In early 2010, KKP (led by CEO John Eady) was appointed to conduct a feasibility study to assess options to develop the Palace of Art in Glasgow for alternative sports, fitness and related leisure activity. Situated in Bellahouston Park, the Palace of Art currently functions as a Scottish Institute of Sport Centre for Sporting Excellence accommodating provision for elite hockey, judo, boxing and wrestling plus high performance strength and conditioning.

Most of these functions will re-locate to the new National Indoor Sports Arena (for which KKP also undertook the initial feasibility study) or Scotstoun Leisure Centre as part of a clustering exercise, tied to preparation for the Glasgow Commonwealth Games in 2014.

The partnership of the City Council, Glasgow Life (the charitable company operating City cultural and sports facilities and venues) and Clyde Gateway Urban Regeneration Company was seeking clear strategic direction with regard to the future use of the Palace of Art together with parallel strategic input into plans being developed for the Theatre of Varieties. The Palace of Art has access to a substantial market; over 900,000 people reside within a 30 minute drive-time of the venue. Covering existing provision in the City and adjacent authorities, the commercial and hotel sector and other proposed developments, KKP's assessment covered a variety of potential uses including fitness, 5-a-side football, spa and related treatments/pampering plus others; high ropes, soft play, conferences, events and training.

KKP evaluated capital cost relative to revenue generation potential and the implications of each plus the extent to which such a development might cannibalise existing markets. The main new uses around which the Palace of Art feasibility study focused were:

Option 1

Development of a Glasgow Club Premier site with spa, top class fitness equipment, treatment rooms, cafe/restaurant, business and conference facilities.

This would fully utilise the asset and generate a substantial improvement in the trading position of the Palace of Art and Active Glasgow. KKP's forecasts suggest that it would generate a surplus in its second full year of trading as well as providing a real opportunity to reposition, add value to and improve capacity to market and promote the Glasgow Club offer.

With this, potentially very high return on investment, development of this flagship Glasgow Club Site would extend the range of markets in which the Charitable Company is engaged enabling exploitation of lucrative local conference and events markets. It would also enable it to expand the range of incentives for customers and staff across the full Glasgow Club brand and portfolio.

However, it necessitated higher initial capital cost and ongoing investment and significant change to specific areas of the building. In terms of organisation structure and culture, this option was also more challenging, requiring more dynamic marketing and management being, as it is, in a highly competitive environment more removed from Trust core business.

Option 2

Development as a ‘standard' Glasgow Club fitness facility making use of areas of the building as presently configured plus conversion of part of the space presently occupied by the water based synthetic turf pitch to 5-a-side soccer pitches.

A lower cost ‘safer bet', involving limited initial capital cost. It would enable reductions in subsidy and a good return on investment and would extend the core Glasgow Club fitness offer in a part of the City with proven additional demand. Although supply of 5-a-side football in the City is substantial, this facility would perform well. On the flip side, the mix of activity was not felt to be so comfortable and it would not fully exploit the high value of the Palace of Art as an asset.

Option 3

Development of a Glasgow Club Premier site spa with fitness equipment and treatment rooms, cafe/restaurant.

This fully utilised the existing asset but works within the existing building envelope, limiting additional build and thus reducing the initial capital outlay. It would also generate a substantial improvement in the trading position of the Palace of Art generating an early surplus and still providing the opportunity to reposition, add value to and market and promote the Glasgow Club offer. Offering a high return on investment, this flagship site would also extend the range of markets in which the Company is engaged plus expanding the range of incentives for customers and staff across the full Glasgow Club brand and portfolio.

Conclusions

The whole area of improving business performance, amending staff structures and improving performance management for individual venues, facility combinations and whole service operation is a specialist area for KKP. Facing increasing financial pressure, Glasgow Life, in common with many trusts and local authorities must evaluate how to maximise revenue generated by its assets while continuing to deliver on its charitable objects and meet demands placed upon it by the City Council and other partners.

Public sector ‘innovation' tends to focus upon price and cost rather than mechanisms to demonstrate value and enhance customer retention. Mintel reports that 24% of AB status respondents believe the most significant impact of the credit crunch has been to cancel a private gym/health club membership - creating (as is already evident in Glasgow) an ideal opportunity for the public/trust sector to provide a lower cost but high quality alternative.

Glasgow Club already benefits from the fact that its offer, at least in a proportion of centres is of high quality and is attracting business from ‘higher end' competition in/adjacent to the City.

Having assessed the options, John facilitated a high-level discussion with senior management staff building a picture about not only their individual potential but the wider impact on the quality and effectiveness of the Glasgow Life's systems, services and overall marketing. Glasgow Life is planning to take a scheme, probably Option 3, forward.