Considering the precarious financial state of the second-ranked club company on our list this year, “fiscally fit” may not be the way some people would describe health clubs these days. However, the majority of clubs on Club Industry's annual Top 100 club list report increased revenue for 2006. For many of them, last year was a good year for continued growth and expansion.
Some of you may have issues with certain clubs making the list, but as we remind our readers every year, the listed clubs are not necessarily the best-run facilities in the industry or the facilities that serve their members best. These companies made the Top 100 list for one simple reason: revenue. Revenue is the most measurable factor by which to compare and rank companies. This kind of ranking offers people inside and outside the industry one measure of the fiscal fitness of the business.
The company that ranks above the rest this year is a familiar name. 24 Hour Fitness, San Ramon, CA, once again tops the Top 100 list, reporting 2006 revenue of $1.21 billion. This compares to the $1.12 billion in 2005 revenue it reported last year. The increase came in a year in which the company installed a new CEO and grew its club numbers by more than 35, including clubs in Asia. In October, Mark Mastrov, founder of 24 Hour Fitness, moved from the CEO role to the chairman of the board position, and Carl C. Liebert III became CEO and a member of the board.
“We continue to see tremendous growth potential, both domestically and in Asia — and it is the right time to bring in an experienced leader who will help us continue to execute on our long-term business plan,” Mastrov said at the time of the move. “Carl brings a wealth of experience in driving both new business growth and same-store sales at customer-focused, multi-store businesses.”
On the domestic front, one of the more than 35 clubs that the company opened this year was 24 Hour Fitness Shaq Sport in Pembroke Pines, FL. This club was the second in a series of signature clubs opened by the company and NBA star Shaquille O'Neal since July 2004.
24 Hour Fitness continues its expansion, listing 14 states as home to at least one of its facilities. This year, the company expects a 12 percent growth in revenue as it moves into the competitive New York City market.
Despite its financial troubles, Bally Total Fitness, Chicago, still reported the second-highest revenue in the industry at $1.059 billion for 2006. This number is a 6 percent increase over 2005 revenue. The company has been delisted from the New York Stock Exchange because it was trading for under $1, it delayed its 2006 financial filings with the Securities and Exchange Commission until late last month, and it announced it would be filing for Chapter 11 reorganizational bankruptcy pending approval by its noteholders. In the meantime, the company is seeking a new CEO after Barry Elson stepped down from that position earlier this year, and the company faces a threatened lawsuit from its second-largest stockholder. (Read more details about the Bally situation in our cover story for this issue.)
On the other end of the spectrum, one of the rising stars in the public arena for the fitness industry is Life Time Fitness, Eden Prairie, MN, which is third on the list for the third year in a row. The company's building spree gave Life Time 60 clubs at the end of 2006 and bumped its 2006 revenue to $512 million from $390 million in 2005. The company has come far since it went public in 2004. In the 2005 Top 100 list, which was the year Life Time's 2004 revenues were reported, the company was at $312 million and 41 clubs.
The most recent company to go public in the industry, Town Sports International (TSI), New York (which had its initial public offering in June 2006), remains in fourth place despite operating 149 clubs to Life Time's 60 clubs. TSI's 2006 revenue came in at $433 million in a year in which its former chairman and director, Mark Smith, resigned. TSI CEO Robert Giardina remains in that position, adding board director to his title. Chief Development Officer Alexander Alimanestianu became president of the company.
The company has continued its stronghold in the Northeast with a regional clustering strategy focusing on residential and commercial neighborhoods. The strategy is to surround members with clubs. TSI operates clubs under the Boston Sports Clubs, New York Sports Clubs, Philadelphia Sports Clubs and Washington Sports Clubs brands.
Club Corp., Dallas, jumped to fifth place this year due to an expansion of the type of clubs that the company included in its self-reported 2006 revenue on its Top 100 form. Last year, the company reported 2005 revenue from its fitness-only clubs. This year, the company reported 2006 revenue from its 20 fitness-only clubs and its golf and country clubs that include fitness facilities. The company was purchased late last year by KSL Capital Partners LLC, a private equity firm. At the time, the new owner announced $150 million in capital improvements for the clubs during the next two years.
Club Corp.'s jump bumped Wellbridge, Denver, to sixth place, a position it may have occupied regardless since its previous owners — an investment firm — sold the company's Minneapolis and Florida operations to Life Time Fitness prior to selling the remaining clubs to the company's management team. That team includes Ed Williams, CEO, who says that if the revenue from the clubs they had in 2006 was compared to the 2005 revenue from just those same clubs, the company would show a 10 percent revenue increase this year. He attributes that growth to membership sales and profit center growth such as personal training and a large children's component in the clubs. He says he's also seen an increase in tennis revenue.
Another noteworthy appearance on the list is Boston-based Millennium Partners Sports Club Management, which purchased six clubs from the Sports Club Co. late in 2005. Millennium ranks seventh at $102 million while The Sports Club Co., Los Angeles, drops from 15th place last year at $56.2 million to 18th place this year, despite increasing revenue at its four remaining clubs to $59 million in 2006.
Western Athletic Clubs, San Francisco, ranks eighth and stays constant at $97 million despite selling its Seattle clubs last year. Spectrum Athletic Clubs, Los Angeles, ranks ninth at $91 million. Sport & Health Clubs, Vienna, VA, drops to 10th place from eighth place last year despite posting a respectable $84.3 million in 2006 revenue.
Two other noteworthy moves on the list are those by Lifestyle Family Fitness, St. Petersburg, FL, and Peak Fitness, Charlotte, NC. Lifestyle Family Fitness increased its 2006 revenue by 50 percent, propelling it from 16th on the list last year at $55.3 million to 11th on the list this year at $80.8 million. Peak Fitness reported a 62 percent revenue increase from 2005 to 2006. This year, the club company ranks 37th on the list at $24.5 million, a huge jump from its 2006 ranking of 54th. The company was certainly helped by its purchase of 13 clubs and the opening of another seven clubs in 2006.
Despite the moves of these big players in the industry, a few big players are missing from this year's list. Probably the biggest missing companies are Gold's Gym International, LA Fitness and Equinox. The last two have been private about their numbers for years, never appearing on our list. However, Gold's Gym International, which moved its headquarters to Dallas last year, had appeared on our list until this year. We had estimated their numbers for the past two years but chose to remove them from the list this year rather than estimate again.
Our hope is that next year, the list of missing companies (see list on this page) will be much shorter as more club owners see the value of reporting their revenue as a way for companies inside and outside the industry to gauge the fiscal fitness of the health club business.
The Missing
The following clubs would likely qualify for the Top 100 list, but because they either have not responded to our requests for their revenue numbers or because they have requested not to be listed, they are not included on this year's list. However, they are still major players in our industry when it comes to revenue.
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Barton Palmer dba World Gym, Orlando, FL
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Cedardale Inc., Haverhill, MA
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Champion Fitness Inc., dba Bally Total Fitness, Syracuse, NY
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Chicago Athletic Association, Chicago
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Courthouse Athletic Clubs, Salem, OR
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Equinox, New York
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Gold's Gym International, Dallas
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In-Shape Health Club Inc., Stockton, CA
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Jewish Community Center, Rockville, MD
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Jewish Community Center of St. Louis, St. Louis
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LA Fitness, Irvine, CA
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Lifebridge Health and Fitness, Baltimore
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Lucille Roberts Health Club, New York
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Meridian Sports Clubs, Novato, CA
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PRO Sports Club, Bellevue, WA
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Racquet Club of Memphis, Memphis, TN
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SIM Investment Corp. dba The Right Stuff Health Club, San Jose, CA
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Shapes Family Fitness Inc., Tampa, FL
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Wheaton Sports Centers, Wheaton, IL
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Women's Workout World, Chicago
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Workout 4Life Health Clubs, Vista, CA
Purchase the 2007 Top 100 on this page: http://fitnessbusinesspro.com/2007Top100/