I have said this before, but the original strategy for WCC’s Health and Fitness Center doesn’t seem to be working. For FY21, WCC predicts that it will receive no revenue from operations – mainly because the building is mostly not operating.
In the November financial report, WCC reported that 2,500 members had either paused or canceled their memberships. That’s problematic because WCC’s business model for the building relies on oversubscription and operating at maximum capacity. It’s not a great strategy because oversubscribing the facility and running it at near-100% capacity accelerates the wear and tear on the building. The strategy greatly inflates the cost of maintenance and repair on a building whose construction quality– according to the CFO – was “less than stellar.”
In the current financial report, to be delivered to the Board of Trustees tomorrow, an additional 2,000 members have paused or canceled their memberships. Even worse, for a building that needed every over-subscribed dollar to pay its loan and maintenance costs.
According to news reports published at the time the building opened, the facility serves 6,000 people. Slightly prior to the onset of the COVID-19 pandemic, the Health and Fitness Center had more than 7,000 subscribers. Now, we know that nearly 60% of the pre-COVID subscriber base is temporarily or permanently gone.
Public deserves answers regarding Health and Fitness Center
First, the Board (and the public) deserve a better description than “canceled or bridged their memberships.” Let’s start with some real numbers. How many memberships has the facility lost outright? That’s important to know because it describes the depth of the hole the building is digging for Washtenaw County taxpayers. It also characterizes the difficulty WCC can expect to have replacing lost members. It’s one problem if 1,000 members have canceled their memberships, but 3,500 are still willing to subscribe post-pandemic. It’s something completely different if 3,500 subscribers have canceled their memberships altogether.
Second, it’s time to have an honest discussion about the prospects for the Health and Fitness Center between now and 2027, when WCC satisfies the bond debt on the building. The prospects for the building are intimately tied to the fitness industry itself. And COVID-19 has permanently changed the fitness industry. It is ludicrous to entertain the notion that WCC will be able to oversubscribe the building and run it at full capacity – which it needed to do to pay the bond debt and building maintenance prior to the pandemic.
While the building’s revenue stream has tanked, the bond debt and the maintenance costs have not changed one cent. So what is the new strategy to ensure that the building pays for itself through 2027?
A November ClubIntel survey of 2,000 gym members showed that 54% either paused or canceled their memberships. WCC’s Health and Fitness Center experienced a slightly higher attrition rate. Even if 75% of the 4,500 missing members eventually return, that still leaves the WCC Health and Fitness Center 1,100 short of its pre-COVID membership. And according to the CFO, the building needs to be oversubscribed and fully scheduled to make its bills.
Taxpayers never agreed to pay for the HFC
Post-COVID, the WCC Health and Fitness Center will need to compete with places like Planet Fitness and services like Peloton. During the pandemic, Planet Fitness released an app that enables users to tap into virtual workouts on their phone or tablet. Although Planet Fitness has plans to roll out premium content, the app (and the workouts) are free to everyone – no membership needed.
Washtenaw County taxpayers never signed on to the Health and Fitness Center. Instead, the Board of Trustees tapped into the school’s operating funds to pay the debt on the building. This “self-supporting” business can’t support itself in the age of COVID-19, and likely never could.
Worse, the WCC Board of Trustees is now using funds the taxpayers specifically authorized to fund the school’s educational mission to pay for their ill-advised gamble instead.
So, once again – what is the new plan for this building?
Photo Credit: Tony Webster , via Flickr