Alive & Well
Fitness Clubs Still Thriving, Moving Forward
By Rick Dandes
Call it survival of the fittest: Despite a slowdown in the U.S. economy, all evidence indicates that the health and fitness club industry has maintained a steady growth pattern over the past 10 years, with membership rates growing consistently, and profits remaining solid.
Even the most conservative experts believe that the demand for gyms and health and fitness facilities will increase over the next few years, as the public becomes even more health conscious and the aging "boomer" population places a greater emphasis on staying fit and healthy. Companies are also boosting demand, realizing that promoting wellness leads to more productive employees—and fewer sick days. Additionally, the amount of leisure time and growth in household incomes will positively affect businesses, leading operators to expand into larger facilities.
All this is very good news for fitness clubs—but there are still challenges ahead.
Like most sectors of the economy, health and fitness clubs are under pressure, and part of that pressure is due to the recession. Certain business sectors have been under siege for years now. Individuals and families are uncertain about their future and the consistency of their income, and nominal wealth is volatile, along with our highly unpredictable Wall Street markets.
Still, facts don't lie: The fitness club category has posted annual gains during the past five years, the worst years of the Great Recession, with revenues increasing from $15.9 billion in 2005 to an estimated $20 billion in 2010, according to a study conducted by the International Health, Racquet and Sportsclub Association (IHRSA). Fitness club membership, the IHRSA study noted, has similarly grown, from 41.3 million members in 2005 to an estimated 50.2 million members in 2010.
But beyond the ups and downs of the economy, there are other trends—from design innovations to new programs and marketing techniques—that are affecting the way fitness clubs do business.
Trends in Design
"Traditionally," said architect Rudy Fabiano, of Fabiano Designs, based in Montclair, N.J., "fitness clubs rented Class B and C building spaces," which are notches down from Class A space. Class As represent the highest quality buildings in their respective markets and are generally the best-looking, well-located buildings with the best construction and the highest quality building infrastructure.
"But that's all changing now," Fabiano contended. "And it's a definite trend. Especially in this economic climate, clubs are actually saving landlords because of low vacancy rates. A lot of spaces that had been rented for retail-based, Class A and B have become available to fitness club owners. It's not just warehouse space that's available anymore. There are more opportunities."
Along with this trend of better, more upscale locations come several design element benefits from an architect's perspective—such as more light coming into play, which Fabiano likes to incorporate into his designs.
"And with that use of light comes other considerations," Fabiano continued. "Bringing light in is beautiful and it really affects the quality of the space, but it also can be a nuisance to people working out. Bringing in light also includes the use of more natural light into the locker rooms. Obviously, there are privacy issues you have to address with that."
Fabiano added that designers of large, expensive clubs in corporate buildings have always understood how best to use and capitalize on natural light. But up to now, this has not been part of mainstream design.
"It is now. Increasingly in a big way," he said, "the use of light throughout a facility is a strong indicator that health clubs are no longer confined to the back warehouses."
Another design trend, Fabiano said, is that clubs are either getting very big or very small. "They are either very large sports clubs, with multi-programs, or more boutique types, functional, very specific training items. That's an interesting trend from a programming evolution, and it affects the overall design."
Large clubs want to deliver a lot of programming to more of the market and higher demographics, both families and single, young and seniors. The success of that multi-programming trend has led owners to build large clubs, with many rooms and big open areas.
"On the other side of the coin," Fabiano said, "is the smaller club that emphasizes personal training, one-on-one training and functional training, which includes core training, balance and stretching, and yoga-only studios."
Smaller clubs are popping up because of the low-cost barrier to entry, the ability to find real estate and the concept of serving one program system versus trying to do everything for everyone.
Another growing design trend can be found in "green" clubs — those designed to for eco-friendly usage and materials, noted Meredith Poppler, IHRSA vice president of Industry Growth.
Poppler said that in many instances, the health club industry has responded to the environmental imperative to reduce carbon emissions by adopting greener, cleaner, more energy-efficient practices.
Environmentally friendly clubs are recycling materials when possible and converting to energy-efficient lighting, heating and cooling systems, and using renewable energy sources such as solar paneling.
For most new-construction green projects, the ultimate goal is to achieve Leadership in Energy and Environmental Design (LEED) certification, based on the LEED Green Building Rating System. This designation, developed by the U.S. Green Building Council (USGBC), is a voluntary, consensus-based, national rating tool for developing high-performance, sustainable buildings.
As clubs focus on healthy lifestyles, it's logical that they also become leaders in healthy and sustainable environments, Poppler said.
Yet another industry trend is highlighted by James Thomas, president and consultant, Fitness Management and Consultant, Flower Mound, Texas. "We currently have three clubs that are new startups," he said. "In every case they are looking to create what I would call a 'cozy' environment. Usually it's limited locker facilities—but instead, clubs are looking for other ways to entertain the members, such things as batting cages, putting greens, etc., are being installed in clubs."
Programming Trends: Substance Meets Form
The No. 1 trend in programming right now is the functional training movement, experts said.
"The trends I'm seeing," Thomas said, "are clubs offering programming that delivers a wide audience, such as starter programs, new users, lose weight … while offering specialty programs that satisfy niche markets."
That's exactly right, agreed Fabiano. "People who run clubs have started to realize that group functional training—where one trainer trains 10 people—from an economics point of view is a winner," Fabiano said. "The challenge there is that existing clubs are struggling to find the space to bring functional or group functional training into their club. Because of its importance, some of the hardcore equipment is being phased out a little bit."
Weight rooms are shrinking, but the areas that we play in are growing, Fabiano said. "At the same time, group fitness has seen a huge resurgence."
For years, from a programming point of view, you'd have one large fitness room space. Now, in a typical club you'll have a large group doing hardcore training, a soft experience room, which might have yoga and spinning, a pilates room, and a cardio-cinema room, which is cardiovascular while watching a movie.
Poppler, of the IHRSA, said, "By working with our global membership base of over 10,000 club and fitness businesses, examining industry research, and monitoring consumer wellness behavior, I identified some of the most significant programming trends in health clubs for 2011."
These trends include the following.
Trend 1: Clubs and trainers are providing more age-appropriate offerings. In other words, exercise is not one-size-fits-all.
Baby Boomers: Clubs are offering specific programming and certifications for exercisers older than 55. Baby boomers want to age well, so they are exercising for more energy and the ability to work and play longer. As people age, strength and balance training become even more important, so the trend is for clubs to provide specialized programming and trainers that are specifically qualified to work with older adults on their exercise programs. Since the older adult market (baby boomers) is the fastest growing segment of the population, this trend will only grow stronger and will continue for the foreseeable future.??
Youth: Children ages 6 to 17 are the second fastest growing demographic of health club members, and there is a growing trend for sports-specific training for children from elementary school on up. Also, due to the obesity epidemic in children, more clubs, training programs and equipment will continue to be designed around children's unique fitness needs.
Generation X: Nearly 8 million Generation X'ers are current health club members, Poppler said, "with another 13 million once having been card-carrying members. Engaging this generation is a priority to clubs as this group's beliefs, attitudes, and perceptions are highly influential on American culture. Programs focused on wellness and cross-promotion with non-club activities (see trends below) will resonate with this group, as they are most concerned with frequenting health clubs for overall health and wellness and to engage in challenging activities that are of interest to them.
Trend 2: Cross-promotion with non-club activities and niche-specific facilities: Club operators and fitness professionals are increasingly offering workshops on functional training for sports such as tennis, training for triathlons or marathons and skiing. Also, more clubs are taking those programs even further and specializing as a niche business (i.e., boxing, rock climbing and mixed martial arts clubs).
Trend 3: Equipment trends from the ancient to the cutting edge: Kettlebells, originating in Russia in the early 1700s, have exploded into both the club and home fitness markets as they have proven to be very effective for building strength.
Exercising on a platform designed to vibrate at very high speeds is another hot trend that club operators and trainers are embracing, Poppler noted. "Makers of vibration machines state that these vibrations make for a much more effective workout. They have become very popular with professional sports teams, fitness centers, celebrities and elite athletes."
There is also a rapidly growing number of health clubs and cycling studios, where the cardio equipment is specifically designed to not only not require electricity, but to actually produce electricity as members exercise. The electricity generated is enough to at least partially offset the power required to run the televisions, fans, lighting and HVAC. This ties into the over all move toward "greener" business practices that many health clubs have adopted.
Trend 4: The rise of wellness programming: Multiple research findings point to the need for and rise of wellness programming. Some 73 percent of U.S. consumers consider being physically fit important to being "well." IHRSA research shows that seven out of 10 health club members keep using their clubs for overall health/well-being. And researchers have found that the return on investment among companies that offer wellness benefits ranges from $1.49 to $13 for every dollar invested.
Trend 5: Group exercise programming on the rise: Traditional group aerobics and unconventional new classes are as popular as ever among health club members. Group exercise classes with the largest growth rates are cardio-kickboxing and yoga.
Trend 6: The explosion of personal training: In 1999, Poppler said, "4 million Americans were using personal trainers. Now that number hovers around 6.5 million. Once thought of as only for the super-rich, now personal training is the most commonly offered program in clubs, with more than 90 percent of all clubs offering personal training of some kind. The main factor for growth, even in the recession, is the trend away from one-on-one training towards small-group or semi-private training to increase the fun level while mitigating expenses."
These trends, however, can cause design-planning problems, as Fabiano pointed out. "Currently," he explained, "I'm doing a club that is only 25,000 square feet, but it has five group X training (hardcore) rooms, which is unheard of. And unfortunately the only thing you can do is shrink the floor. So the floor itself and the corrections that owners have to make are much more focused and deliberate because you don't have the space.
From a layout perspective, Fabiano noted, "flow and movement in the walkways of the club becomes critically important. It wasn't that many years back when I was at a NY sports club where there were no walkways. You'd walk across the workout floor, the workout area to the one or two pieces of equipment you wanted to work on. Now, you really need a circulation path, clarity. And that actually gives you some open space that doesn't look cluttered and guides new members, for example, through the club very comfortably. It elevates the experience of the club."
The "typical" health club member has the following characteristics, according to several experts in the field:
- Equally likely to be male or female
- Between the ages of 25 and 44 (average age of 39.5 years)
- College graduate or higher
- Earns at least $75,000 annually
- Been a member between two and five years
Retention and Marketing Strategies
Retention rates average around 70 percent for fitness clubs. Rates are higher among members who sign membership agreements. Members who pay monthly are also more likely to renew than members who pre-pay for a year, which is one of many reasons most clubs have adopted monthly rates.
"We've found that high usage correlates with high retention," Poppler said. "Members who use multiple services at a club have higher retention rates than members who only use one service. Therefore, clubs encourage members to branch out and experience all the different services and programs the club offers. And, of course, the clubs that regularly invest in facility improvements (as well as their staff) have higher usage and retention rates."
Thomas, of Fitness, Management and Consultant, said, "We help our client clubs conduct networking meetings inside their clubs. This helps to attract between 50 and 60 guests per week, and it's traffic that would not normally walk into a health club. There are many keys to member retention, but we first start with keeping the member heavily involved the first 90 days."
Social media, like Facebook, YouTube, Twitter and even Groupon can raise awareness of a site, and through "friends," build membership through viral word of mouth.
Whatever the marketing program, in the end, design matters. Even when it comes to retention.
"Here's what I do to help my clients' marketing efforts," Fabiano said. As an architect, he believes it's important how the club looks before someone comes into the facility. The look of the building is a factor in providing that first impression. But more importantly, he said, what do they see when they are looking through the windows? Most clubs put all their cardio at the window because they are looking at the club from the inside out. A person drives by and they'll often see a very busy club. But that's not necessarily an ideal way to sell.
"We like to present a softer image," Fabiano said. "With more social spaces. But I certainly don't want to look in and see an empty aerobics studio. So when it comes to the placement of what's going on inside the club, one has to be conscious of how it is going to be perceived by someone driving by, and also walking in."
Navigating Through Hard Times
As with any business segment, some clubs are doing well, while others aren't.
Nationwide, health clubs are still a growth industry. U.S. health clubs in 2010 showed a 10.8 percent increase over 2009, Poppler said. Also, the number of non-member patrons increased by 8.2 percent to 7.8 million in 2010, up from 7.2 million in 2009.
"Clubs that have been successful in this economy are those that provide a great value," she explained, "and those that pay close attention to servicing their members, even while they are looking at every expense very carefully. Industry growth or new club development has come from clubs with a specific purpose, like the 24-hour access model, niche training or sport-specific clubs, and/or upscale women's only clubs."
Make your "cost" centers into "profit" centers, suggests Thomas. "A cost center is usually front desk, nursery and group exercise. We help clubs conduct training classes and raise expectations for these departments whereby they have an expectation to not only produce revenue, but also control expenses."
"I know the price point of the low-cost model is really affecting everybody's perspective," Fabiano admitted. "The challenge comes when clubs start competing on price only, and then it becomes an economic factor. If someone is shopping by price they are going to choose a $19 club over a $25 club, so I think some clubs are doing worse because of that mentality than just because of the overall economy in general."
What Fabiano encourages his client clubs to do (if they can) is borrow against their own existing building to make improvements and get the facility in shape for when things do turn around.
"Very few people in the last few years have been able to ramp up and start building lots of clubs," he said. "Get your club in shape. Now is the time to go through it, do a full evaluation of things that are OK, of things that you have neglected, of things that aren't working, of programming that you should implement, that you don't have the space for, and get your club in shape incrementally. You don't have to do it all at once."
It's easier to borrow money and to find financing for an existing business than if you wanted to start a new business somewhere, Fabiano said. "So protect your own base and get your club looking good and feeling good and being efficient. Take care of your current members so that you don't lose them, and when the economy does turn around you'll be in a position to be very competitive in your offerings and get new members."
Fit for the Future
Consolidation in the industry in the larger club format will likely continue. "The concept of the neighborhood club is going to come back in a big way," Fabiano predicted. "Smaller boutique clubs should do well. As will the very large, all-purpose club. I am pleased to say that whether it is a low cost model or a higher end model, aesthetics will over the years become increasingly important in marketing, branding, selling and experiencing a club and I think that trend is going to continue."
Developing clubs that look good and have durable materials that have a higher end feel is going to continue.
"What is happening internationally is that the aesthetic bar is very high," Fabiano said. "Which means the initial capital improvement to develop a club is a little bit higher and ultimately those facilities are going to have more staying power; they are going to look like something substantial, and they are going to mean something that is important. And that is wellness."
Looking long term, added Poppler, the fitness industry has nowhere to go but up, especially since a large untapped market (roughly 80 to 85 percent) of the U.S. population is not currently members in health clubs.
Add to that this alarming statistic: An estimated 60 percent of the population is either overweight or obese. So if the industry can get away from being viewed as where the fit go to get more fit, there is plenty of opportunity ahead.
As club officials and personnel, here are some questions to ask yourself (courtesy of Jim Thomas, Fitness Management and Consultant). Answer yes or no. But if you answer "yes" a lot, you might need outside professional help.
- Has your health club lost market share?
- Do you have declining member purchases?
- Do you have high attrition and low referral business?
- Do you have declining membership sales?
- Are you experiencing disproportionate sales to a small group of corporate clients?
- Does your health club have high employee turnover?
- Are costs rising faster than sales (declining profit margins)?
- Do you have an increase in member delinquency?
"The first key to getting out of this situation and getting your health club back on its feet is to have very specific and defined goals," Thomas said.
Your most important goal is to fix your health club. Begin by writing an action plan. Next, do an operational analysis for the business. Then come up with a recommendation for improvement. Every situation is unique.
