Mid-Priced Health Clubs Are the Focus of a Bloomberg Article on Debt

Boston Sports Clubs
(Photo by Stuart Goldman.) Town Sports International, which operates clubs under the Boston Sports Club brand among others, can delay a $194 million loan maturity date if it completes its planned acquisition of Flywheel, according to Moody's.

For years, the fitness industry has seen how mid-priced health clubs are getting squeezed by low-priced clubs, luxury clubs and boutique studios. If you are a mid-priced club, you likely have seen that firsthand. A recent Bloomberg article highlighted how this trend is affecting two of the largest mid-priced brands in our business—Town Sports International and 24 Hour Fitness.  

Town Sports is a public company that owns New York Sports Clubs, Boston Sports Clubs, Philadelphia Sports Clubs and Washington Sports Clubs among others. The company has faced financial difficulties as far back as 2012. In fact, Town Sports CEO Patrick Walsh was originally an active investor making waves about turning around the company and then was voted onto the board in 2015 before eventually becoming the CEO.

Town Sports recently began purchasing other brands in the industry, including Lucille Roberts Health Club, Total Woman Gym + Spa and TMPL, a gym by David Barton. Town Sports’ most recent purchase was of FlyWheel. 

The other mid-priced brand mentioned in the article was 24 Hour Fitness, which Margaret Taylor of Moody’s Investors Service said in the story “carries too much debt for what it earns.” An automated check-in and sign-up system had a “rocky debut,” and membership declined from 3.5 million in the third quarter to 3.4 million at the end of the fourth quarter, she added.

24 Hour CEO Tony Ueber offered the following statement to Bloomberg refuting the article's angle that mid-priced clubs are in trouble: “We see a tremendous opportunity in the mid-tier that hasn’t yet been realized. As a result, we are in the process of transforming our business model and making the necessary investments to firmly establish a leadership position in the industry.”

The article contrasts these two brands with Planet Fitness on the low-priced side of the business and Equinox on the high-end side.

Check out the full article here and then let us know what you think about the future of mid-priced clubs by commenting using the comment button.

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