The consolidation talk currently making news in the health club industry is not reserved for the for-profit club market. Nonprofit fitness and recreation facilities also are looking at merger possibilities as well as partnerships with other organizations and businesses.
Tough economic conditions have left many nonprofits struggling to remain solvent during the last few years. This inevitably led to the closing of some facilities, but others have found that merging with another local nonprofit has allowed them to continue operating.
For the Lee County (FL) YMCA, a May merger with neighboring South County YMCA offered a way to reduce overhead and find financial stability while continuing its services to the community. Under the new partnership, Lee County will continue to operate its two facilities in Fort Myers and Naples, and with the help of another local nonprofit organization, the Lee County Y plans to increase its reach by opening another facility this August in Cape Coral. The new branch will be located in a former Shriners Club building that the Cape Coral Kiwanis Club is buying with the intention of having the YMCA operate the new center’s programming.
In June, the YMCA of Greater Saint Paul (MN) and the YMCA of Metropolitan Minneapolis announced they will integrate to become the YMCA of the Greater Twin Cities by Jan. 1, 2012. The merger will not be official until ratified by each organizations’ general boards and approved at general membership meetings later this year, but Bette Fenton, vice president of marketing and communications for both organizations, says this is merely a rubber stamp.
There would be little for the boards and members to protest. The merger will not affect most staff or members, and it does not bring many sudden changes because the organizations have been sharing some administrative and back-room operations for up to 15 years.
“We had two associations that started sharing services, and over time we started sharing more and more,” Fenton says. “We’ve just decided that now’s the time.”
There will be one big staff change: a new CEO for the merged organization. The current CEOs of the constituent Ys, who each have more than 35 years of experience with the YMCA, both plan to retire after seeing the merger through. The Y will conduct a national search for a successor, who Fenton says it hopes to have in place by next June.
Fenton stresses, though, that the merger is not at all about downsizing. No facilities are closing as a result, and no budget cuts are planned.
“We’ve saved money over the years because we’ve been sharing services and have been very frugal and smart in how these two organizations have been run. That’s why they’ve been so successful,” Fenton says. “Will there be additional cost savings down the road? I’m sure there will, but that’s not why we did it.”
Instead of savings, the merger offers new opportunities, Fenton says.
“We can reach more people, serve more people and expand the mission,” she says. “And we believe that we can raise more money together than we could separately.”
The merged Y will be among the five largest Ys in the country and will operate 22 full-facility YMCAs. Although there currently are no specific plans for new facilities, Fenton says that is definitely a possibility, along with other new services, programming, day care sites and community partnerships. And with combined assets of more than $260 million and an annual budget of more than $110 million, the Twin Cities Y’s growth seems like more than a possibility.
The opportunity to provide better services also was behind The Jewish Community Center of San Francisco’s decision to hire Club One, also based in San Francisco, to manage its fitness facility.
“They were building a brand-new JCC, and their core competencies are in other mission programming, but they also knew they needed to have a successful fitness center and membership base to be financially sustainable,” says Tom Nelson, vice president of new business development and of community and medical fitness at Club One.
Nelson says the term outsourcing does not accurately convey Club One’s relationship with the JCC of San Francisco.
“What they really wanted and what we really strive to do is partner with the JCC, so it’s a collaborative effort as opposed to just handing us the keys and letting us run the center,” Nelson says, adding Club One made great efforts to understand the mission, vision, values and culture of the nonprofit organization so that the integration would be seamless.
The Club One at the JCC management model is now in place in seven locations, including most of the JCCs in the Bay Area and the Scottsdale, AZ, JCC.
Like the Twin Cities Y, Nelson says that the partnership likely saves operating costs, but savings is not the key advantage.
“Although we do provide efficiencies in operations and volume purchasing power that save on expenses, Club One’s financial value [to the JCCs] is in driving membership acquisition and ancillary revenues, such as personal training, etc.,” he says. “Selling 50,000 memberships each year across our entire company, we have fine-tuned our marketing strategy and sales approach to be one of the most effective in the industry.”