The Top 100 Health Clubs of 2010

Top 100 Health Clubs 2010

No one in the fitness business needs a tally of club companies’ revenues to be convinced that 2009 was a rough year. The industry certainly encountered the most difficult economic year in its history.

That fact is reflected in this year’s Top 100 Clubs list, which you can view in the attachment at the end of this story. Our annual list ranks club companies by revenue in the previous year. It is not meant to rank clubs based on quality or service.

Thirty-six club companies reported lower revenues for 2009 than they reported for 2008. We estimated a 4 percent decrease for another 11 companies from whom we did not receive forms this year but for whom we had self-reported numbers last year.

The good news is that despite the record number of companies with lower 2009 revenues, the decreases were generally in the single digits, compared to other industries where revenue decreased more steeply. It was much harder for owners to increase revenues in their core businesses last year, and because the economy did not allow many club companies to add new facilities in 2009, operators found it more difficult to offset the losses in their core businesses.

24 Hour Fitness, San Ramon, CA, continues as the top club company with $1.325 billion in revenue. LA Fitness, Irvine, CA, ranks second with $1 billion. LA Fitness added more than 50 sites last year—a growth rate of about a club a week that few companies in the industry can match.

LA Fitness and Equinox, New York, which ranks No. 6 at an estimated $344 million, are on the list for the first time, not because they never qualified before, but because we previously were never able to make an accurate estimate on their revenue. This year, we received what we think are reliable estimates, so we’ve included them on the list.

Equinox, which is owned by real-estate company Related Companies, opened five clubs in 2009, but it is better positioned for growth this year after getting a new investor in Leonard Green & Partners and going through a debt refinancing of $425 million.

The top five continues with Life Time Fitness Inc., Chanhassen, MN, at No. 3 with $837 million, ClubCorp., Dallas, at No. 4 with $812 million, and Town Sports International, New York, at No. 5 with $485.4 million.

Capital Fitness, Chicago, came in No. 7 on our list for a year in which it experienced much growth with its XSport clubs. The company grew revenue by 17 percent, increasing from $115 million in 2008 to $134 million in 2009. Much of the growth was from the addition of three clubs.

Planet Fitness, Newington, NH, increased revenue by 31 percent, mostly due to the addition of three corporate facilities and 58 franchised facilities. It ranks No. 8 this year with $129.5 million.

No. 9 was Millennium Partners Sports Club Management, Boston, at an estimated $110 million, while No. 10 was Western Athletic Clubs, led now by Matthew Stevens, at $107.5 million, a 2 percent increase from 2008 revenue.

After Chapter 11

The biggest name left off the list this year is Bally Total Fitness, Chicago. Bally did not report its numbers to us this year. Because the company emerged from Chapter 11 last year and closed or did not renew leases on several clubs, we decided estimating 2009 revenue for the company was unwise.

The numbers for Crunch, New York, calls for some explanation, as it also emerged from Chapter 11 last year. In the process, Crunch dropped from 30 clubs to 19 as it moved out of the Chicago and Atlanta markets. That explains much of the 22 percent revenue decrease for the company, which dropped from No. 13 last year at $84.5 million to No. 20 this year with $65.7 million.

But Crunch’s management has big plans for the future. Already this year, the company has acquired two clubs in the San Francisco area. Plans are for one to two more acquisitions by the end of the year.

In addition, Crunch has a new, low-priced, franchised club option. The first one will open in August in Lake Forest, CA. The second will open in September in the Portland, OR, area.

Although Curves International, Waco, TX, did not file for Chapter 11, it is another company missing from the list this year. The one-time women-only franchise sensation has seen its U.S. franchised location numbers drop from 7,748 in 2007 to 5,208 in 2009, according to the company’s franchise disclosure document. Curves President Mike Raymond told The Wall Street Journal that the decrease was an intentional effort to rid the company of franchisees who bought a location for the wrong reasons.

After we compiled the Top 100 Clubs list, we received details that Curves’ 2009 revenues were $84.1 million, which would have put the company at No. 15 on our list. That compares to $128.7 million in 2008.

On the Up Side

Being in the club management business seemed to be a good thing in 2009 as both Midtown Athletic Clubs/Proactive Partners and PlusOne saw increased revenues for the year.

Midtown Athletic Clubs/Proactive Partners, Chicago, grew from $70 million in 2008 to $83 million in 2009, a 19 percent increase that placed it at No. 15 on the list. The company added five clubs to its management side of the business (Proactive Partners), accounting for much of the growth, according to Steven Schwartz, CEO. The revenue growth for the Midtown clubs without Proactive Partners was just 2 percent to 3 percent.

In a recession, people who have fitness centers but whose primary business is not fitness, have to take a long, hard look at noncore businesses, Schwartz says, which often results in them finding someone else to run that business for them. Proactive Partners was positioned to take advantage of that.

The company also took advantage of having cash on hand, low levels of debt and strong lending relationships to follow through on $7 million to $8 million renovations at many of its Midtown clubs last year. The spending on capital and marketing is being rewarded this year with more member referrals and better retention rates, Schwartz says.

The renovations were important to Schwartz to ensure his clubs were positioned in the upper end to defend the company’s price points and to make sure Midtown had the best product in that price point, Schwartz says.

“We don’t want to lose sight that even though the market is tough, if we slide back to look like everyone else, then our price is going to be under pressure,” he says, adding that the company did not cut dues at any clubs but did increase them in a few clubs.

PlusOne, New York, had a 13 percent revenue increase, growing from $39.5 million in 2008 to $44.8 million in revenue in 2009. That placed the company at No. 26 on our list.

Tom Maraday, senior vice president of PlusOne, attributes the club management company’s good year to a combination of bringing on new management contracts and the acquisition of Time Out Services, both of which increased the number of managed facilities for PlusOne from 79 to 112.

“There were a number of facilities that were planned and under construction prior to the recession, so the companies continued to open these facilities despite the economy,” Maraday says. “In general, most companies that managed their facilities internally or with other management companies looked closely at how they could cut costs with other companies but very few actually made a change.”

The recession led PlusOne to be more disciplined in its spending and more cautious in adding overhead, Maraday says.

“Ultimately, we were able to leverage an existing infrastructure to support our growth and maintain a high level of service delivery for our clients,” he says.

He anticipates that revenue in 2010 will be slightly higher as will the number of facilities under management.

“We think that the turnaround is starting to happen now but very slowly,” Maraday says. “We don’t expect to see significant turnaround until 2011 when budgets are loosened and members feel more confident in their job status.”

Growth continued at The Rush Fitness Complex, Knoxville, TN, a company with 19 clubs that has been moving up the Top 100 list for the past few years. This year, the company ranked No. 29, coming in at $40.7 million in 2009 revenue compared to $36.3 million in 2008.

“The majority of our clubs are less than three years old, and the dues base at these newer clubs was still ramping up in 2009,” Mike Manning, CFO at The Rush, explains. “This will continue throughout 2010.”

To get through the recession, Manning says that management and the staff worked hard and focused on what they could control—in particular, their attitude.

“We’re back in growth mode with two clubs in pre-sale, and we plan to have several more clubs open before year’s end,” Manning says.

The company has a 10,000-square-foot club in pre-sale in Dalton, GA, expected to open in October and a 6,500-square-foot club in pre-sale in Winston-Salem, NC, expected to open in September, Manning says.

Personal training sales through May were up about 24 percent over last year for The Rush, which also has had an increase in new member units in many of the older clubs and attrition trending more toward normal, he says.

Aquahab, Cherry Hill, NJ, came in at No. 52 on our list with $16 million in revenue, an increase from $14.1 million in 2008 when the company ranked No. 60. That’s a 13 percent growth with the addition of two clubs in 2009 to bring the company’s total to six. Matt Littman, partner, says the company plans to acquire one club this year and expects a 5 percent growth in revenue in 2010.

“I had to approach 2009 differently than past years,” Littman says. “We have always watched our controllable operating expenses and are mindful of reducing them without affecting value to the members.”

Littman looked at ways to reduce energy consumption, which led to the company installing motion sensors around the clubs, replacing HVAC filters more often and installing programmable thermostats. Littman also expects a 15 percent electric bill decrease with the installation of energy suppression boxes on all of the electric panels.

Management also re-evaluated all employees’ production and roles to see who could be more effective in their positions. This resulted in some positions being eliminated, and other employees taking on more responsibilities, he says.

Aquahab’s walk-in traffic slowed considerably in 2009. To offset that, Littman looked at underutilized space and converted the indoor basketball courts into portable baseball practice areas.

“We began an indoor baseball program, which has been wildly successful in its first 18 months,” Littman says. “We offer private instruction from a former major-league player, clinics, team practice, and hitting and pitching clinics.

Aquahab’s personal training business did well in 2009, Littman says. He added other non-dues offerings to help increase the non-dues revenue from 31.4 percent of sales in 2008 to 40.4 percent of sales in 2009. Those offerings include diet and nutrition packages, swim lessons, team fitness challenges and corporate sponsorships to local businesses.

“The biggest move of the year was merging one of our underperforming facilities with our competitor down the road,” Littman says. ”We were going head to head for 10 years with another fitness center, and the area began to become saturated with fitness centers of all kinds. This along with the economy meant less and less of a piece of the pie for everyone.”

The merger took eight months of negotiating, but it eventually led to a $2.5 million renovation of the building in which the competitor was located, which was a better location, Littman says. The merger led to twice the membership and one expense line plus the elimination of the company’s main competitor.

“We turned a tough situation into a new beginning and have reaped the rewards from this,” he says.

Littman also invested in his other clubs, including a $700,000 renovation of another location.

“The fitness business is definitely capital intensive, but you need to stay fresh to compete with the big box fitness centers that continue to pop up around us,” Littman says. “If you get stale, members begin to look elsewhere. We have always believed that change is good. The recession is a constant reminder to us that we can never get comfortable. It has been a very tough three years navigating through all of the economic uncertainly and making changes that we calculated and hoped they pay off.”

On the Down Side

Companies that experienced a decrease in revenue in 2009 included The Sports Club Co., Los Angeles. The Sports Club Co. had a 14 percent drop in revenue, falling from $63.5 million in 2008 to $54.5 million in 2009 revenue. The company, which ranks No. 23, held steady at four facilities.

“I do think that in 2009 for the first time ever—after going through three or four recessions in our 30-plus-year history—we did feel the recession, and it was the driver for our revenue decrease in 2009,” says Nanette Pattee Francini, president and co-founder of the company.

However, Francini is focused on 2010.

“We have had an amazingly good first half 2010,” Francini says. “Our new memberships are up 1,500 members since first half 2009, and our attrition is down 1,214 year-over-year to date. Percentage-wise, attrition is down a point as well, and we expect the trend to continue throughout the year. The fact that we have now regained all we lost last year (membership-wise) bodes well for the future and, of course, builds greater dues revenues each month.”

To accomplish these changes in 2010, the company adjusted its initiation fees.

“We don’t play with our dues because they are our bread and butter, but we are able to adjust initiation as needed to lessen the barrier to entry,” Francini says.

The company’s ancillary services—private training, food and beverage, spa—are also doing well this year, Francini says.

Weymouth Club, Weymouth, MA, also saw its revenue fall in 2009, dropping from $12 million in 2008 to $9.7 million in 2009 (and dropping its ranking from No. 68 to No. 71). However, the main reason for the drop in revenue was that the company closed one of its two clubs.

“We decided to sell the smaller club so that we could concentrate on growing our main club and use the cash to do over $1 million in improvements,” says Rich Synnott, executive director. The smaller club generated just under $2 million. The main club will do about $10 million this year, he says.

This year, Weymouth is at record-level for memberships, which means an increase in membership revenue. Non-dues revenue also is growing, much of it due to new programs, such as a cheerleading and a dance program. The club also now has a registered dietician, which has helped increase revenue in the club’s nutrition program.

Personal training revenue continues to grow by double digits, Synnott says.

“Especially helpful is our group personal training, which now represents 25 percent of our personal training revenue,” he says, adding that this growth has not hurt the one-on-one personal training, which has also grown.

Tennis became another area of growth. The club made changes to its tennis pro staff and increased its private tennis lesson business. Management also “recruited” local college tennis coaches and offered the club’s facility for rent to their tennis teams. The Weymouth Club now provides courts for local colleges, such as Boston College and Northeastern, not only for their practices but also for tournaments.

“They fill a lot of our softer times,” Synnott says.

To deal with the recession, Synnott held a retreat for Weymouth’s senior staff in October 2008 to look at all of the club’s pricing and the business model. They focused the discussion on the areas that produce the most profit and how to grow profit there further.

They also focused on ensuring they were priced correctly to provide the best value in every area by looking at things such as marketing six-week programs instead of eight-week programs to non-members. And they discussed opportunities to generate new programming, especially as it related to filling soft times, which is where the cheerleading, dance and college rental programs came about.

Greater Midland Community Centers saw a 16 percent decrease in revenue, dropping from $9.2 million (and a rank of No. 78) to $7.7 million in 2009 (and a rank of No.80). The nonprofit multipurpose organization in Midland, MI, was hit by issues related to donations, says Chris Tointon, executive director.

“The United Way gift that we got was reduced as a direct result of the economic situation and reduced giving,” Tointon says. “The other factor was capital gifts. This was the first year we had no requests for capital giving of physical plant improvements.”

To keep revenue from dropping further, Tointon reduced spending and shrunk full-time staff through attrition. He also tried to entice people into the club for their vacations.

“We focused on low-cost ‘staycation’-style packages to keep people local having fun rather than going on expensive vacations,” he says. “We also won Best Tennis Town from the USTA (U.S. Tennis Association). That drove a lot of attention to our tennis center and got people excited who normally aren’t tennis people.”

Even though revenue was lower, Tointon said that Greater Midland’s business actually improved and memberships increased during the year as the organization benefited from some other clubs in town going out of business.

Tointon expects a 12 percent growth in revenue in 2010, mostly because he says capital gifts will be up (even though the United Way giving is expected to be down) and membership is continuing to increase. He also is counting on the new spray park attached to the pool to drive more business.

“I’m seeing signs of strength right now for our local economy, but I think we aren’t the norm,” Tointon says. “Our area is growing in green sector jobs. I expect to see a great January 2011 as people start getting more comfortable with the economy and job expectations. I do see the poor getting poorer, and as a nonprofit, expect that part of the market to continue to get more difficult.”

Despite any hardships in 2009, many of the executives who submitted their forms this year appear to be more optimistic about 2010. The majority of operators estimated that 2010 revenues would be higher than 2009—and many of those estimates were for increases of 5 percent or more. Those increases may only bring club companies back to their pre-recession numbers, but it is at least a start to a recovery.

Missing Clubs

The following clubs and franchisors are large enough to be included on the Top 100 Clubs list, but their owners did not submit a Top 100 Clubs form, and we were not able to find another way to estimate their revenue.

  • The Alaska Clubs, Anchorage, AK
  • Brick Bodies, Baltimore
  • Bally Total Fitness, Chicago
  • California Family Fitness, Vacaville, CA
  • Champion Fitness Inc., dba Bally Total Fitness, Syracuse, NY
  • Chelsea Piers, New York
  • Club Fit, Jefferson Valley, NY
  • Curves, Waco, TX
  • Fitness USA, West Bloomfield, MI
  • Franco’s Athletic Clubs, Mandeville, LA
  • Gold’s Gym International, Irving, TX
  • Healthplex Sports Club, Springfield, PA
  • Lady of America, Fort Lauderdale, FL
  • Lakeshore Athletic Club, Chicago
  • MVP Sportsclubs, Orlando, FL
  • PRO Sports Club, Bellevue, WA
  • SIM Investment Corp., dba the Right Stuff Health Club, San Jose, CA
  • Titan Fitness Holdings, McLean, VA
  • Wheaton Sports Center, Wheaton, IL
  • Women’s Workout World, Chicago

Special Thanks

Thank you to Rick Caro, president of Management Vision, New York, for reviewing the information provided by the club companies and helping with the analysis.

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