Pairing an upscale health club and a four-star hotel has produced a winning combination
By Bradley A. Keeny
It's a model that, theoretically, makes a great deal of sense—combine a four-star hotel with a large, upscale health club, a topnotch day spa, and inviting food-and-beverage venues, all under one roof, and let the synergies and economies flow.
That, in a nutshell, is the concept that has given birth to Renaissance ClubSport, in Walnut Creek, California, which, next month, will celebrate its first anniversary.
It has been a very good year.
Renaissance ClubSport is, in a sense, a prototype, a one-of-a-kind example, of an entirely new type of club property. Scour the landscape from coast to coast, or even overseas, and you'll not find its like or equal. The inspired notion—that of mating a first-class hotel to a first-class club to obtain unheard-of construction, operating, and marketing advantages—seems destined for greater things.
The club component already boasts more than 3,000 memberships, representing some 8,400 individuals, and expects to reach capacity, of 4,000 (11,000 people), by January. The hotel division has quickly achieved an occupancy rate in the mid-40% range, comparable to the industry average for similar facilities.
As a result, the $50-million complex expects to generate $17 million in revenues, and break even on a cash-flow basis, during its first year of operation.
Short-term, Renaissance ClubSport is regarded as a template for a chain of 10 units, and, long-term, as many as 50, throughout the U.S.
A unique concept
The breakthrough approach and stunning product were developed by Leisure Sports International (LSI), a prominent six-club chain based in Pleasanton, California, that owns and manages the property under a franchise/cobranding agreement with Marriott International (NYSE: MAR), the international lodging conglomerate.
'Once we'd developed the concept—for this hotel/club mall—we began to look for a partner, because we wanted to build a brand,' explains Steve Gilmour, the president and CEO of LSI. 'We were interested in identifying a hotel company that had the capacity for brand growth, and, when Marriott purchased Renaissance in the late ‘90s, we saw the opportunity. Marriott had units in a lot of good markets and wanted to go back into some of them with a different brand. That was exactly what we were searching for—a 'style' brand that we could grow in numerous locations.
'So we went to Marriott and positioned our product beside Renaissance.'
Though the description of his creation seems simple, straightforward, few people can really visualize—or appreciate—it until they've seen it in person. Like a sunset or fireworks display, it doesn’t translate well into either words or pictures. It is something that, in order to be understood, has to be experienced.
The Renaissance ClubSport is not a hotel with an impressive fitness center; it is not an upscale YMCA with a few serviceable guestrooms. It is a beautifully designed and impeccably appointed 175-room hotel and a state-of-the-art, 85,000-square-foot health, racquet, and sports facility. The latter includes, among its many amenities, five group exercise studios, three swimming pools, racquetball and squash courts, an NCAA-regulation gymnasium, and cardiovascular, circuit training, and free-weight areas that occupy nearly 12,000 square feet. The complex also offers members and guests the c-blue Wet Bar and Bistro; the R Spa day spa and salon; a pro shop; and a separate childcare facility.
But what it has is less important than how well it all works together. The needs and dreams, strengths and shortcomings, of hotel and club properties have been carefully studied, weighed, balanced, and addressed so that the two components now complement—and compliment—one another in a graceful, seamless way.
'When the brand manager of Renaissance visited the facility for the first time,' notes Scott Pickert, the executive vice president of LSI, 'he told us, 'You know, I sat in on the planning meetings and completely bought into the concept, but, really, you can’t appreciate the flow of it all unless you’ve been here and seen it. It’s really a unique and exciting place.'
A better mousetrap
If it seems unlikely that such a deftly executed and finely polished production could have emerged, full-blown, from Gilmour’s imagination, there’s a reason. He and his team have been learning and honing their skills for more than 20 years—LSI opened its first facility, the ClubSport Pleasanton, a 185,000-square-foot operation in Pleasanton, California, in 1981—and, for nearly as long, have been tinkering with the hotel/club equation. In 1985, LSI entered into a partnership with the Travelers Insurance Company to develop a $25-million, 300-room Hilton hotel adjacent to its Pleasanton site.
'The community was a dynamic, growing business center, but there was a supply-side problem with respect to hotels in the marketplace,' recalls Gilmour. 'I thought that, if I could attach a hotel to the club, I could achieve a number of objectives. I’d be able to provide a much larger amenity package for hotel guests—one that no one else in the area was offering. It seemed to me that the club’s numerous corporate clients would appreciate having meeting space and room accommodations available . . .
'Basically,' Gilmour summarizes, 'I was trying to built a better mousetrap by putting these two pieces together.'
The potential, value-added benefits are certainly tantalizing. A hotel and health club, working together, can share certain functions, e.g., management, marketing, accounting, maintenance, employee training, etc. They can obtain volume discounts on their purchases. Hotel guests, as Gilmour surmised, like the added amenity, increase club utilization, spend more, and are more likely to return for another visit and to recommend the facility to friends. Club members, corporate and otherwise, make good use of the restaurants, spa, and meeting rooms, and value the fact that when colleagues, friends, or family come to town, they can stay at the member’s 'club.' The lodging industry can be both seasonal and cyclical, but fitness is steadier, producing a more stable and predictable business environment.
The Hilton/ClubSport product was, Gilmour realized, a 'better' mousetrap, but, he recognized, it was hardly the best one. The hotel and club functioned as a single entity, and enjoyed a number of operating synergies—e.g., they had the same general manager and accounting department—but, because they had been created four years apart, suffered from unavoidable redundancies. 'Because we built them at separate times, we weren’t able to take advantage of the construction savings that would have accrued if we’d combined them beneath a single roof,' points out Gilmour. 'For example, we had to create two lobbies, two food-and-beverage outlets, two sets of back offices, etc.
'So we began to think, 'If we had built this project from the ground up . . .'
The right partner
LSI managed the Hilton hotel for seven years, and continued to study, revise, and redefine the hotel/club mall model, but sold its ownership interest in the facility in the early ‘90s when Travelers decided to divest its real estate/hotel holdings. The Hilton experience had not only confirmed that the hotel/club concept was viable, but had also suggested how much more it could deliver—if it were done properly. LSI continued to build its portfolio of standalone multipurpose clubs, but also began searching for a new partner.
'Marriott would have been our first choice,' reflects Gilmour, 'but, at the time, it didn't own the Renaissance brand, and didn't seem to offer the growth potential that we were hoping for. So we began to look at other four-star hotel companies, and wound up entering into a relationship with the Westin Hotels group.' A short while later, however, a change in the Westin ownership led the company to cut back on its spending for new projects. 'That left us with two options,' explains Gilmour. 'We could continue down the road with them, but without their financial support, or we could choose another direction. We decided to part company and buy them out of the agreement.'
Fortuitously, at about the same time, Marriott purchased Renaissance and Ritz-Carlton, which made LSI's first choice look like its best choice. 'We approached Marriott—with, at this point, a very well-prepared model—and, after doing a great deal of due diligence on our company, they allowed us to purchase a franchise. Now both of us are committed to establishing and building the Renaissance ClubSport brand.'
Improved performance
Today, the Renaissance ClubSport in Walnut Creek stands as proof that the proposition, as well as the partnership, works very much as Gilmour had envisioned. The property has attracted national attention, a growing number of guests, and members who seemed delighted to pay a $600 initiation fee and $99 per month for the privilege of belonging. It was recently spotlighted in an article in Time magazine, 'Hotels of Whim and Vigor,' about the fastest growing trend in lodging—theme hotels. 'It's a fitness freak's paradise,' the magazine proclaimed. Other examples that it offered: the Jules' Undersea Lodge, in Key Largo, Florida, where guests scuba dive to their underwater rooms; and the Library Hotel, in New York City, where each floor is devoted to a particular area of knowledge (e.g., eighth floor, literature).
An 85,000-square-foot fitness amenity is not only one that intrigues and attracts, but it's also one that other innkeepers can't easily match. 'A lot of hotels in suburban markets have adopted a limited-service approach, basically cutting back on, or eliminating, various amenities,' observes Gilmour. 'We, however, are offering a full-service hotel, combined with a full-service, upscale sports club, restaurant, and spa. There are other full-service hotels in the area, but their health and fitness offerings don't begin to compare.'
'It's really exceeded everyone's expectations—even during a period when the hotel market, in general, is down,' says Pickert.
And the savings, efficiencies, and synergies that Gilmour was counting one have, one after another, clicked in. LSI saved significantly on the cost of construction: e.g., the mall-like design caters to two different clienteles efficiently with a single lobby, spa, restaurant, bistro, pro shop, childcare center, and set of administrative offices. 'Because the business is run as a single entity, there are also a lot of shared payroll costs,' reports Gilmour. 'For instance, there's just one general manager, one accounting department, one maintenance department, and one person supervising sales and marketing.'
A dual-purpose plant is not only cheaper to build and operate, but also quicker to achieve real momentum. 'One of the nice things about the Renaissance ClubSport concept is that, with a typical hotel, it takes 2-3 years to build up your market share, to reach a stable point financially,' explains Pickert, 'but, in the health club business, you're able to premarket and presell. We'd sold more than 1,700 memberships before we'd opened the facility's doors. You begin seeing cashflow from the club side much earlier than from the hotel side, which certainly helps during the initial ramping-up phase.'
Cross-utilization, an appealing idea, is equally attractive in action. Hotel guests do use the club and the rest of the complex' offerings; club members do patronage the spa and restaurants, and reserve rooms at the hotel for their friends and business acquaintances. 'Cross-utilization is one of the key elements that differentiates both the hotel and the club,' acknowledges Gilmour. In many cases, the combination not only provides more options, but better ones as well. 'With the restaurant, for example, we're really providing an enhanced amenity for members,' he points out. 'In most clubs, all they get is a grab-and-go deli, but here they have this beautiful, four-star restaurant . . . That, plus the availability of rooms and meeting space, and the day spa, which is used by a tremendous number of members, can only help our retention numbers.
'The hotel and club industries have a lot in common,' concludes Gilmour, 'and coupling their synergies beneath a single roof allows us to provide a superior product on both sides—that's really what this is all about.'
Renaissance ClubSport, though not quite one year old, is already outperforming many established standalone hotels. 'There are 68 hotels in the Renaissance system, and, according to Marriott's guest satisfaction surveys, we rank No. 1 in the ‘intent to return' category,' Pickert notes with satisfaction. 'We believe in this concept, and believe that it's going to pay handsome returns in terms of customer loyalty.'
It's clearly a model that—in practice as well as theory—makes a great deal of sense.
Bradley A. Keeny is a freelance writer based in Hull, Massachusetts, and can be reached at b.keeny@fit-etc.com.
