As we approach another presidential election year, the "spin doctors" are revving up their engines for another run around the track. And we should be prepared to get blasted with half-truths, non-truths and outright made-up nonsensical factoids. Ditto for the health and fitness industry people who postulate that our business is thriving and has never been better.
Eight years of surveying independent-only fitness facilities plus an 18-month report from nearly 1,600 clubs (January 2014 to June 2015)* show an industry in the midst of a confusing and disruptive consolidation.
As the average membership per club continues its downward long-term trend (the high was back in 1999 at 2,071 members per average club compared to 2014's 1,570), it seems as though owners and managers would be concentrating on retention and ancillary income production to steady the ship. Not so, according to private polls that indicate better than 60 percent of operators still think they need to sell more memberships.
Less than half of reporting businesses have grown their membership sales in 18 months. During the same time, less than half have increased their percentage of retained customers. The average retention benchmark across the broad industry now sits at 62 percent, having fallen from a decade high of 66 percent just three years ago.
One-to-one personal training sales in clubs have definitely topped out from strong growth patterns in 2011 and 2012. Small group training, which has fueled rocketing numbers of studio openings in the past two years, is still trudging along in both for-profit and not-for-profit facilities. Group exercise class attendance increases crested in early 2013 and—though still a healthy part of many clubs' programming—needs a shot of adrenaline and stronger promotion.
Unbundling of memberships is not only a hot topic but escalates annually. Data-based estimates are that nearly 40 percent of for-profit businesses have begun to offer an a la carte membership of some sort to be more competitive and saleable. Though only about 20 percent of not-for-profits have unbundled, rumors are that a couple of major not-for-profit organizations are discussing the possibility.
However, all is not bad news. Significant progress has occurred in generation of ancillary revenues. The industry norm, which stood at 17 percent in 2008, now exceeds 24 percent in the average club. Stated another way, more than half of facilities now focus on predictably profitable sales of supportive programs and amenities. This, in turn, has triggered growth in the percentage of clubs reporting increased annual revenues despite generally declining net membership numbers.
The average pre-tax profit benchmark has stumbled from a decade-high 11 percent of just a few years ago to its present approximate 8 percent. But more business operators are now reporting profit growth, though a consistent one-quarter of clubs operate at bare break even or at a loss.
The outlook is cloudy. While 60 percent of club operators say their businesses will be more profitable in the remaining six months of the year, only 21 percent are optimistic about national fiscal health. Our industry is dependent on consumer sentiment and that is mostly dependent on the economy. We’ll just have to wait and see. How do you feel the industry is doing? Share in the comment section below.
*For access to a copy of this report, email Michael at [email protected].