Coventry School System in Coventry, OH, didn't know what to do with its fitness facility, Portage Lakes Fitness Center. After all, the district managed school buildings, curriculum and students, not health club members. However, eight years ago when the school district bought a building with a bowling alley and fitness facility in it with designs to turn the building into their high school, they decided to give bowling alley and fitness center management a try. Before long, however, the bowling alley closed, and the school system turned to Akron General Health & Wellness Center in Akron, OH, to staff and manage the fitness facility.
Akron General jumped at the opportunity, not just for the revenue it would provide, but also for the opportunity to serve the community, says Doug Ribley, director of wellness and administrative services at Akron General Health & Wellness Center. Facilities such as Portage Lakes Fitness Center attract people in the community, and managing the site is a way to get the hospital's name out into the community.
“Being a not-for-profit health system, we have a different motivation than some of the other management companies out there,” says Ribley. “This was a way to work with a local school system to support them.”
In fact, the revenue generated by the school system's center is minimal in comparison to the millions of dollars of revenue generated at Akron General's four owned sites, says Ribley. Of the annual revenue generated at the facility, Akron General's fees end up being about 15 percent of that. Akron General is paid a monthly fee to run the facility. Any profits generated are turned over to the school district. At the end of the year, Akron General gets a percentage of the net profits.
“In the big picture, it doesn't contribute significantly to our revenue,” says Ribley. “But, that's not the intent. It does make money and it justifies us being involved.
The same can be said for Wellbridge in Denver, which manages three facilities (two in St. Louis and one in Boston). While unable to disclose just how much revenue the three managed sites earn the company, CEO Ed Williams did say that the portion of the overall revenue is very small considering the millions of dollars the private company earns from its 33 owned clubs.
“It's not a major portion of our revenue,” Williams says.
While these clubs are larger companies, smaller clubs looking to get into the management of on-site facilities may find the revenues earned are valuable for them. The opportunity to manage a club without most of the expense associated with owning a club can be attractive to small club owners. In addition, managing an on-site facility offers an opportunity for advancement of well-qualified, hardworking employees who otherwise would have nowhere to advance.
Ribley agrees that managing a site gives employees an opportunity to grow.
“It will give people who have worked hard and are ready for advancement an opportunity,” says Ribley.
In addition, if a key staff person is out sick or on vacation, the managing club has a whole pool of people to call upon to cover for them. In Akron General's case, the school district also gets a whole pool of people whose expertise they can rely upon — marketing, finance and information system support — inexpensively.
For Wellbridge, managing a facility allows the company to use its staff's expertise. The company originally was founded as a management company, at one time managing 50 facilities. For that reason, the employee base and expertise in managing facilities is already there, and the opportunity to do so allows senior management to grow and expand.
“Plus, the company gets a quality product because we have more senior management in that area,” Williams says.
CHALLENGES
Twelve years ago, Wellbridge managed 10 sites, but recently the company changed its focus to one of ownership of clubs rather than management of clubs. By switching to its focus, the club minimizes the various challenges that club owners must face when managing a corporation's fitness center.
Akron General has had small issues with determining how to work with the school and its support services to fix things such as a leaky faucet. Akron General has to work with the school system's maintenance department to get repairs done. In addition, Akron General's finance department has to interface with the comptroller of the school system on a regular basis so funds are accounted for appropriately.
“Figuring out who to work with and what is expected, how to report to the school board — those are the challenges and things that need to be worked out,” Ribley says. “You have to know what is expected. You have to develop things up front and be clear on everything.”
Generally, oversight by the owning entities isn't a major challenge, say Ribley and Williams, because the oversight into the day-to-day running of the facilities is minimal.
For Wellbridge, oversight is almost non-existent other than the fact that the employees who work at the companies come into the club everyday, putting them under some sort of daily scrutiny. Wellbridge meets with the owners on a monthly or quarterly basis to go over the revenue with the companies.
Akron General must answer to a school board and a school administration about the facility. However, they have been given a lot of support and flexibility to make things work.
“It's their center. They own it,” says Ribley. “They've hired us to come in. They have the ultimate authority. But, they know what their strengths are and what ours are. As long as we submit a budget and stay with that, they've been very arms length.”
However, for the most part, the challenges a club faces when managing an on-site facility is not unlike the challenges a club faces in managing its own facility, says Ribley. First and foremost, the facility must be successful. Initially, that was a challenge at the Coventry site. The school system considered closing the site because it couldn't justify using taxpayer money to run an unprofitable business. However, Akron General helped turn the business around by looking at the membership structure, the program and the facility.
Despite the challenges being similar, the club management business is different from the club ownership business. A club owner who wants to do on-site managing must make sure they are providing the service that the facility owner expects. The details of what is expected of both sides must be ironed out before anything goes forward, Ribley says.
“If you are used to being an entrepreneur, this is not the type of business to get into,” says Williams. “You are working for someone else. You don't have the flexibility. You have to do it within their constraints. You have to understand the business that you are getting into. You are going back to work for someone else.”
DIVISIONS AMONG THEM
Some clubs have found it worth their time to develop divisions devoted to just managing on-site facilities: Club One, Fitcorp and Tennis Corporation of America are just three larger health club companies that do this.
Fitcorp, based in Boston, operates 14 public centers in the Boston area and manages 22 private centers for corporations.
Tennis Corporation of America began more than 30 years ago by opening its Mid-Town Tennis Club. Starting in the 1990s, TCA began managing corporate fitness centers. Now, TCA owns or manages more than 40 clubs in North America.
Club One's ProServices division provides on-site staffing, facility management, wellness services and special event coordination to more than 150 companies in the United States. The team manages 33 facilities in various cities across the country. ProServices staff provides a performance report for the corporate facility owners on a monthly, quarterly and annual basis.
AKRON MAKES THE GRADE
When it comes to managing the Portage Lakes Fitness Center in Coventry, OH (a suburb of Akron, OH), Akron General Health & Wellness devotes much time, effort and staff to the facility. The center requires 25 employees — all but five of which are part timers. The employees are Akron General employees on Akron General's compensation benefits program. Akron General handles the staffing and all the financial aspects of the facility, including payroll. The school district audits the facility annually and pays Akron General a monthly fee to run the facility. Any profits generated are turned over to the school district. At the end of the year, Akron General gets a percentage of the net profits.
Teachers and students can join the facility at a discounted rate although the facility is also open to the community at a higher rate. Of the club's 1,400 members, most come from the community.
The facility itself is 15,000 square feet with an indoor running/walking track, group exercise studio, full cardio/strength area, racquetball courts, a swimming pool, steam room, sauna, whirlpool and locker rooms.