Overview: Budgeting for Your Hotel Fitness Center
By Kurt A. Broadhag President, K Allan Consulting | November 2009
Successful commercial gyms develop their business model through a well-defined plan. Long-term profitability compares initial start-up expenses which both construction/build-out and equipment purchases to projected membership sales forecasts and other income generators. This comparison allows management to create initial and ongoing budgets to plan for expenses specific to the fitness center including cardiovascular and strength equipment purchases as well as ongoing maintenance and repair.
The uniqueness of the hotel fitness center lies in the fact that success is not measured by a balance sheet but rather non-tangibles that define the ROI. Often times management looses site of the fitness centers effectiveness because of this negative cash flow. This eventually leads to less and less willingness on management's part to spend money on the upkeep of the facility. Properly planning a detailed budget for the worst case scenario up-front will allow the operator funds to maintain the facility.
By far the largest expense in the hotel fitness center, assuming build-outs are limited, is the equipment procurement. Budgeting for this expense is dependant on a number of variables but can be summarized in a dollar amount per square foot workout floor space. In general, this ranges from $50 sq/ft to $75 sq/ft. Factors affecting this price range include differences in cardiovascular equipment lines (full commercial verses light commercial), personal screens verses the traditional drop-down televisions, and variations in strength lines. An important consideration during this phase is to consider not just purchase price but total lifespan cost of the equipment which, as discussed in one of my previous articles, includes maintenance of the equipment, repair, power requirements, and down-time. A word of caution - Budgeting for the lower-tiered equipment during this phase may end up eating more of the budget in the long run when including this calculation.
Another area of expenses to consider and possibly budget for during equipment procurement is extended warranties for the fitness equipment. Exercise equipment, more specifically cardiovascular equipment, is often difficult to budget for because repairs are often unforeseen and costly. It is not uncommon for treadmill repairs to run $500-1000. To help guard against these expenses you may consider budgeting for extended warranties as an added protection. These warranties are usually "bumper-to-bumper" and can run anywhere from $300-700/piece of equipment for up to three years coverage. Extended warranties should always be considered, protecting your repair and maintenance budget for at least three years, especially if you have the funds up-front when the budget is being developed as opposed to later down the road.
In addition to equipment procurement there are a few design elements unique to the fitness center to budget for during retrofitting/build-out of the facility. Properly placed mirrors serve a dual purpose of opening up small spaces while at the same time providing guests the ability to watch proper exercise form. Mirrors, typically found in the freeweight area, span at least a full eight foot long section per dumbbell rack and cost approximately $250 for each 4' X 8' section including installation, totaling $500 for each dumbbell rack span. The freeweight area also consists of a special rubber floor which not only aids in protecting the floor from the freeweights but helps with sound abatement. There are a number of fitness flooring options available on the market running anywhere from $2-$7 per square foot. Thus, this same section would run about $125-$450 for each dumbbell rack.
While the initial start-up budget is fairly easy to control the monthly expenses for the hotel fitness center are nearly impossible to pinpoint. With proper planning, however, these expenses can be minimized and controlled. The largest ongoing expense and one that is often neglected by many fitness centers because the cost is unjustified in the eyes of some management is preventative maintenance of the fitness equipment. As discussed in one of my previous articles, preventative maintenance is key in prolonging the life of the fitness equipment and thus the long term budget. Preventative maintenance contracts between private fitness service providers are based on the amount of equipment. Typically these contracts run about $45 per cardiovascular piece and $25 per strength piece per year with a quarterly contract.