whether it be diabetes, etc., hopefully they will get their call, but we have to make them feel comfortable when they come into our clubs. There are too many facilities –particularly the higher end—that when you walk in, you are looked up and down and that turns off those people. I’ve heard enough stories about people in our clubs who went into a facility and got that response and then worked up their courage to come to our facility and they joined because we made them feel welcome.

Q: Are clubs trying hard enough to reach the obese market?
A: We are scratching the surface. Every report that I’ve read would say that exercise and nutrition is the best way to deal with obesity, but the key is to create an environment that when the obese person walks into a health club, they feel comfortable. When they come in, we have to put them on a program.
The people that I’m most worried about in the obese population are the lower economic people. There’s a poverty link. The lower income people are tied into the fast food market because it’s a lot of food for little money. It’s the lower economic level that needs to be educated about exercise and nutrition.

Q: What are you doing to address the obesity issue among lower income people?
A: Our members are of higher economic stature because of where we are in Manhattan. So it’s just making people feel comfortable when they come in. You won’t walk through our clubs and think this is like the movie “Perfect” many years ago with John Travolta. It’s a diverse population here.

Q: Will you be adding weight loss programs to your facility?
A: It’s possible. It’s something we’re mulling over. I spent several years with NutriSystem. I have concerns about the health of some of these programs—the prepackaged food. When I was with NutriSystem, it worked, but once the program was over, what do I do now? There is not enough education. The yo-yo effect is horrible.
[NYHRC has] an in-house nutritionist. But I am concerned about some of the information that is given out by health club employees that don’t have the education to be giving out that information. We send all our people to Jackie Storm, our nutritionist. She’s educated in that area so we send them to her. Over time we’ll go from one nutritionist to having one in each club. I don’t want to put all of our clients on the Atkins Diet.
I think people go to these weight loss centers for quick fixes. You hear [lose] 60 pounds in six weeks. I don’t think it’s healthy.

Q: Would you consider opening a facility such as a Weight Watchers within your club?
A: I’ve had several companies come to us and want to open facilities within our facilities, and I’m just not comfortable with that.

Q: How are you preparing for the growing senior population?
A: We are primed for it. I would hope that for other clubs, they are primed for it. We are proud of our large senior population. We create programs around it. We have classes such as Better Bones and Restorative Yoga focusing on the senior population. Our issue is that we are trying to service Gen X, Y and Baby Boomers, too.
Music is the biggest issue in health clubs. We try to find music for everyone.

Q: How has programming changed at NYHRC since you’ve been there?
A: I came from Crunch, which was all about programming, so I was a firm believer in programming. However, I’m about fewer classes, more people in classes and more excitement in a class. People want to walk into a club with more energy. The Baby Boomers and Generation X want more excitement. I want a prospect to walk into a club and see a hip hop class of 40 people, not four. Our group program director has done an amazing job of reshaping our programming. Classes were a huge part of it. Quality is better than sheer numbers. The first thing we did was take accurate participant counts. We cut the classes that were not popular, and we became more innovative in the classes that we put on the schedule.

Q: What is the future of group exercise?
A: That is a moving target and it’s all about innovation. We try not to jump on the latest fads and trends. We turn to our employees. We try to have creative classes that no one else has had before. It’s easy to jump on the bandwagon.
We’ll always have the basic classes that others have like spinning because that’s what people want, but let’s be creative with it. Let’s hear from the instructors because they have their fingers on the pulse of what people want.

Q: What is the future of personal training and group training?
A: We tried group training for a while. It didn’t work for us. There is so much of our market that is untapped with one-on-one training. We make it affordable with different pricing levels. It’s about finding the right personal trainers and director. The right education. The right certifications. Personal training is here is to stay.

Q: Your thoughts on competition?
A: In Manhattan, we don’t have a lot of non-profit competition, but it’s tremendous in the suburbs. Ys today are beautiful. In Manhattan, I think competition is great. Whenever a new club opens, there is a little panic from some people at the club near there, but I say this is when you become even friendlier. This is just bringing more people into the area.
Our flagship club had a new competitor come in, but eventually, our membership exploded. Competition is a challenge—a challenge to get better. It keeps us on our game.

Q: Will clubs have to compete based on price from now on?
A: I’ve made mistakes in the past of lowering the price to compete, but that’s what it was—a mistake. You get what you pay for. I don’t see our membership base jumping [to another club] to save money. If they are getting good service and a lot of value, then hold your own. I could see if I was a mom and pop club and a low-priced club opened next door. But I don’t know what the long-term staying power of a club is that charges $9 per month and offers few amenities. Bally had that model forever and look at its stock. I think short term it works because you load up with members, but the facilities can become rundown very quickly and that price isn’t going to give you the capital to keep up those facilities. The next five years will be very telling.

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