Our industry is still primarily a small-business venture, and the majority of club operators expect the economy to negatively affect them this year, according to initial results from the first CMETO Independent Club Survey. I conducted and published results of the 12-question online survey last month using responses from 271 North American clubs, varying in size from less than 500 members to more than 5,000 members.
In general, the survey shows that approximately 55 percent of clubs are less than 20,000 square feet in size (the small club sector). Thirty-five percent are less than 10,000 square feet (mini-clubs). Twenty-eight percent are between 20,000 and 60,000 square feet (the middle market). Only 17 percent exceed 60,000 square feet (the large club segment).
As far as club members go, 24 percent of clubs have less than 500 members, 18 percent have between 500 and 1,000 members, 27 percent have between 1,000 and 2,500 members, 19 percent have between 2,500 and 5,000 members, and 12 percent exceed 5,000 members.
The survey showed that 36 percent of respondents report less than $500,000 in gross annual revenues, 23 percent have between $500,000 and $1 million, 20 percent have between $1 million and $2 million, 11 percent generate between $2 million and $4 million, and 10 percent have more than $4 million.
What are club membership numbers showing? Thirty-three percent of respondents say they had a net membership loss in 2008, 34 percent reported that membership stayed the same in 2008 as in 2007, and 33 percent reported growth in net membership. When it comes to new membership sales, 39 percent of respondents say they sold fewer new memberships in 2008 compared to 2007, 30 percent sold the same number of new memberships, and 31 percent reported selling more new memberships.
This translates to 33 percent of respondents reporting making a healthy profit on operations in 2008, 21 percent making a profit but not as great as in previous years, 23 percent reporting breakeven operations and 23 percent reporting a net loss for 2008.
So what do these numbers tell us? About one-third of clubs have less than 10,000 square feet, and more than five out of 10 facilities have less than 1,000 members. Two-thirds of clubs suffered no growth or net loss in memberships in the past year, nearly 70 percent of clubs are selling less or the same number of new memberships as in previous years, and almost half of health club operators are making no money or are losing money on operations.
To determine some subjective findings, I asked three opinion questions about the economy, competition and operators' outlooks. Seventy-eight percent of club operators say that the economy will have either some negative effect or a large negative effect on our industry in 2009, 15 percent say there will be no effect and 7 percent say that the economy will have some positive effect on their businesses. Forty-seven percent say about the same number of clubs will exist at the end of the year as at the beginning, 36 percent say there will be fewer facilities and 17 percent say there will be more clubs.
Will 2009 be a make or break year for club operators? Sixty-nine percent of respondents say no, and 31 percent say yes.
A reality check has finally imposed itself upon the health and fitness industry. En masse, facility operators are paying attention to long-neglected member attrition statistics. Although they are yet to all-out embrace the concept of creating ancillary revenue sources, they are cognizant that the writing is on the wall regarding membership growth in a flailing economic atmosphere. Based on my conversations with dozens of owner-operators last fall and early winter, club owners will pay more attention to programming, staff training and software solutions than ever before, while curtailing heavy expenditures on equipment.
Recessions have a way of bursting bubbles. Usually, a prolonged economic slump sobers idealism and balances marketplaces of every kind. Our industry is no exception to this age-old rule. I believe 2009 will be a year of reckoning.
Michael Scott Scudder operates MeetingZone, an online-based consulting and training service. He can be contacted at 505-514-0294, on Skype at michael.scott.scudder or by email at [email protected].