The independent health club industry appears to be in a mixed positive state. Responses to the Fitness Business Council's first quarter 2015 survey of independent health club operators show that a higher percentage of facilities enjoyed membership sales growth, total sales growth, retention growth, increases in group exercise class participation and increases in net profits compared to the first quarter in both 2014 and 2013.
But numbers can mislead. Looking specifically into the annualized member retention percentage tells a tale of average retention now standing at 63 percent contrasted to 24 months ago at 66 percent. Stated a different way, yes more facilities increased retention—but that retention is a full three points below the first quarter retention rate of two years ago. For the average club, this represents a net loss of 50 members or, more importantly, a loss of approximately $30,000 in revenue.
Although more club operators did in fact increase their net profits (total revenues less total expenses), the average net profit percent is down almost 3½ points from the high in first quarter 2013 (11.7 percent). For the average club nationally, that's $35,000 less net profit.
One of the positive signs is the percentage of clubs reporting growth in group exercise class attendance. GEX participation is often a leading indicator of increased member retention. If GEX statistics follow suit for the remaining nine months of 2015, we can expect that customer attrition will be less of a problem than it has been for the past two years.
The percentage of facilities showing growth in one-to-one personal training and/or small group training continues to steadily decline. Just a few years ago, training revenue growth was being experienced by approximately 60 percent of clubs. That number now flounders at the low 40 percent level, and the first quarter showed no turnaround indicators in either category.
Historically, the first quarter has been the best-performing three months of each fiscal year and can be a forerunner for the rest of the year. The first quarter was indeed the best quarter in the "down years" of 2008-2011, but the rest of each year proved mediocre. In 2012, a so-so first quarter was followed by a rebound year with strong across-the-industry retention. 2013's good first quarter was followed by three quarters of down-pricing, lowered retention and profit declines, which continued into the first half of 2014. The final two quarters of 2014 saw some recovery.
The remainder of this year will likely verify or nullify an industry turnaround.
What do you think the rest of the year holds for the independent health club market? Share your ideas in the comment section below.