O'Rourke, Bryan K. M.B.A.
With budgets tightened amid the 2009 recession, leaders in the fitness and wellness industries more closely weighed the implications of their capital investments. A plethora of demands for financial resources including facility upgrades, maintenance of existing equipment, and new purchases to keep ahead of the competition while maintaining the delivery of quality integrated programs requires thoughtful evaluation. Considering that economic conditions are improving and demand for equipment is forecasted to increase, now is a good time to review procurement processes. Interviews with industry insiders and a review of recent research and literature point to some key things to keep in mind when evaluating investments in new equipment, along with other programs and solutions.
Despite an economic slowdown, a recent survey conducted by the Medical Fitness Association (MFA) (2) indicated that the medical fitness market will continue to grow as demand for medically integrated programs and services reach an all-time high with more than 3 million facility members nationwide and a projected membership of more than 4 million by the end of 2010. Approximately 95% of the MFA survey respondents were buyers and decisions makers from medical fitness organizations, and the findings of the research reflect continued spending by these types of organizations in the short-term. Some key results for the MFA industry survey are reflected in the Figure as follows:
Figure. Percentage o...Image Tools
* 90% plan to purchase new equipment in the next 2 years
* 43% plan to expand or renovate their facility within the next 2 years
* 49% plan to purchase new software in the next 2 years
* 49% plan to purchase new fitness programs and assessment tools in the next 2 years
A notable finding of the survey was price, being the key purchasing factor, as opposed to features, which was the primary factor identified in the 2007 survey results, confirming increased scrutiny around spending and an emphasis on value. Although price remains an important consideration, interviews with leading professionals reflect a wide variety of other factors that contribute to the decision of what equipment to purchase. Given the forecasted increase in demand, how should leaders and managers approach the procurements process? By following four key disciplines.
1. START WITH A SOUND PLAN BASED ON MARKET NEEDS
Choosing what equipment to invest in is best done in the context of an intelligent business plan. A thoughtful vision for the facility and the community it plans to serve represents a best practice. An evaluation of your existing customers, trade area demography, and how your facility's equipment, programs, and planned space utilization are aligned to that mix, while being mindful of the competition, is a good place to start. Such methodology is the basis with which resources should be allocated to meet customer needs both in the short- and the long-term.
By evaluating available space and membership needs, medical fitness professionals are better able to project when new equipment will be necessary and what equipment would be best to procure. Listening to your members and learning what they think, what they value, and what they want is crucial. Surveys, focus groups, and regular interaction with staff can provide a good basis for evaluating purchasing decisions as well.
Keep in mind that even with well-developed plans in hand, interim factors can impact implementation. However, that should not dissuade the application of planning disciplines. "There is always a balance between maintaining the facilities we oversee while integrating the latest innovations to deliver the highest quality integrated fitness programming available," said John Ramirez, board member of the ICAA, former regional director of MFA's South Central Chapter and a long-time wellness professional working in Houston, TX. Recent economic and regulatory trends on health care organizations can impact resources wellness centers rely upon to fulfill their mission in the short term. As Ramirez explained, "In my professional opinion as a program manager at the Memorial Hermann Wellness Center, we tend to see our hurdles as primarily being the hospital's recognition of the needs of the wellness center." Regardless of the struggle to keep his needs at the forefront of the minds of his organization's leadership, his company, Hermann Wellness, continues to make significant investments in its programming and facility.
As MFA's 2008 Medical Fitness Center's Benchmarks for Success (3) reflects, 88% of medical fitness centers are owned by either hospitals or health systems. But despite financial demands on hospital systems, the report still projected capital investment in these facilities to exceed $1.5 billion for 2009 to 2010, confirming that despite tougher economics, the mega-trends of integrated wellness continue. Therefore, although temporary restraints on short-term resources can hasten annual expenditures, long-range planning is still key for thoughtful purchasing decisions.
2. KEEP ON TOP OF THE LATEST TRENDS
For most fitness facility managers, an annual budget as well as its related wish list of items, hopefully reflective of a longer range plan, is where the procurement process begins each year. Professionals concur that there are generally two main components to this process. First, evaluating purchases that include the latest features or trends to help a facility stay competitive, and second, optimizing the management of existing equipment investments.
Ed Trainor, vice president of Fitness Services and Product Development for Town Sports International (TSI), who recently attended the Athletic Business, ICAA, and Medical Fitness conferences this past December in Orlando, is a long-time veteran of the fitness industry. In addition to his present role, his background includes serving as a tenured educator and coach and as a director of a corporate wellness facility in Washington, DC, area. Mr. Trainor shared his unique perspective on the purchasing process, "It's certainly not business as usual today for obvious reasons. At TSI, we're trying to invest wisely with every dollar we spend. It's not about what we want to do; we've got to listen to our customers. Our members are becoming more sophisticated every year. They travel and experience other facilities, and they expect us to keep up-to-date with what's available out there." In addition to listening to members, keeping up-to-date requires reading the latest published articles, meeting with and maintaining vendor relationships, and attending trade shows as well. As the industry evolves, needs change and intelligent operators continually stay on top of what new products and services are being offered.
Medically integrated fitness centers, along with the entire fitness and wellness industry, also must consider another important trend: the need to ensure that facilities are inclusive to all, including the physically challenged. The Inclusive Fitness Coalition's Health and Fitness Club Workgroup (http://incfit.org/), chaired by MFA's Executive Director Cary Wing, Ed.D., is driving initiatives that increase available accessible environments, equipment, and programming. Given demographic trends and the advancing role of medically integrated facilities, purchasing decisions and initiatives must increasingly consider this important population and base its facility's purchasing and design purchases accordingly.
Other important emerging trends are alternatives to expensive equipment upgrades. Information systems and programming, for example, can be a pragmatic alternative to expensive equipment, helping to deliver improved service and enhanced member experience at a lower level of investment. Industry veterans started to confirm this trend last year, with emerging focus on programming, such as group exercise.
"The overarching theme for fitness in 2009 was getting more bang for the buck," said Chief Science Officer Cedric X. Bryant, Ph.D., at the American Council on Exercise (ACE), who summed up high points of the ACE fitness trends report for 2009 (1). "Consumers will engage in workouts that provide multiple benefits due to time and economic limitations. We also will see continued trends from 2008, including boot camp-style workouts and an increased interest in fitness for those who are older than 50 years," Bryant added.
3. OPTIMIZE YOUR EXISTING INVESTMENT
Making the most of the equipment you already have is obvious; but for a number of reasons, that might not be as apparent to some. As Mr. Trainor puts it, "Vendors are very conscious of maintaining their brand's real estate in existing facilities. All products have a shelf life and related cost of ownership. We track this and carefully structure trade-ins with our equipment vendors to make sure the mix of equipment is just right. For example, treadmills aren't as popular as they used to be, and elliptical usage has surged by comparison. So when we trade in 10 treadmills, some come back as ellipticals or even bikes. This enables us to keep our equipment offering aligned with our member's needs." Maintaining detailed information on each piece of equipment and its projected useful life and primary function enables optimal planning when evaluating new purchases. As a result, managers are able to forecast well in advance when they will be making their next investments and have a better idea of what those investments should be. As a result, facilities can optimize trade-in opportunities. In addition, a quality maintenance program with a proven service company ensures an optimal return on investment for any equipment. Quality service companies also can provide excellent advice on what brands to consider when evaluating new products.
4. KNOW WHAT YOU ARE BUYING AND WHO YOU'RE BUYING IT FROM
The fitness equipment industry has gone through tremendous changes in all segments during the past several years, with consolidation and business failures being a part of the landscape. John Stransky, the president of Life Fitness, recently acknowledged during a Fitness Industry Technology (4) interview, "It's no secret that the economy has provided challenges for every manufacturer in the industry." Although the result is an opportunity to cut good deals, it also means being aware of certain risks.
With all of the change in the supply channel, it is more important than ever to test items thoroughly and involve your staff during the process. Trade shows, demonstrations, or visiting other facilities that use the equipment can provide an opportunity to kick the tires. Asking your staff for feedback and having them use the products firsthand both serves to confirm a quality purchasing decision and empowers them to support its introduction to your members. Obtaining references from organizations that have purchased the equipment before and getting the details of warranties and service options in writing, along with the price, also are smart moves.
Long-time industry veteran Sal Pellegrino, who worked in the equipment arena for more than a decade at Precor before joining Les Mills International agrees, "I would love to be buying equipment now. You can obtain great bargains today." Although Pellegrino's experience lends to the recognition of how lean times can create great buying opportunities, he warned, "Buyers need to pay close attention to the vendors they are considering making large purchases from." Imagine purchasing a significant amount of equipment from a vendor who is no longer in business a few months later. Service, trade-in, and other considerations can come into question, making a thoughtful purchasing decision appear shortsighted. It's important to conduct a thorough evaluation of the vendors you are considering, including current credit and reference checks.
A CASE STUDY - ARLINGTON HEIGHTS WELLNESS CENTER
Jackie Baumann, NASM, AEA, AAHFRP, CEI, of The Wellness Center based in Arlington Heights, IL, uses a combination of these best practices when considering new equipment. Her organization's approach to making investment decisions reflects a quality evaluation process. "When evaluating equipment, we place our emphasis on fundamentals. We determine if the equipment will perform as marketed and whether it is functional, reliable, and convenient, particularly considering our important senior clientele. Finally, we weigh the price, warranty, and brand reputation," she said. In reviewing and evaluating various equipment purchases, Jackie and her team also rely on attending various industry trade shows each year. "Attending trade shows helps us make a final decision because it allows our staff to try the equipment firsthand," she said. Another important resource Baumann uses when making an equipment purchase is the contracted service company who maintains the facilities equipment. "We check the repair history of the item with our contracted repair and maintenance service provider who helps with questions and lets us know how frequently they have seen the machine being serviced." By following the four key disciplines of equipment procurement, the Arlington Heights Wellness Center demonstrates good purchasing disciplines.
Medically integrated fitness facilities continue to make sizable investments in equipment, programs, tools, and upgrades to meet growing demands. When evaluating investments in your facility, keep these important tips in mind:
* have a sound plan that reflects the community you serve while keeping the competitive landscape in mind
* listen to your members and understand what they use and their needs
* have an annual budget and wish list evaluation process
* stay on top of the latest trends, like inclusive fitness, to understand what you could be offering or doing to optimize the member experience while maintaining your competitive appeal
* manage your existing equipment investments to optimize their returns
* involve your staff in the decision process by empowering them to try the equipment before you make a final decision
* conduct an in-depth vendor evaluation with due diligence before making a purchase
CONDENSED VERSION AND BOTTOM LINE
A recent MFA survey shows that more than 90% of decision makers in medically integrated facilities plan on procuring new equipment, programs, and tools in the next 2years to meet growing demands. The recent business climate means that now is an excellent time to purchase equipment. A quality long-range plan, an annual wish list, and budget process based on available resources, in addition to an awareness of member needs, is a solid foundation for decision making. Understanding emerging trends while properly managing existing assets to optimize trade-in opportunities is good practice. Even more important is the need to closely scrutinize the vendors you are considering to ensure their stability and long-range viability.