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Orland Park Health & Fitness Center Management Services
History
In October 2016, the Village contracted with Power Wellness to operate the OPHFC for the period of January 1, 2017 through January 1, 2020. On September 20, 2019, the Village extended the Management Agreement for a three-year term from January 2, 2020 up to and including January 1, 2023 with an option to extend the Agreement for a two-year period up to and including January 1, 2025.
In 2022, the Village chose to explore the market for other medically oriented fitness center operators. RFP 22-046 was issued September 2, 2022 with a proposal due date of September 19, 2022 for this purpose. The Village received proposals (attached) from Healthplex Associates Inc. and Power Wellness.
Healthplex Associates, headquartered in Saint Marys, Georgia, operates 13 centers employing 423 staff. Centers managed are hospitals, universities and medical facilities. Managed facilities range in size from 16,000 sq. ft. to 50,000 sq. ft.
Power Wellness, headquartered in Lombard, Illinois, operates 30 centers employing 2,200 employees including 70 in a home office which supports managed centers. Centers managed are owned by hospitals, universities and municipalities. Managed facilities range in size from 5,000 sq. ft. to 140,000 sq. ft.
The evaluation committee conducted interviews with both firms providing each an opportunity to review the firm’s qualifications, experience, staffing plan, 5-year pro forma, protocols for injuries, marketing plans, membership retention, proposed programming including group exercise and personal training, experience overseeing pools, facility maintenance expectations and financial reporting. These, and additional criteria (see attached) were graded by the committee. Out of a potential total of 180 points, Power Wellness earned 147, while Healthplex Associates earned 112.
Each firm’s five-year pro forma, transition plan, and willingness to adhere to the Village’s opening/closing protocols were evaluated independent of scoring.
Healthplex Associates (HPA)
*Pro forma: HPA projects a net loss of $152,932 in year one, growing to a total net gain of $1,353,695 over a five-year period.
*Transition Plan: HPA would conduct a series of open house type of events for members and staff as an opportunity to meet HPA staff, learn of any changes, and become comfortable with an expected seamless transition. HPA expects to offer positions to current staff at the same hourly/salary, filling openings by being competitive in the market place. Additional details can be found on p.28 of HPA's proposal.
*Opening/Closing Protocols: HPA opening/closing of the facility would be in full compliance with the Village's expectations.
Power Wellness (PW)
*Pro forma: PW projects a net gain of $6,001 in year one, growing to a total net gain of $782,153 over a five-year period.
*Transition Plan: No transition necessary (current operator)
*Opening/Closing Protocols: PW opening/closing of the facility would be in full compliance with the Village's expectations.
HPA projects lower expenses by $786,069 and higher revenues of $571,542 over a five-year period in comparison to PW. However, the evaluation committee believe HPA’s proposal underestimates expenses, while over-estimating revenues.
HPA expense projections do not include funds for service contracts, equipment replacement, miscellaneous or unforeseen expenses. Power Wellness includes $81,689/yr. to service building systems (HVAC, boilers, pumps, alarms, pest control, etc.); $72,500 for fitness equipment replacement and $32,253/yr. for miscellaneous expenses.
During the interview with HPA, the candidate shared that all IT and telephone expenses would reside with the Village. This would result in a substantial start-up cost, as well year-round support from the Village’s IT Department. Power Wellness is supported by a corporate IT division. IT expenses related to upgrades and replacement are within Power Wellness’ operating budget averaging $58,324 per year with little burden to the Village. HPA projects club operating software at $13,000/year within the supplies and other budget line item within the HPA pro forma.
In evaluating staff salaries, wages, benefits and commissions, HPA projects a first year expense of $1,852,073; Power Wellness projects salaries, burden and burden ancillary at $1,791,699. Over a 5-year period, HPA projects total salaries, wages, benefits and commissions to be $9,803,507; Power Wellness’ projects total salaries and burden and burden ancillary at $9,273,176. (Note: The Power Wellness total includes Janitorial Services which are broken out in the pro forma).
HPA’s staffing plan (proposal p.9), appears to be a generic plan and does not address the specific operation of the OPHFC. This plan includes an event assistant at 48 hrs./wk., a basketball coach at 6 hrs./wk., a full-time youth sports program coordinator at 40 hrs./wk., a full-time aquatics program lead at 40 hrs./wk. and swim instructors at 66 hrs./wk. Many of these positions duplicate efforts at the Sportsplex and could negatively impact participation in programs offered by the Recreation & Parks Department.
Overall, HPA projects a monthly FTE of 35.23 while PW projects a monthly FTE of 33.08.
Additionally, some of HPA’s hourly wages appear to be inconsistent with the local market. Massage therapists are budgeted at $15/hr. as compared the Center’s current rate of $32.44/hr. Additional discrepancies include group exercise instructors at $75/hr. as compared to current rate of $28.65/hr.,
Evaluating revenue projections, HPA’s proposal is heavily dependent upon enrollment fees averaging $111,110/yr. as compared to Power Wellness’s $16,234/yr. While this may seem encouraging, the trend in the fitness industry is to offer reduced, or no enrollment fees with month-to-month memberships. This reliance on high enrollment fees could be met with resistance, affecting overall membership enrollment and peripheral revenues.
HPA projects personal massage revenues at $107,514/yr. and personal training revenues at an average of $364,624/yr. In 2021, the OPHFC earned $38,809 in massage revenue and $99,914 in personal training revenue. While the projected numbers are attractive, these seem unrealistic. Comparatively, Power Wellness projects $59/456 per/yr. in massage revenue and $135,283 in personal training revenue/yr.
Programmatically, HPA’s proposal includes a total of 50 group exercise classes per week, four of which are water based. The current OPHFC October schedule offers 76 classes, 30 which are water based. Power Wellness’ proposal includes 75 per week with 26 water based classes. HPA’s proposal also assesses fees for classes typically included free with the membership. A reduction in classes, and assessing a fee for classes which are currently included in the membership may impact retention, as well as sales.
The OPHFC maintains a certification, led by Power Wellness employees with the Medical Fitness Association (MFA). In 2019, the OPHFC was named the MFA Facility of the Year out of 47 MFA certified facilities around the country. There are currently 44 MFA certified facilities including the OPHFC. This certification recognizes the OPHFC’s operations, staff, programming and emergency protocols as possessing the medical expertise to serve clientele safely and effectively. Serving a membership which is 40.93% senior based, many of whom experience medical challenges, this is an imperative qualification and skill. Power Wellness engages in a well-rehearsed emergency response protocols which are proven to effectively serve the OPHFC’s membership.
HPA commented that while they could earn an MFA certification, many owners are reluctant due to the initial cost, and therefore HPA self-certifies staff in emergency protocols. HPA creates a facility operating manual customized for each facility.
Evaluating the quality of each firm’s proposal, Power Wellness has submitted well-detailed and superior plans for member retention and engagement. Power Wellness conducts random daily surveys, and utilizes digital comment cards to engage members. In addition to a yearly survey, PW takes an extra step by measuring its Net Promoter Score (NPS). The NPS measures on a scale of 1 - 10 how likely a member would recommend a friend or colleague to the Center. In 2021, the OPHFC earned a score of 71, representing a category of excellent. In 2018, 2019 and 2020, the OPHFC earned scores of 73%, 76% and 70%. The NPS score is benchmarked against all industries. PW’s score consistently ranks among NPS leaders.
HPA conducts two types of surveys. One is an annual member survey which is compared to previous surveys of the center and benchmarked against other HPA managed centers. The second is an ad hoc survey of a select group of members to gain immediate feedback which can be quickly utilized for improvements.
References for both HPA and PW provided positive affirmations related to each’s qualifications.
HPA references noted memberships of 3000 - 3200 with one noting that “all are not paying members”. Another noted that due to lagging membership revenues the facility's focus was shifted to personal training. In relation to P & L, references commented that revenues were good, but less than expected. One shared the facilities’ goal is to reduce losses from an initial $500,000/yr. to $200,000/yr. In one of the HPA managed facilities, only the general manager is an HPA employee. The rest of the staff are hospital employees. HPA's references included hospital administrators which oversee the financial performance of the hospital's HPA manages wellness center.
Power Wellness references noted memberships of just below 4,000 to over 7,500. Employees at each center are Power Wellness employees. References shared that PW revenues have met expectations, while working within the owner’s expense constraints. A community college in Michigan noted that PW operates at a financially self-sustaining level outside of capital expenses, while another noted that PW was profitable before the pandemic and is working towards achieving this again. Each commented on PW’s corporate resources and support. PW’s references include one hospital, one university and one community college.
While both HPA and PW have a level of qualification needed to operate the OPFHC, staff believe PW is the more capable operator of this important Village asset. PW is keenly aware of the Orland Park community, local economies and competition. Additionally, staff believe PW provides the most probable opportunity to achieve financial success based on realistic projections and direct experience operating the Center for over 20 years. As such, staff recommends awarding a three-year contract to Power Wellness, with an optional two-year renewal commencing on January 2, 2023.
Financial Impact
The 2023 budget includes funds for the OPHFC which includes $3,221,875 in expenses and $3,202,376 in revenues.
Recommended Action/Motion
I move to approve awarding a three-year contract to Power Wellness, commencing January 2, 2023, with a 2-year renewal option;
AND
To authorize the Village Manager to enter into a contract with Power Wellness subject to Village attorney review.