Apr 17, 2007 5:14 PM
Interview with Jim Gerber, Owner of Western Athletic Clubs, San Francisco CA
Jim Gerber, Owner, Western Athletic Clubs, San Francisco.
The upscale Western Athletic Clubs charge members a high price for their products and services, but Jim Gerber ensures that his eight clubs also give back to those in need.
An interview with Jim Gerber, owner, Western Athletic Clubs, San Francisco
Interview conducted by Pamela Kufahl, editor
Q: How did you get involved in the fitness industry?
A: Another fellow and I were playing racquetball in 1973-1974 in the Bay area and were looking for more courts, so we built our own. About that much thought went into it. It was really successful. It was called The Court. It was during the boom [in racquetball]. We decided it was a good business. In 1976, we found the location for the San Francisco Bay Club and opened it in 1977.
Q: What made you move from a racquetball club to a health and fitness club?
A: Back then at age 28, I was and still am in the first year of the Baby Boomers. All of us were coming out of college and the service, and we were looking for ways to continue to exercise and to play racquetball or squash or basketball or tennis. It was more about recreation than health and fitness. And that was about the time that aerobics started and group exercise started, and we rode that. It evolved into more of a fitness and exercise place.
The Bay Club was the first co-ed multi-facilitied club in the country. It had a lot of sports. It was a great place to meet people, a great place for Boomers to meet men and women. It was a real club. That’s one way we’ve characterized ourselves—as a place to make friends and meet people.
We also had something fairly uncommon at the time—a financial model that was unusual. We had a country club model, which meant an initiation fee and monthly dues but no contract. You could quit anytime you wanted to. That put the emphasis on us keeping members happy. As a result, we didn’t advertise at all. We sold based on referrals from members. We still don’t advertise. We might take out an image ad once a year in a paper.
Back then, that [business model] was a very distinct difference between our clubs and other clubs in the West. The others were more fitness centers. Because it was more expensive to join, it really focused on a more economically upscale clientele and it always has.
Q: How did Western Athletic Clubs come about then?
A: As soon as we built our second club—which was a result of the success of the Bay Club, which sold out all its memberships before it opened—then, we formed the Western Athletic Clubs, which owns and operates all these clubs. It’s been our opinion that an upscale club was better positioned as a stand-alone club rather than as part of a chain, so Western Athletic Clubs has never been used in the marketing. Members know the name because they have reciprocal memberships at the other [Western Athletic Clubs] clubs, but we don’t advertise Western Athletic Clubs as a name of a club.
Q: How would you describe the Western Athletic Clubs for people who have never been in one?
A: We have two types of clubs. There’s the Bay Club model, which is urban, large and a complete facility with swimming and exercise facilities. And then there is the sports resort model, which we call the Pacific Athletic Club model—suburban, eight to 10 acres, family oriented with swimming, tennis, white table cloth dining, squash, sometimes racquetball and all of the Pilates and yoga.
The suburban members are by definition more family oriented. There’s a slightly younger crowd in the city and fewer children, but we do have kids programming there, too. But basically it’s the same rough demographic profile as far as economic status.
Q: Can you tell me about the deal you announced related to Carlsbad, CA?
A: We announced some time ago that we are building a club in Carlsbad, CA. Now, we are buying an additional six acres next to it and remodeling an existing 80-room hotel and banquet/meeting space to go with it. It might be named Pacific Sports Resort.
We are buying the whole thing and focusing it on the club and marketing it through our membership. Carlsbad is a terrifically dense (in population), light-industrial area. All the golf manufacturers are there and a lot of ski manufacturers. As a result, there are plenty of demands for meeting space, and [these companies will] enjoy the benefits of the meeting space. The club will be 100,000 square feet with tennis, swimming, dining and what our typical resort product is.
Q: Do you plan to purchase/build more clubs in the next two years?
A: Yes, we do. [The Carlsbad location] is still empty land. It will take two years to be up and running. We are also working on another piece of raw land, and we are working on the purchase of another club.
Q: Would you buy a lower-end club and upgrade it, or are you looking only for higher-end clubs?
A: We would. Our focus is to find clubs with enough land and density in the area.
We put $12 million into the Courtside Club to upgrade it after we bought it.
Q: Is expansion important to you?
A: We’ve always focused on thoughtful expansion. Not expansion for expansion sake, but when we find clubs that make sense for us, we expand. We’ve never not tried to expand, but we are also always willing to sell and move in and out of clubs. We sold three clubs in Seattle last January (2006). But we’re expanding into existing markets that we’re in with bigger clubs.
Q: Why are you expanding with bigger clubs in those markets?
A: The question is, why do you want to expand at all? You either expand or shrink. It gives employees a lot more room for growth. We have a low attrition rate for employees. When they are here for five to 10 years, it gives them more job opportunities.
Big clubs make sense for us. They are hard to duplicate. We know how to build them and what demographics we need. Once you do them, they pretty much control a market.
Q: Why did you sell the Seattle clubs?
A: I’m from Seattle and I like that market, but we decided not to build more large clubs up there, and we received an offer on them that we thought was reasonable. It was harder for us to find a suburban sports resort. It was harder for us to find an outdoor product for Seattle that made sense.
Q: Do you remodel your clubs on a regular basis, like every five years?
A: We do, but it’s not on a formula. We change [the clubs] as they need to be changed. About 10 years ago, we did a major facelift on the Bay Club, repositioned the locker rooms, added a day spa. More recently, we added 11,000 square feet that we call the Mind Body Studio. In that club, we have a first-class yoga program that we can hold up against any yoga facility. It is beautiful. It is used by Yoga Journal for photographs. In 1983, the Bay Club offered Pilates. Back then, Pilates was mostly [used as] rehabilitation for San Francisco ballet dancers. So we’ve been in the yoga and Pilates business for 25 years.
The Decathlon Club in Santa Clara (CA) in the middle of Silicon Valley has had a lot of homes built around it where before it was light industrial. So we are going to reposition it to make it more family friendly with more kids programs and pools.
Q: Is it better to lease or own your facilities?
A: We own the large sports resort properties out of town. The city clubs are leaseholds. It’s just worked out that way. It’s easier to lease space in a building than to buy the building. On the other hand, it makes more sense to build a $440 million club on space you own.
