The State of the Health Club Industry in 2011

For the Long Run: Although patience will again be a virtue in 2011, the time is now for club operators to decide how best to run their business.

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State of the Industry

Whether it’s advertisements for shake weights or weight-loss shakes, the general public is inundated with ideas for quick-fix schemes for better fitness.

That’s the public perception of the fitness industry. Those in the fitness club industry know better. At least, club operators should know better.

Quick-fix ideas have come and gone in this industry, too. Franchisors who promise streaming memberships and instant cash have often left franchisees in ruins in only a matter of months. The club owners who have thrived and survived over the years have planned ahead, changed their course and have done whatever it takes to keep their doors open and their members coming back.

That mentality is needed more now than ever. The economy is still slowly making its way back, and if club operators are waiting for the economy to continue to improve in order to make their move, they’re going to be waiting a long time.

To successfully break away from the pack and get ahead, club owners will need to factor in the expectations of 2011 as well as 2012, 2013 and beyond. The future of each club company is bright—only if that owner makes it bright.

First, the industry must acknowledge the 400-pound gorilla in the back of the group ex room. Several industry experts are predicting the economy won’t pick back up to pre-recession levels this year.

“It’s not coming back at a roaring rate to make a marginal difference in 2011,” says Mark Mastrov, co-founder of New Evolution Ventures, Lafayette, CA, who built the 24 Hour Fitness empire and now heads the Crunch Fitness brand, among others. “Ultimately, I think you’ve got another year of difficulty. In 2012, you head towards an election year, and in an election year, people try to make things better as they want to get back in office.”

To add insult to injury, Michael Scott Scudder, consultant with Club Management Education & Training Online, Taos, NM, says that unemployment needs to return to about 6 percent in order for the country to return to a stable economy. Unemployment jumped to 9.8 percent last November.

“We’re not going to be going back to a stable economy until 2015 or 2016,” Scudder says. “It’s that serious.”

Not the prediction anyone wants to hear, is it?

But for some people in the industry, 2011 is looking better than it has in two years, if only slightly, at least according to Club Industry’s2011 State of the Industry report.

In the survey, 28 percent of respondents plan to expand their facilities in the next 12 months, a slight increase from the 25 percent of club operators who planned to expand in 2010. Of those who plan to expand, 51 percent plan to do so by expanding their existing building while 38 percent plan to convert or renovate at least one of their facilities.

More than half of the survey respondents—59 percent—anticipate revenue will increase in 2011, another hopeful sign, considering 54 percent of respondents said revenue would increase in 2010. Six percent anticipate revenue will decrease in 2011 while 30 percent say it will stay the same. (Five percent did not answer the question.)

Equipment manufacturers, however, may have a tough time convincing club operators to spend in 2011. According to the survey, club operators will spend an average of $10,000 less on equipment purchases during the next 12 months than they expected to spend in 2010. (Mastrov says equipment manufacturers will do well this year because their parts divisions will be especially busy since operators will want to re-tool old equipment rather than purchase new equipment.)

The biggest ray of sunshine, according to the 2011 report, involves membership expectations. In the report, 68 percent of respondents expect memberships to increase in 2011 compared to 57 percent in 2010. Twenty-eight percent anticipate membership levels will stay the same in 2011 compared to 36 percent in 2010. Only 3 percent anticipate a decrease in 2011 compared to 6 percent in 2010.

The numbers seem to signal that some people in the industry are hopeful. A little hope goes a long way, but how can club operators set themselves apart and come out ahead once the recession truly is over?

NEXT PAGE: LOW-PRICE CLUBS TO CONTINUE

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