Last month's Club Industry East trade show in Philadelphia and some recently received “other communications” have led me to take a look at the industry mid-year to give you a bird's eye view of where we stand after six very interesting and somewhat turbulent months.
The recent trade show was not so much an eye opener as it was an affirmation of change. As usual, it was a small, regional, quality-packed show — not as attended as it should have been, but I've learned, sadly, to get used to that. The good players were there, with the exception of a few regional mid-Atlantic and Northeastern chain operators who skipped out entirely (obviously, they are now believing their own press releases and don't think it necessary to grace educational conferences with their presences any more). The customary groupings of small and new one-off clubs were in attendance. But the talk was different.
It used to be that people from the independent sector wouldn't let me go. They would follow me around and besiege me with questions from early morning until late at night. Either I've gotten a reputation for being inaccessible (which I'm not), or they have less interest now. Questions were coming from small investment companies looking to invest in the industry, hedge fund representatives who were snooping for club companies to possibly buy and others who were genuinely concerned about the competitive nature of the business.
Unquestionably, money is coming into our industry at an increasingly rapid rate. It is coming mostly from outside the industry, and these investors aren't looking to buy single clubs or do business in the same way we have done it for years. They're looking to monetize memberships and market to niches of current and potential customers who we have not yet found the keys to totally capturing.
The presence of LA Fitness around the greater Philadelphia area has caused a serious buzz. Many veteran club operators are feeling the effect of this company's apparent “cluster marketing” efforts. As the model develops from its earlier beginnings, LA Fitness appears to be a major competitor, if not the major player, in the mid-price marketplace to come.
Some questions posed to me focus around the big-boxers like Lifetime Fitness. What will their strategy be? What effect will they have on the larger population markets and thus on the athletic club segment of our industry, which has been relatively impervious to competition for a couple of decades? In talking with one veteran owner who reinvests in his club regularly and has training sessions implemented for all levels of staff, I discovered that Lifetime Fitness has taken nearly 15 percent of his memberships in the year that they have been in competition in his marketplace.
Other talk focused on the low-price club arrivals and how they appear to be doing some big numbers when it comes to membership sales. One yet to open suburban Philly Planet Fitness owner has sold more than 2,500 memberships in pre-sale, and already three local small clubs have approached him about buying out their memberships in entirety.
Frequent to-the-side chats centered around rumors of imminent sale of a noted national gym chain, reports that several high-price niche, multi-club operations are not doing all that well this year, and the always present gossip that a few smaller equipment companies are about to close their doors. Some banter was with strictly niche operators in the studio marketplaces (personal training only and group fitness only), and they are all generally doing well.
Finally, as I was about to leave Philadelphia, I received an e-mail from a friend in the mid-Hudson Valley of New York. Attached to the e-mail was a photo of a hand-written sign on a recently closed Curves franchise door (the city's name will be withheld to protect the innocent and/or terminally stupid) that read: “To all members: As of June 1, Curves is closed. We are sorry for any inconvenience this may cause, but Planet Fitness has 50 percent of our members. Curves of (town name), (town name), (town name) or (town name) will be more than happy to take any members. If you choose to go to a club, please call (town name club) at (phone number), and I will transfer your files to wherever you'd like to go to.”
With that, dear readers, I leave you to make up your own versions of the untold parts of that story. I have way too many scenarios to even begin here in this column. But it seems to speak volumes about where we are midway through the summer of 2006.
Michael Scott Scudder, a contributing author for Fitness Business Pro, owns and operates MSS FitBiz Connection, an online-based club consulting and training service. Scudder can be reached at 505-690-5974 or email@example.com.