Boutique Clubs Make a Sustainable Case for Themselves

Boutique clubs such as Ruff Fitness in Hagerstown MD are causing bigbox clubs to make some changes Photo courtesy of Ruff Fitness
<p>Boutique clubs, such as Ruff Fitness in Hagerstown, MD, are causing big-box clubs to make some changes. <em>Photo courtesy of Ruff Fitness.</em></p>

Boutique fitness clubs are everywhere these days. In fact, boutiques made up 21 percent of the club market in 2013, according to IHRSA's 2014 Health Club Consumer Report. Their proprietors are beginning to sense a trickling up, of sorts, on the operations of big-box gyms. From an increase in niche equipment and a wider array of group exercise classes to membership options and marketing, larger club operators are borrowing bits of wisdom from boutique models.

The word "boutique" conjures many images. Smaller than average? Surely. Sophisticated? Perhaps. Specialized? Definitely. More expensive? That's often true, too.

Dave Ruff is the co-owner of Ruff Fitness in Hagerstown, MD, which covers about 2,000 square feet and has eight trainers. Boutique clubs differentiate themselves from big-box clubs by being able to offer more individual attention and a greater sense of community, Ruff says. When customers sense those differences, he says, they will happily pay more for it—regardless of their income.

"At first glance, you might think [a boutique club attracts] wealthier people, but that's not the case," Ruff says. "You create a tremendous amount of value, and when something's valuable, the price is not a big deal."

A boutique club—thanks to everything from higher monthly dues, lower overhead or less rent for a smaller space—may need only 500 to 600 members to be profitable, whereas a big-box club needs 5,000-plus members to keep things afloat, says Sean Squillaro, owner of the 350-member, 7,000-square-foot Vigorous Fitness Clubs in Middle Village, NY.

Squillaro likens Vigorous to "sexy" gyms like David Barton Gym in New York, just less expensive. Squillaro charges $89 per month with little resistance to the price.

"Things are going to change in the industry for the better for us," he says. "People still want to exercise in a really nice club."

Squillaro says boutique clubs are a different sensory experience, too.

"Every Retro Fitness looks the same," he says, "whereas we have brick walls, plush couches, velvet chairs, candles—all right around equipment."

Josh Leve, co-founder and president of the Association of Fitness Studios, says boutiques are more prevalent in major metropolitan areas such as Boston, Chicago, Miami and New York. Those also happen to be places where people can and will pay more for their ideal workout, he says.

Despite the focus on boutique clubs differentiating from big-box gyms, Ruff does not see larger clubs as competitors, but rather as a way for his clients to supplement their fitness routines.

"People who train with us also belong to Gold's or the YMCA," he says, "so they can go in on the five days a week they are not training with us."

To draw and keep members, however, boutique club owners must spend an inordinate amount of time on marketing. Marketing is the hardest part about being a boutique fitness club owner, says Squillaro, whose two decades of industry experience include running a World Gym in Manhattan.

"It's not a matter of opening up your doors anymore," he says. "If you don't market, you're going to go out of business. And you don't have the same cash flow as the big-box clubs, and [big-box clubs] have more renewals. But I don't feel like we are beating up on the bigger clubs—there's still a market for that."

Conversely, Leve says, personal trainers at boutique gyms quickly become brands—also known as walking marketing campaigns.

"Much of the boutique business will rely on word of mouth and partnering with neighboring businesses," he says. "Some don't spend anything on marketing."

Slow but Steady Change

A March 2014 report from IBISWorld noted that the United States now has 85,000 locations for personal training, yoga and Pilates that produce a combined $17 billion in annual revenue.

"Those are huge numbers," Leve says. "It's important to realize just how big this market has gotten."

Big-box clubs have certainly taken note of these numbers. The mass appeal of intensely personalized workouts and tighter trainer-client relationships has spurred some larger outlets to inject newness into their offerings.

"The big-box gyms are trying to copy what we do in the studios, from bands and kettlebells to ropes and dumbbells," Ruff says, "and there's a push toward incredible service and incredible training."

Some national chains also are beginning to loosen their grip on contracts, in hopes of lowering the barriers to entry that so few boutique clubs have.

They're losing people to cancellations," Ruff says, "so I started looking at why that all takes place, and the No. 1 reason is the lack of service and people getting lost in the shuffle."

Despite the boutique features such as plush couches and candles, bigger clubs have yet to see the merits of changes such as lower lighting and aromatherapy, Leve says. Instead, he says, more macro changes are taking place. Instead of one large, open-concept space, for example, some clubs are creating smaller, more minimalistic rooms set aside for group cycle classes or kettlebells.

Big-box clubs “are taking a good hard look at retention and creating that perceived value,” Leve says. "They need people to stay and to feel like they belong. If a customer is only coming to the club for spinning, they might look to go somewhere else."

Membership also is morphing at larger clubs. A growing number of big-box clubs are offering pay-as-you-go options—but the fear of losing money with that model is still present in the large club sector, Leve says.

With a predicted rise in disposable income in the next five years, higher-priced personal training will see a greater uptick, according to the IBISWorld report. That could add fuel to the fire of boutique club growth and sustainability, Ruff says. In addition, self-starters who are tired of working for a more corporate gym company may see this growth as an opportunity to work for themselves, create their own hours and really get to know their clients.

However, Leve urges caution to anyone planning to make the jump to boutique club owner.

"It takes quite a while to get established," he says. "[Smaller club owners] think their clients are never going to leave them, but they do."

Even though they are surrounded by big boxes with their bigger spaces, bigger marketing budgets and more name recognition, boutique clubs are performing well on the whole, Leve says.

"We wouldn't be seeing growth in this market if they weren't," he says. However, he adds that the jury is still out on whether boutique clubs have better retention rates, and not enough research is available on how often they go out of business.

Squillaro is optimistic, though, banking on devotees raving far and wide about their boutique experience.

"You want members who will talk about your club all the time, every day," Squillaro says. "You walk into [our club] and it smells like cinnamon. You walk into the YMCA and it smells like sweat."

 

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