Fitness Landscape

It is no longer about how much you work out, it is about what’s your routine, where do you work out, what are your goals? The evolution of the industry has seen many fads come and go and is currently again being transformed again with the rise of technology and community.

According to IHRSA, in the U.S., the health club industry continued to grow in 2015. Revenue from health club membership and the total number of clubs all rose from 2014 to 2015. Revenue increased from $24.2 billion in 2014 to $25.8 billion in 2015, while membership improved from 54.1 million to 55.3 million over the same timespan. Club count also grew from 34,460 locations to 36,180 sites in the U.S. The industry is still growing year over year as we see customers engaging in the fitness scene in masses.

The growth is still occurring because consumers are given more options:

  • Budget clubs: Planet Fitness, Blink Fitness, Anytime Fitness and others are seeing growth in membership volume and the number of locations. The uniqueness of this model is that it is priced so low that having a membership at any one of these budget facilities may be one person’s sole gym or another person’s back up gym, for example, when they need to use a treadmill in the winter. These fitness clubs can be found in cities and the suburbs, making fitness available to all at any income level. These units have relatively low buildouts, little amenities and no group exercise classes. These clubs also reside in strip malls and have low rent.
  • Mainstream clubs: LA Fitness, Town Sports (New York Sports Club), Life Time Fitness to name a few. There has been little growth in this segment of the market. These clubs offer the basics plus group fitness classes. Basic amenities such as towels may also be offered. The price of the dues can average around $60–70 per month depending on the market. Value shoppers tend to join these gyms, they offer value with less bells and whistles than the luxury club. These units have moderate buildout costs and don’t tend to be on main and main streets resulting in lower rents.
  • Luxury clubs, this space still remains to be dominated by Equinox. After the acquisition of SCLA by Equinox, they were able to grow their footprint even bigger. Lifetime Fitness is trying to build clubs to compete in NYC with its Life Time Athletic at Sky, but Equinox has a strong foothold in NYC. Equinox is focusing on growing its global portfolio of clubs and its growth doesn’t seem to be slowing down anytime soon. If anything, fitness has become such an important piece of people’s lives that paying $180+ doesn’t seem to phase the frequent user. The Equinox member wants to be seen during the workout, wants eucalyptus chilled towels and has a high value on cleanliness. These studios have high buildouts, with investments in technology and moderate to high rents depending how close they locate to main on main.
  • The boutique studio: Soul Cycle, Barry’s Bootcamp, Orangetheory Fitness are a few that come to mind. This niche offers unique focus i.e. spinning, boot camp, barre, pilates, rowing, TRX training, to name a few modalities, all with a model of high fees, pay per class model and the building of unique “tribes”. The tribe factor has had a unique effect of promoting healthy competition and sticking to the commitment of the workout. Despite the average cost of $30+ at these boutique studios, membership seems to be sticking. Clients are proving that they want to be able to buy into their own time slot, with their favorite instructor and know that they can do this amongst their friends, their community, and their tribe. The investment here is moderate with a relatively small footprint, buildout may not be too expensive but the location may result in high rent costs.
  • CrossFit, your local “box”: this movement has been explosive in the last several years. What started out, as the anti-gym has now become a movement. CrossFit has about 13,000 boxes in about 120 countries. CrossFit’s growth has been attributed to its unique business model. An “affiliate” has to pay a fee to use the CrossFit name, the current licensing fee is $3,000/year and some of the early affiliates pay as little as $500/year. Workouts change daily so members don’t get bored and the workout always consists of functional movements to increase member’s strength. Despite the workout being viewed as tough or intimidating, the population is split 50%women/50% men. The rise in popularity has been due to the fact that members work hard, despite level, give 100% effort and form bonds around a common activity. CrossFit builds friendships/community not one person in the workout thinks they are better than the other, everyone works hard within their own capacity. Buildout is extremely low and rents tend to be relatively cheap.

This industry has definitely evolved over the last 50 years, with the opening of Gold’s gym in the 60’s. The growth will not stop. With so many choices in the market, we see consumers gravitating to what works best for their body, their schedule and their wallet.

In 2017, my prediction will be that fitness will become even more popular. Research regarding movement for longevity has become more mainstream and as consumers we are getting more educated around the value of sweat for our own health journey.

As we look towards 2017 and setting new goals, don’t just say, “exercise more”, choose the workout you like and then find the club/studio that can satisfy those needs. Fitness is no longer a one stop shop but has become customized to meet the consumers’ needs.