Feb 1, 2008 12:00 PM

For-profit club owners say they cannot compete with city rec centers, whose managers say they just want what is best for the community.

A newspaper columnist in Vancouver, WA, once referred to that city's $25 million Firstenburg Community Center as a “Taj-Ma-health club.” It's no wonder. Firstenburg has more than 7,000 pounds of free weights, 40 pieces of cardio equipment, 15 bikes, several weight machines, a leisure swimming pool, basketball courts, a climbing wall and six flat-screen TVs.

Firstenburg, which is celebrating its second anniversary this month, is one of several city rec centers across the country that are attracting members with lavish amenities, and that has some former and current for-profit club owners crying foul. Not only do city rec centers have the backing of city government and taxpayers, but many of them bear none of the mortgage or rent costs that for-profit owners have. Most also charge lower membership fees than for-profit clubs, and they often market their facilities using existing mailing opportunities, such as notices in city water bills.

These advantages smack of unfair competition, say some for-profit club owners and industry observers. However, some city rec center managers say they are not competing with for-profit clubs. They say that the city facilities are primarily there to serve the community. But Rick Caro, president of New York-based consulting company Management Vision, disagrees, saying that city rec centers compete with for-profit clubs just as YMCAs, Jewish Community Centers, corporate in-house facilities and residential facilities do.

Whether or not city rec center managers see their facilities as competition to tax-paying clubs, city rec centers have helped put some for-profits out of business, their owners says. At least three club owners who operated close to Firstenburg in Vancouver are selling or have closed their clubs since the facility opened in February 2006. Ron Feik, owner of the 40-year-old Landover Athletic Club, closed his club to members last March, although it remains open to private club athletic teams. In Firstenburg's first month of operation, Feik says his club's membership fell from 3,000 to 500.

“When you lose 55 percent of your revenue the month they open, that kind of says something,” Feik says. “How can you compete with a $25 million facility? You can't.”

Hollie Olson owned Exclusively for Women, a 5,300-square-foot club near Firstenburg. Many issues led her to sell the club, including rising rent, but she says, “Firstenburg was the nail in the coffin.” Exclusively for Women closed in 2006.

“A powerful figure with a lot of marketing is going to hurt the smaller independent clubs,” Olson says.

Club owners that are battling city rec centers in other cities are threatening to close as well. Last month, Chuck Simon, the owner of the River Oaks Racquet and Fitness Center in Rocky River, OH, told the Cleveland Plain Dealer that Rocky River's rec center and other neighboring community rec centers that have cheaper dues were cutting into his business. To keep the club open and to pay his club's taxes, which totaled $95,000 in 2007, he said he would require members to pay an extra $300 as a special assessment or dues increase, which would bring in an estimated $250,000.

Government Influence

Some for-profit club owners claim that city governments that run the rec centers make decisions that adversely affect for-profit clubs. Feik and other for-profit club owners in Vancouver say the city placed advertisements for Firstenburg in water bills. Feik also says that when he needed to re-build a new sign at his club, the city made him place it parallel to the street rather than perpendicular, which made it harder for passers-by to locate his club.

Dave Miletich, the Vancouver-Clark County (WA) parks and recreation assistant director, says the representatives from the city that worked with Feik about the sign may or may not have known about his club's proximity to Firstenburg.

“They certainly didn't do anything intentionally to harm his business,” Miletich says.

During the development phases of Firstenburg, Miletich says he heard few objections from for-profit health club owners. In meetings between the city and for-profit owners, the focus was on working together and finding ways not to compete with each other, Miletich says.

“For the most part, those have been positive discussions,” Miletich says.

Matt Lamarque, owner of two Garden Health and Fitness clubs in Monterey, CA, also says that the local government interfered with his business after he remodeled one of his clubs that is about 5 miles from the Monterey Sports Center, a fitness facility run by the city. When Lamarque bought the club in September 2005, it was not in good shape. After he remodeled it, the city took notice and ordered a fire inspection on his club, forcing him to spend $5,000 on improvements, he says.

Lamarque recently remodeled his women's locker rooms, which cost him $140,000. After the remodel, Lamarque says the Monterey Sports Center asked for $550,000 from the city to remodel its locker rooms.

“The coincidences do add up,” Lamarque says. “When the place was a dump, nobody cared. We're a viable threat, the way I look at it.”

Competing against the Monterey Sports Center is an uphill climb, Lamarque says.

“You have a city-run [and] sponsored facility that does not have to pay rent, does not have to pay for remodeling, and they don't have to service their own debt,” Lamarque says. “They don't have to make a profit. They've never been in the black. You can't compete with that. You can't put them out of business. It's cart blanche. They can do whatever they want, and they govern you at the same time. I've heard people say it's close to Communism.”

The manager of the Monterey Sports Center declined to comment for this story.

Vic Sprouse, a state senator from West Virginia and an owner of four Curves clubs in Charleston, WV, says he understands the difficulties of owning a club located near a city rec center. A Curves not owned by Sprouse as well as another for-profit club, both near a city rec center in South Charleston, recently closed.

“As a private business owner, how in the world do you compete with someone who's willing to lose $1.3 million a year?” Sprouse says. “The part that kills me is when my own tax dollars are being used against me. That's a little bit of a slap in the face.”

Market Analysis

The tax dollars that for-profit club owners pay sometimes go to building city rec centers near them. Cities that plan to construct a new city rec center often do not do a proper market analysis, Caro says, to see if and where a city facility is needed. If a new city rec center is constructed and if the supply of health club facilities in that community is greater than the demand, then the new city rec center hurts the entire marketplace, Caro says.

“That's where all citizens should protest and demand some kind of accountability, which sometimes just is not prevalent in these situations,” Caro says.

However, Clarence Mamuyac, a principal at ELS Architecture and Urban Design in Berkeley, CA, says that most cities do in fact do a thorough market analysis when planning the construction of a rec center. The cost of most city rec centers ranges between $20 million and $40 million, Mamuyac says.

The cost is worth it because citizens want city rec centers, contends Mark Westermeier, the director of Carmel-Clay (IN) Parks and Recreation, which opened a city rec center in June called the Monon Center. Citizens in Carmel, IN, needed 125 signatures from the 70,000 citizens to stop the rec center, but the petition fell short, he says. The Monon Center, which is the centerpiece for Carmel's $55 million Central Park, had between 5,000 and 6,000 pre-sale memberships and now boasts 21,000 memberships.

The primary competition for the Monon Center, which features a water park and a natatorium, is a neighboring YMCA that attracts members from the Carmel community.

Both city rec center managers and for-profit owners should be aware of where their competitors are, says Iowa City, IA, recreation superintendent Michael Moran.

“Duplication of services is something that we as government officials really have to pay attention to now because it's a waste of money,” Moran says. “If the parks and recreation agency was there first, and a fitness agency comes in and tries to outscope them, then shame on them if they haven't done their homework. On the other hand, it would be ludicrous for me as a parks and recreation director to offer something in direct competition with somebody else just because I don't like them or I want a lower price.

“I believe that the public should get the biggest bang for their buck, and I think public parks and recreation agencies could do that cheaper,” Moran adds. “That only stands to reason because the private enterprises want to make money.”

Like Moran, Westermeier supports the notion that government should examine what services it needs to provide its community. The support for a new fitness center in Carmel was overwhelming, Westermeier says.

“When our survey information from the residents who live here says, ‘We're willing to pay more in taxes to get this,’ then that sends a clear message that perhaps private industry hasn't met their needs,” Westermeier says.