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Scud Missile

There are certain instances in a profession when you realize you are in a place where you belong, when you are at the right place at the right time. When I was a full-time sportswriter and I was covering a big game, I had that kind of feeling.

I had that feeling again on Wednesday after I first arrived at the Club Industry show and headed to Michael Scott Scudder's session entitled "Growing Your Business in Tough Times—Recognizing Where You Are and What to Do." These are trying economic times, and I went to find some answers in this session.

Scudder gave a grim picture of the club industry today. Consumer confidence is at a 20-year low, he says, and the recession we are in reminds him of the recession of the early 1990s, when the industry lost 9 percent of its clubs and 10 percent of its members.

Scudder rattled off some numbers based on his own personal survey of clubs. These aren't IHRSA-like figures, so take them for what they're worth, but they do come from a guy who's been in the business for more than 30 years and cares deeply about the direction the industry is going.

This year, new membership sales are down 5 percent, cancellations and non-renewals are up 20 percent, and ancillary revenues from sources such as program sales and personal training are down 15 percent, Scudder says. Of those surveyed, 85 percent say they are getting fewer walk-ins and call-ins from advertising than ever before, and 60 percent are considering pricing incentives to boost business for the rest of the year.

"We're not getting the number of members that we've been depending on," says Scudder, who thinks the industry has a more than 40 percent attrition rate.

In other survey findings, Scudder says only one in three clubs say they are doing better this year than last year, 35 percent say they are doing about the same, 18 percent say they are doing worse and 12 percent say they are "not sure." (Scudder has a problem with that last group, by the way.)

With the long recession ahead, Scudder predicts that a lot of clubs will go out of business, clubs in general will find it more difficult to borrow from banks, and non-profit projects will be put on hold. Scudder says there will be 5,000 fewer fitness facilities by 2009, and that will actually be good for the industry, since he believes the market is already saturated.

Scudder read a statistic in which every 9 seconds in the United States, someone turns 50, and that there will be 37 million people who will turn 50 in 10 years. Scudder says the industry is not doing a good job attracting and retaining this market.

There are some opportunities that can help all fitness facilities succeed during the recession. Rather than focus on membership sales, clubs should focus on member conservation. Methods to increase member referrals can be implemented and can reduce advertising costs. Scudder cited an IHRSA statistic that says 42 percent of a club's revenue goes into payroll and payroll taxes. The solution? According to Scudder, clubs need to cut back on staff, whether they are sales people, people at the reception desk or group exercise instructors who have fewer than 10 people in their class.

Clubs also need to study their demographics and marketplace better, change the pricing and the programs in their clubs, adapt to the industry, re-position the business and seek niches, Scudder says. When it's all said and done, it comes back to providing better customer service, or as Scudder puts it, "human service," and that means shaking hands with every person who walks through the front door.

"It is time to wake up," Scudder says. "The recession will wake you up."

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