BOSTON -- Commercial health club financial performance struggled in the first quarter of 2009 relative to the first quarter of 2008, according to the International Health, Racquet and Sportsclub Association’s (IHRSA) 2009 First Quarter Index, which demonstrates the financial performance of a sample of the for-profit health club industry. The survey of 18 U.S. health and sports club companies represents 530 facilities, an average of 29 clubs per company.

Despite the lower results compared to first quarter 2008, participating clubs indicated growth from the fourth quarter 2008 to the first quarter 2009.

Overall, Quarterly Index participants reported decreases in total sales, membership revenue, and non-dues revenue from first quarter 2008 to first quarter 2009. Total sales decreased by 3.6 percent from $7.8 million in 2008 to $7.3 million in 2009. Membership and non-dues revenue also decreased by 1 percent and 8.1 percent, respectively. Total membership accounts increased by a modest 1.2 percent.

Although respondents collectively struggled with first quarter performance, some participants reported improvements. The majority of respondents (56 percent) reported increases over 1 percent in total membership accounts, while only 33 percent reported similar increases in total membership dues revenue.

“Non-dues revenue can be expected to fluctuate as consumers limit their discretionary spending,” says Katie Rollauer, IHRSA senior manager of research. “However, the low single-digit decline in membership accounts and revenue, relative to other retail industries, demonstrates the resilient nature of the club industry during a recession.”

Participants reported a 5 percent decline in earnings before interest, taxes, depreciation, amortization and rent (EBITDAR) from first quarter 2008 to first quarter 2009, amounting to 29 percent of total revenue—the lowest since fourth quarter 2006. With a cash-strapped U.S. consumer populace at hand, clubs often resort to discounting membership and non-dues services, which in turn may contribute to the drop in EBITDAR, according to IHRSA. Additionally, decreased EBITDAR reflects the need for more efficient expense management.

“It is possible companies have started to tighten expenses, but benefits to the bottom line might not be observed until future quarters,” says Rollauer.

While Quarterly Index participants, overall, reported decreased revenues and accounts from the first quarter 2008 to first quarter 2009, on a consecutive quarter-to-quarter basis, participants reported growth from fourth quarter 2008 to first quarter 2009. Total sales, membership dues, and non-dues revenue all increased. Non-dues sales were up 16.6 percent from $5.8 million to $6.8 million. Total membership accounts also increased by 4.7 percent, and EBITDAR improved by 9.7 percent.

“Although strong first quarter sales and membership accounts are typical of the health club industry, positive quarter-to-quarter growth indicates the industry was able to maintain performance over a consecutive six-month period in the midst of a challenging economy,” says Rollauer.

IHRSA noted that the data from this study is intended to provide a snapshot of U.S. health club industry performance. However, the results are based on a small sample of companies, and care should be taken when making comparisons of these findings to the overall industry at-large. Industry Insights Inc. conducted the survey for IHRSA.

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