A long-time axiom in the health club business is "As goes January, so goes the year." Even though that has not always proven to be true, more often than not, one could bank on it.
I found hope in the numbers reported in my independent limited-audience survey of just under 350 club operators (FBC Surveys January 2015 vs. January 2014). Respondents answered progress questions for 11 key business categories, five of which I highlight here: membership sales growth, membership retention growth, unbundled memberships, ancillary sales percent and net profit percent.
A functional tool is the indicator status of each category. Is it positive, flat or negative when compared to the same time frame in the previous year and against a full-year indicator? This usually helps to establish at least a near-term direction of statistical observation.
The most outstanding double positive (better than both indicator benchmarks) was club operators reporting increases in member retention. January 2015 evidenced 56 percent of reporting facilities having increased retention compared to January 2014 (37 percent) and all of 2014 (32 percent). If this statistic holds true for the entire year, we can expect increased net memberships and profit margins in clubs.
The next noteworthy finding was the averaged overall ancillary revenue percent (often called AR2TR–Ancillary Revenue to Total Revenue), which climbed to a high of 24 percent for the eight years I've been doing the survey. Since ancillary sales normally produce net profits in excess of 20 percent, this statistic indicates that the industry as a whole is getting used to producing sales other than membership, which is an accomplishment, considering highly competitive times, declining membership fees and a still-struggling national economy.
Nearly equally important were clubs reporting increases in membership sales January vs. January (54 percent in 2015 compared to last year's 45 percent and all of 2014 at 48 percent). Often in the past, a January with over half of clubs reporting membership sales gains indicates a strong beginning for the entire industry.
It's interesting that although the number of club operators reporting net profit increases dropped substantially from January 2014 and full-year 2014 results, the averaged overall profit margin climbed 1/10 of 1 percent to a survey average of 8.7 percent.
Perhaps the most perplexing indicator was the number of club operators reporting unbundled memberships. In January 2015 46 percent of respondents said they had unbundled memberships. This is considerably higher than January 2014's 38 percent and full-year 2014 at 36 percent. Consistently for the past five years, more facility operators have "unbundled" their memberships or made them a la carte in efforts to either compete with value-priced clubs in their markets or to reduce initial buying barriers for consumers.
No firm relationship is yet known and documented between unbundling and higher sales, or unbundling and higher profits. Nor is the opposite true. What remains to be seen is full-year results in 2015 and if unbundling plays out in parallel with these categories.
Overall, some promising signs appear in the January 2015 numbers. As the year develops, we will see what happens. Share with me in the comments below how your January went and what you think that means for the full year.