Without doubt, the fitness industry has been one of the hardest-hit sectors by the coronavirus pandemic. Gyms and spas were closed for a significant portion of the year. Those that are open are operating at severely reduced capacities. Several prominent fitness chains have declared bankruptcy and permanently closed clubs, and the fitness future doesn’t look rosy. WCC’s Health and Fitness Center has experienced significant losses during the pandemic. According to the school, things won’t be looking up anytime soon.
In a presentation to the Board yesterday, the College’s chief financial officer reported that WCC expects to absorb nearly a $1.5M loss this year on operations for the Health and Fitness Center. In addition, more than one-third of the building’s previously reported subscribers have cancelled their memberships.
That’s more than too bad for Washtenaw County taxpayers. Last year, the CFO stated that the Health and Fitness Center needed every penny of the revenue share on the building to pay for its loan debt and building maintenance.
The Health and Fitness Center, which was supposed to pay for itself (but never quite has), will likely draw off the General Fund for the remainder of the year, regardless of what happens with the pandemic. The vaccine will not be widely distributed to the general public until the spring or summer of 2021. That assumes there are no production or distribution issues.
Recent studies have shown that gyms have lost between 60%-70% of their subscribers during the pandemic. Until gyms can operate at full capacity, it’s hard to know whether subscribers will ever return. A growing number of on-demand fitness alternatives have entered the market while places like the Health and Fitness Center have been closed.
How will the Health and Fitness Center survive?
Peloton has taken full advantage of people stuck at home. Sales of its pricey stationary bikes and treadmills rose nearly 172% earlier this year. Worse (for fitness centers) is the fact that Peloton’s monthly subscription charge is about 25% cheaper than most fitness club memberships. Once users have invested thousands of dollars in home fitness equipment, they’re not likely to tack on a club membership.
Other competitors in the home fitness market include MIRROR and Echelon Reflect. These devices deliver streaming fitness classes and workouts and personal training sessions. When they’re powered off, they appear to be a full-length mirror. The monthly subscription rate for these services is priced to compete with Peloton.
Just days ago, tech giant Apple entered the market with its Fitness+ service and its $9.99/month subscription fee. An annual subscription will cost $80. Subscribers need only an iPhone, an Apple Watch, an iPad or Apple TV to get fitness-on-demand services streamed right to their device. In the case of Apple TV users, Apple plans to push the required app straight to users’ devices when they install the next OS update.
I’m not saying that the Health and Fitness Center isn’t going to survive, but if the taxpayers are being asked to subsidize this failure to the tune of millions per year (operating losses combined with the bond payments on the building, and the excruciating maintenance demands of the building), we deserve a detailed plan for the building going forward.
Taxpayers never authorized the Health and Fitness Center
After all, the taxpayers never authorized this boondoggle. We’ve just gotten stuck with the bill. We deserve to know what the grand plan is. How long can we expect to see the money we authorized for education being diverted to prop up the Board of Trustees’ ass-backwards idea of a “great investment?” The taxpayers also deserve a full accounting of everything we have spent on the building, from bond payments and building maintenance, to subsidies for the building’s operation.
Today, we have a building that can only be operated at a loss. It cannot be sold without losing part of the campus. With fitness centers losing money left and right, it’s unclear than anyone would buy it. It must be maintained, whether or not anyone uses it. And WCC still owes millions on the loans the Board authorized for its construction. Are we just going to let the HFC bleed millions per year for the foreseeable future?
We need to know when the Board of Trustees admits that the Health and Fitness Center was a costly mistake. How much more money does this venture have to lose before the Board acts?
When do we stop throwing good money after bad?
Photo Credit: I am R., via Flickr