In This Difficult Economy, Truth Hurts


We've had a little inside joke around the office for the past year. Whenever we talk about the economy, we toss in the phrases “in these challenging times” or “in this difficult economy” as often as we can. We do this because we've noticed that those phrases seem to be used in every story we read about the economy.

Perhaps the economy, as “they” say, is getting better. But one thing that I noticed during this recession is that some people in the fitness industry don't want to fess up to the fact that “these challenging times” have affected them. Some individuals, companies and organizations don't want to share the hard truth about how the recession has affected individual companies or the industry as a whole.

For more than a year, we've interviewed various manufacturers about how they are faring. Few of them have admitted to more than a minor blip in their sales. However, we all know that manufacturers have experienced more than a little blip. Many have laid off employees and cut employees' pay. At least one filed for bankruptcy, and one company is even exiting the commercial fitness business altogether.

The public equipment manufacturers have not been able to hide their results. Because they have to report their earnings to shareholders, we've all seen that the majority of public manufacturers have seen a dip in their commercial sales.

In addition, the Sporting Goods Manufacturers Association recently released a report showing that for the first time in 20 years, commercial fitness equipment sales dropped in 2008, and a further decrease is anticipated for this year. (See story)

Some health club companies can hide their earnings. Trying to get them to report their 2008 revenue for our annual Top 100 list this past summer was more torturous than in past years. Few wanted to admit any revenue drop. However, 16 owners did admit to revenue decreases, compared to eight the previous year. I can only imagine what it'll be like next summer when I ask for 2009 revenue.

Our two public club companies have to be forthright with their revenue numbers. Although Life Time Fitness, Chanhassen, MN, had increased overall revenue in its second and third quarters this year, its same-store revenue was down in the first three quarters. Town Sports International, New York, experienced increased overall revenue in the first quarter only, but decreased same-store revenue for the first three quarters.

So that's why I chuckled slightly when I received press releases from the International Health, Racquet and Sportsclub Association (IHRSA) explaining results of its new monthly survey that tracks club revenues. I commend IHRSA for taking on this research, as it is a good gauge for the industry. However, as an association for for-profit clubs, IHRSA obviously wants to put the best face on the results. For example, the release sent to media about the September 2009 survey was headlined “IHRSA Clubs Report Solid Year-to-Date Performance in September.” The release highlighted that clubs showed consistent performance to the same time period in 2008. However, after reviewing the numbers and ignoring the spin, it was clear that all was not as solid as the headline and press release indicated (see same story).

I don't blame anyone for wanting to put a good face on the bad times. I can't say that we haven't been guilty of it a few times, too. But if we're going to pull through, we need to face reality, even when reality hurts.

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