IBISWorld Industry Report Has Its Plusses, Minuses

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IBISWorld recently updated its report on health and fitness clubs in the United States. The numbers in the report, which were released earlier this year, offer some similarities and differences to industry figures produced by other outlets, including Club Industry.

IBISWorld says there are 43.6 million memberships in 2012. That's well short of the 51.4 million memberships that the International Health, Racquet and Sportsclub Association (IHRSA) reported the industry had in 2011. IBISWorld also says that industry revenue is expected to grow to $25.3 billion in 2012. IHRSA, by contrast, reported $21.4 billion in revenue at U.S. commercial health clubs in 2011, meaning the industry would have to grow by $3.9 billion this year to match the IBISWorld figure.

IBISWorld defines the industry as one that "operates fitness and recreational sports facilities that feature exercise and other active physical fitness conditioning or recreational sports activities, such as swimming, skating or racquet sports." Firms are also involved in facilities management and fitness instruction, IBISWorld adds.

IBISWorld says there are 29,365 businesses in the industry. (By comparison, IHRSA reported 29,960 commercial health clubs in 2011.) Gyms and fitness centers make up 65 percent of that total, according to IBISWorld, with the rest of the businesses divided among dance centers (7 percent), swimming pools (7 percent), ice and roller rinks (6 percent), tennis centers (5 percent) and other (10 percent).

An IHRSA spokesperson told us that it did not assist in the IBISWorld report, although IBISWorld does list IHRSA as one of its additional resources. Another resource listed is the Sporting Goods Manufacturing Association, which is now called the Sports and Fitness Industry Association.

IBISWorld has done its homework in this report, yet I question some of the revenue figures of the companies featured in the report. IBISWorld offers 2012 revenue estimates for the two public club companies in the industry, Life Time Fitness and Town Sports International (TSI). IBISWorld says Life Time will produce "roughly $1 billion" in 2012 revenue, and TSI will generate $536 million in 2012.

Because they are public companies, and since Life Time and TSI release quarterly earnings reports, there is a more accurate way to make estimates for those companies. Life Time is well on its way to producing more than $1 billion this year. (In its third quarter report, the company expected 2012 revenue to be between $1.127 billion and $1.137 billion.)

And since TSI reported $466.9 million in 2011 revenue, it is highly unlikely TSI would jump to $536 million by year's end, which would be about a 15 percent increase from 2011. TSI generated $364.7 million in the first three months of 2012 and expects to add about $117 million in the fourth quarter, giving the company a total of about $482 million for this year.

IBISWorld's 2012 revenue estimate of $803 million for Bally Total Fitness appears to be too high. Bally reported it had $468 million in 2011 revenue to Club Industry for our Top 100 Clubs report, and the company is down to about 60 clubs after selling 39 clubs to Blast Fitness earlier this year.

The 24 Hour estimate of $1.25 billion in 2012 revenue by IBISWorld is less than the $1.5 billion Club Industry estimated in the Top 100 Clubs list. Curves International and Gold's Gym International have not reported revenue figures to Club Industry in years past. For the record, IBISWorld says Curves will generate $482 million in 2012 revenue for its U.S. segment (which seems a little high, in my opinion) and that Gold's Gym will generate $379 million in 2012 revenue (which seems a little low, in my opinion).

Life Time, TSI, 24 Hour Fitness, Bally, Curves and Gold's Gym are the six club companies highlighted in the report, yet because no company has more than a 5 percent market share, according to IBISWorld, none of the companies are considered "major" companies. One could argue that with their dwindling number of clubs, Bally and Curves are no longer the market leaders that they were in years past.

The biggest omission among the highlighted companies is LA Fitness, which is No. 2 on Club Industry's Top 100 Clubs list with an estimated $1.2 billion and could be No. 1 on next year's list. Regarding the LA Fitness omission, industry analyst Dale Schmidt of IBISWorld told Club Industry in an email: "Unfortunately, we cannot profile every minor company, and the number currently profiled in this report (six) is already beyond the number of players that we traditionally analyze, so LA Fitness was left out."

Recently, Club Industry has produced two reports, including a look at the Top 100 Clubs list over the past five years. The other report is on sales strategies of health clubs. We will soon publish our own market overview, adding another point of reference for the industry.

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