Take Budget Advice from the Big Boys
The calendar has turned to September and all of the sudden it’s Fall. And now we’re all looking ahead to 2022. Your budget is done. Or almost done for some of you. But take a look at your numbers. When it comes to your amenities, your fitness center specifically, have you accounted for:
- equipment upkeep/maintenance?
- needed repairs?
- replacement equipment, as needed?
- new pieces to liven up your space, satisfy current and attract new residents?
One or two of those got line items? All of them (congratulations!). Maybe none. If you’ve turned your budget in pending approval, still read on. There are some lessons for next year here for you too.
Remember, according to the latest surveys, your fitness center is considered a must-have by prospective renters/buyers in multi-family communities. And Millennials, they expect all the bells and whistles whether they’re looking at penthouses in Manhattan or more modest homes. So, you’ve got to invest in keeping it running well and keeping it current with trends.
What You Can Learn from the Big Box-ers
of the Fitness Industry
Before we get too far down the road toward spending money and figuring out budget numbers for your fitness space, let’s take a look at the pros – Membership Gyms. Lifetime Fitness, L.A. Fitness, and other “big box” gyms live and die by attracting, and more importantly, retaining members; they’ve got this stuff down to a science (well, almost a science).
STOP! We’re not advising you to spend the kind of money Planet Fitness spends annually – we’re not even talking dollars and cents here – and not to use the same factors in the formulas we’ll look at for your fitness center. But those formulas and a little extra advice can give property managers and owners much more accurate budget numbers.
Most big box-ers plan their operating and capital budgets based on decades of industry data. Just like you, most spend a set amount every year on repairs, updates, and additions to their facilities.
- The recommended annual budget for maintenance and repairs for
these gyms is $4 per square foot.
- Every five years health clubs spend about 10% of their profits on
customer-driven improvements, i.e., what their members are asking for.
You could calculate that for your facility. If you don’t know the exact square footage of your space, just use a good estimate. Then multiply that by $4. Then cut that down by roughly 30%. This still isn’t necessarily what you need to spend but compare it to recent years’ actuals and ask around for the best future expense numbers. Use the number that “feels” the most reasonable for your budget constraints to project future budget numbers. You may want to set an annual or bi-annual increase (like a COLA).
Think about a comparable metric for your property. Your fitness consultants, current or past vendors, other industry pros can help you get to a sound dollar amount – and better, a formula you can use in future years.
One last lesson from big box-ers.
- Industry experts tell them that they need to budget 20% – 30% of revenue
on a total upgrade of their clubs every 10 years.
Obviously that number is disproportionate to how your fitness center figures into your overall P/L. How much you need to spend can be recommended by a fitness consultant and will ultimately depend on your market and your owners/board.
But if you’ve been in property management for any amount of time you can probably pick a number that will work. Best to run it by your consultant or a more experienced manager, or a developer, especially when it comes to those resident- “driven improvements.” No one has a crystal ball but it’s best to turn to multiple sources for these kinds of numbers so you’re not way off in your recommended budget.
Because of the nature of the housing market, Heartline recommends upgrades to your fitness space in the 7–10-year range for the multi-family market. That’s not just replacing old equipment; that’s upgrades and other changes to bring your fitness spaces into line with market demands. Regular replacement of equipment is based on the lifespan of different types of equipment.
Knowing this information tells you when to start planning for replacement. Of course, if a piece of equipment has had major repairs, that cuts down its lifespan. While it’s hard to predict and plan for those kinds of expenses, some business have what used to be called a “slush fund” built into their budgets to offset unexpected, but potential, expenses. When you purchase new equipment, wherever you buy it, always ask what the lifespan of that type of equipment in your type of fitness center, the kind of use it generally gets. Record it and when you’re working on longer term budget materials factor in when you should start budgeting for new equipment.
If You Want Answers, Do You Know the Questions?
There are a few mentions in the preceding section of consulting with a fitness industry/equipment expert. If you’re a regular reader of Heartline’s Newsletter, you know you can pick up the phone and contact your sales rep (call the main office if you don’t know who that is or how to contact him or her). And you’ve heard us talk about our Fitness Amenities Assessments. Hundreds of your colleagues – “from Maine to Miami – plus Chicago/the Midwest” have taken us up on it.
In the last year and a half, we’ve offered a Pandemic version of the Assessment, including revised layouts for social distancing, picking the best machines to take out of service, where to move the most popular, if necessary as well as proper cleaning and disinfecting of the fitness room – and we still do. But for years we’ve created evaluations for properties on their current fitness space(s) and recommendations for appropriate short-term and longer-term upgrades, and non-equipment improvements like re-orienting your fitness equipment in the space. Recommendations are based on the property’s resident demographics, the property’s “lifestyle” and sometimes the local market/competitor market.
Heartline offers Assessments for:
- Renovations and Upgrades (big and small)
- Repurposing unused or underutilized space
- Safety & Risk mitigation
- Space Assessment for New Construction
After the Assessment you’ll get a report with the evaluation of your current equipment and layout. It will include notes on equipment that is out of date, not appropriate (consumer/home equipment should never be in a multi-family fitness center) or not in the right place in the room to accommodate an easy flow for users. And any potential safety and/or ADA issues with placement and spacing of equipment and more, depending on your fitness center. This is a professional report you can share with your management team, owners, your board and other stakeholders. You won’t necessarily act on all (or any) of the recommendations – and that’s OK with us). But file it where you can find it when the time comes.
Throughout the Assessment you’ll get specific, actionable items – we’ll even list them all at the end so you’re not searching the document to make a list of your own. It’s right there in the Assessment for you.
Sometime after the assessment the consultant can talk or meet with you to expand on parts of the assessment and answer questions. He or she will also advise you on how to plan out as much as 10 years in the future. Or if you want to fast track something, they will work with you to make it the change that you envision.
HERE’S THE ANSWER TO ‘WHY?’ We know that the pool of renters is shrinking now with the cost of money being so low. So, to bring in those new renters you need the property’s fitness amenity to help build the community. And HOAs and condominiums, lots of new buyers are hitting the market. They’re looking for the right community fit and the best amenities. Even during this trying time of covid. Possibly even more so post-pandemic.
Let’s Wrap it up
It seems we’ve veered a bit away from your budget. But think of it this way. The Assessment is a tool to help you create a spending plan around upkeep and updating your facility. Not just a one-time budget plug-in number. You’ll be ready to map out a five-year (even 10-year) planning budget for your fitness needs and possibly capital expenditure plans.
You’ll get back together every year or two with a consultant to see if any adjustments are needed. That means every year you’ve got at least one area of your expenses that you don’t have to noodle the numbers around to submit an on-point budget number for this important area of your property.