Club Industry is part of the Informa Markets Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

January 2009 Club Results Are Mixed

OVERLAND PARK, KS -- January was a mixed bag for club operators, according to a handful of club owners and two veteran club consultants that Club Industry’s Fitness Business Pro surveyed.

Many clubs are reporting a similar January this year to last year, according to conversations that consultant Rick Caro, president of Management Vision, has had with club operators. The club owners he spoke with run the gamut — some operate several hundred clubs, while some are smaller club operators, and all are at various price points, he says.

Michael Scott Scudder, owner of Club Management Education & Training Online, says that the consensus from the two dozen club operators he’s spoken with is that January in general was a bit of a disappointment. Many of these operators are multi-club owners from across all three segments of the industry (high-end, middle, low-price). Many of them didn’t reach their sales targets and had sales targets that were down from January 2008. They also did not have higher membership sales in January 2009 than in January 2008.

Both consultants heard that attrition was better this January for many club operators.

“In some cases, they controlled attrition better or maybe non-dues revenue didn’t grow as much as in the previous January, but they made up for it with a net gain in membership greater than the previous year,” Caro says.

Caro adds that some club operators are working harder to “save” people who want to quit by offering them reduced or free memberships if they are having financial difficulties.

Cost cutting that some clubs implemented in the fourth quarter started to kick in this year, Caro says. However, he noted that a lot of club operators are worried about what the rest of the year will bring, even if January was good for them.

Some club operators are still smarting over January numbers. One 21,000-square-foot club operator in New York, who asked not to be named, said that he had a slower January this year than last. In January 2008, he had 67 new members. In January 2009, he had 35. Revenue in January 2008 was $120,000, but this January, revenue was down by $20,000. (He did not offer an attrition number.) Usage of his club was also lower in January this year, with 21,214 workouts compared to 22,328 last January.

Club One, San Francisco, had a slower January this year than last, according to Bill McBride, COO. Although he wouldn’t provide actual numbers, he noted that dues revenue, ancillary revenue (including personal training), memberships and usage were down this January compared to last January. However, retention was up.

“We had net membership gain and saw good improvements on retention. We are cautiously optimistic,” McBride says.

Still other club operators report increases in January. Life Time Fitness Executive Vice President and Chief Financial Officer Mike Robinson told financial analysts in a call Thursday morning on preliminary 2008 results that January memberships were encouraging.

“Although the mix of new memberships continues to put pressure on average dues, we saw a net membership increase of approximately 20,000 memberships compared to the net 10,000 memberships added in January 2008,” he said. “We were ahead of our internal plan on new membership acquisition, and attrition was relatively stable in January 2009, as compared to the last part of 2008.”

Robinson said that Life Time’s fourth quarter revenue was affected by several factors.

“Not only did we see more individual memberships enroll, as compared to couple and family memberships, but we also saw an impact from new lower-priced dues programs, which gained wider acceptance than anticipated,” Robinson said. “The focus of these new dues programs has been on identifying opportunities for certain underserved audiences to more readily establish memberships with us and drive higher membership growth.”

The program with the highest acceptance was a “young professionals” membership plan where individuals ages 26 and under qualify for up to $20 in lower monthly dues. In the fourth quarter, the company’s employees also could refer one friend or family member to join at a reduced enrollment fee, and a $20 reduction in monthly dues per member.

“It was the success of these types of programs that led to very good membership growth, but lower dues growth than anticipated,” Robinson said.

Membership “deals” typically are common in January for many club operators. In late November 2008, Planet Fitness ran a three-day sale in the Boston and New Hampshire market that gained the company 8,000 new members for about 43 clubs, according to company spokesperson John Craig. The promotion was $1 down, $10 per month, and it was promoted mostly on radio as a “got a buck, you’re in luck” campaign. In December, the franchisor ran a weeklong radio/TV campaign in New England (excluding Vermont) and New York for $99 a year that added about 50,000 new members, Craig says.

“The activity inside our clubs is probably higher than it’s ever been,” Craig says. “I don’t think it’s any accident that a low-cost model is really clicking with people right now. It seems like it has extra-special appeal in times like these. Why pay $50 a month when you could pay $10 to $20 a month?”

Scudder says that several Planet Fitness owners confirmed to him that their sales were up. One out of every four sales came from members of other clubs that were more expensive, they told Scudder.

“[Members] were shifting gears because they felt they had to save money,” Scudder says.

Scudder compares the low-price players’ success to that of Wal-Mart, whose sales also increased in January.

Fitness 19 operators also told Scudder that their sales were strong in January.

“One can make a case that some part of the membership marketplace is going to stay with fitness but is going to stay conscious of price,” Scudder says. “I don’t know if that is consistent with club member behavior as much as it is consistent with retail buyer behavior.”

Price consciousness also drove up Curves’ January numbers. The Waco, TX, franchisor had its best January ever in terms of TV and Internet leads, according to spokesperson Becky Frusher. Leads were up 113 percent over this same time last year.

“These are hard leads — either phone calls from TV ads or people who filled out an e-mail request for more information,” Frusher says.

Frusher attributes the increase partly to the company’s January membership offer, which was 50 percent off the sign-up fee and 30 days free. (The offer runs through March 6.) Last year, the company offered 30 percent off, 30 days free and ran the promotion through February. In addition, Frusher says that Curves appeals to older members and potential members, and these people are typically more educated about the health risks of not exercising, so they might be more likely to continue to sign up. She also says that the company’s new CurvesSmart personal coaching technology gives members instant feedback and detailed progress reports showing calories burned, muscles worked and goals achieved, which has appealed to a lot of potential members.

Some regional players also reported a good January. Royce Pulliam, CEO of Global Fitness Holdings, Lexington, KY, which operates 30 Urban Active clubs, says his company brought in 11,795 new memberships this January compared to 9,997 new memberships last January. Cancellations this January ran 5,122 on a base of 169,000 members compared to 5,898 on a base of 126,000 memberships last January.

“So retention was a lot better this year,” Pulliam says.

Usage this January also was higher this year than last at Urban Active clubs, with 670,000 workouts compared to 460,000 workouts in January 2008.

Membership revenue also increased for Urban Active, going from $4.65 million in January 2008 to $5.87 million this January. Personal training revenue increased as well this January, closing at $1.91 million this year compared to $1.52 million last January.

Urban Active ran a membership promotion in January that offered free enrollment fees and free processing fees, but the company did not discount dues.

Pulliam says that this January was better across the board than last January for his company, despite an ice storm during the last week of the month in Kentucky that affected about 15 of his clubs, which were literally shut down due to weather.

“We were pleased with January and could have blown last January away even more if it wasn’t for the ice storm,” he says.

Cliff Buchholz, owner of Miramont Lifestyle Fitness in Fort Collins, CO, also had an increase in new memberships this year. He sold 471 memberships this January compared to 436 in January 2008.

“In addition to that, we sold 124 wellness programs, and our conversion from wellness programs to memberships is over 90 percent,” he says.

The most successful program is Quick Start, or learned exercise. The program costs $149 for an eight-week membership, six weeks of which are with a trainer (a minimum of three days a week for six weeks). Members do group exercise one day, cardio another day and work with a personal trainer the third day.

“We get them involved in the club,” Buchholz says. “They learn what we’re all about.”

Jump Ahead Academy, a 2,400-square-foot children’s fitness and gymnastics academy in Chicago, also had a better January 2009 than January 2008, according to Emilia Cole, who opened the club in September 2007. The academy signed up 198 new members this year compared to 129 last January.

Cole’s membership revenue for the month was down, but she explained that January is typically in the middle of a 12-week session for the academy, so income depends on what date members actually pay for the session. (Rates are prorated.) The Jump Ahead Academy brought in $10,000 this January compared to $11,895 last January, but personal training revenue increased from $240 last January to $1,340 this past January. She’s also increased other ancillary revenue this January from birthday parties, going from $690 in January 2008 to $1,063 this January.

“We are thrilled to see that we continue to grow in a compromised economy,” Cole says. “Since we mainly offer services to children ages 1 to 14 years, it seems that people are not cutting back on the growth and development of their youth.”

Caro attributes some of the success some clubs are seeing to their staffs pulling together.

“People are working much harder and pushing more of the decision making down in their organization and involving more people in the organization to be more accountable and contribute more,” Caro says.

However, that hard work may not be enough to keep all club operators open this year. Scudder anticipates that weak players will close in large numbers this year.

“I think we’re going to see a massive closure of the weaker players, as we’re seeing in retail now,” Scudder says. “There’s going to be no place for [weaker players] to find money. There isn’t any money out there now.”

Scudder adds, “Businesses run on money. If you can’t generate the money from operations, then you’ve got to generate the money from someplace else, and if you can’t generate the money from someplace else, how long can you stay afloat?”

TAGS: News
Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.