Town Sports International will spend four times more money in the first quarter of this year to promote its lowprice club model as it looks to have 84 percent of its clubs converted to this model by the end of May Photo courtesy of TSI

Town Sports International will spend four times more money in the first quarter of this year to promote its low-price club model, as it looks to have 84 percent of its clubs converted to this model by the end of May. Photo courtesy of TSI.

Town Sports Commits $5 Million in First Quarter 2015 to Promote Low-Price Model

Town Sports International Holdings Inc. (TSI), New York, will spend $5 million in advertising and marketing to promote the move of 84 percent of its health clubs to its premier membership high-value, low-price (HVLP) model, the company announced today. By comparison, TSI spent $1.6 million on advertising and marketing in first quarter 2014.

The large promotional effort will include a four-week Grand Central Terminal interior shuttle "Better gym. Better price" campaign, capturing the attention of more than 13 million subway riders between Times Square and Grand Central. Commuters will also notice billboards at the Lincoln and Midtown Tunnels, Penn Station and on branded trucks driving throughout New York City. Other marketing efforts include a mailing campaign already underway promoting memberships to all residents living within a 5-mile radius of premier membership locations.

At the end of 2014, TSI had 71 clubs operating under its HVLP model. As of late February when the company released its 2014 financial report, 98 clubs had been converted to HVLP and another 19 clubs were operating as passport-only membership clubs. By the end of May, the company plans to have converted 84 percent of its 158 clubs to the HVLP model.

Approximately 25 of TSI's clubs will operate under the higher-priced passport membership model. Memberships under the HVLP model begin at $19.95 per month with initiation fees and offer many of the same services of the company's passport memberships, including group exercise programs and the UXF Zone training.

The increased marketing campaign occurs as the company announced in late February a $16.4 million (3.5 percent) revenue decrease in 2014 compared to 2013. At that time, TSI also announced that its board of directors was evaluating strategic alternatives, including a possible sale of the company, and had retained Deutsche Bank Securities Inc.to assist it in the process. TSI became a public company in 2006.

"We believe the services and amenities in our clubs represent a compelling value for our members," says Dan Gallagher, CEO of TSI, which operates the Boston Sports Clubs, New York Sports Clubs, Philadelphia Sports Club and Washington Sports Clubs. "We are attracting members who want more value for what they are investing in memberships, and we are recapturing market share with this new model."

Gallagher says that the HVLP model gives TSI an advantage over other health clubs because TSI's facilities and services provide members with a better quality experience at an affordable price point than other chains offer.

"Our top of the line equipment, exciting group exercise classes, and our UXF cross training zones are all examples of some of the elements we provide that many others do not," he says.

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