Sometimes, a look back at a year reveals new and exciting information and innovations; other times it is like looking at a picture in a photo album — it looks the same every time you glance at it.
Taking the pulse of the fitness industry for 2003 was a bit like that. In fact, it was a bit like that for just about every industry you could examine. It was more a year of treading water and regrouping as worries of war and lack of job security kept Americans waiting for the often promised, yet slow in coming, economic rebound.
But this, in part, may have helped the industry keep its head above water, and may even add to its success in 2004, especially if clubs continue to concentrate on becoming more community friendly and expand their reach beyond traditional demographics.
Recent trend research, however, suggests that an unpredictable economy (despite its recent upturn), continued fears of terrorism, a renewed focus on “getting back to basics” and an aging population are helping to redefine American social behavior. As a result, more Americans are participating in “local area nesting,” getting out of the home but staying in the local community.
According to research conducted by Roper ASW, participation in activities away from home is on the rise. While Americans are taking fewer vacations to far away destinations, they are increasingly focusing their leisure activities in their own communities as they seek comfort and connectivity with their neighbors.
More specific to the fitness industry, Americans also care a great deal about physical fitness. According to research conducted by IHRSA and American Sports Data, 85 percent of Americans acknowledge the importance of getting enough exercise. Increasingly, health clubs often provide a community within a community for many Americans as health club members share a common value of overall good health and even more of them are striving for this feel. But is it enough?
SPREAD THE WORD
While Americans may realize the importance of exercise, they may not be acting on that knowledge, and the industry itself may be to blame.
“I think we have all the structured dues and membership packages we can muster. Half the sales people out there don't understand them. We don't need any more equipment, any more nutrition or diet packages. As an industry, we still fail to reach the ‘uninitiated’ 70 percent of the population that won't set foot in a club,” says Ken Germano, president of the American Council on Exercise (ACE). “The industry needs to re-focus on the rest of the population with one voice. For all our assets we are not reaching the public.”
Even when clubs did bring in new members in 2003, they often found themselves incapable of holding onto them in the long run.
Research done by Club Industry magazine showed that 29.2 percent of single-club operations enrolled between 101 and 500 new members in 2003. At the same time, 39.5 percent of multi-club outfits added more than 1,000 new members to their operations for the year. Conversely, single-club companies lost those same 101 to 500 members at a 21.4 percent clip and almost half (48.8%) the multi-club chains saw more than 500 members leave in the year — basically a flatline when looking at the state of the industry when it comes to membership and retention.
“We saw Curves and Curves look-alikes grow at an exponential rate,” says Stephen P. Roma, chief executive officer for New Jersey-based WOW! Workout World. “All of this is sensational for our industry. We all know that the profile of the Curves member is typically not the profile of a traditional health club member and they will eventually graduate to more traditional health clubs after their initiation into fitness. All in all, there is great opportunity in our industry for a club that can make small strides in solving the retention epidemic in our industry.”
Meanwhile, that same research shows that many club operators expect a slight bump in overall membership numbers in 2004. In fact, 71 percent believe there will be an increase in membership numbers in 2004, and 25 percent believe numbers will remain the same.
M&A TO HEAT UP IN 2004?
Another trend in 2003 was a halt to mergers and acquisitions in the United States that had been so abundant in the immediate past. This was due primarily to a lack of private equity entering the industry.
“There will be an increase in consolidation among clubs of all sizes as you see big chains buying smaller groups. You'll also see small companies buying each other,” says Rick Caro, president of Management Vision. “I believe that once a company has a successful exit by going public this year, you'll see a domino effect that will bring new money and new players to the table. You will see consolidation along with new clubs of every kind opening from both new and older, more established companies.”
In addition to merger and acquisition activity, Club Industry research shows that 40 percent of clubs contacted had plans to expand their facilities in 2004. Of these respondents, 67 percent plan an expansion to their existing facility, 37 percent will open a new location and 12 percent will acquire another club or chain.
But as more money is invested this year in these expansions, some feel individual businesses may suffer.
“Bigger and better clubs are opening. More dollars per square foot are being spent on clubs than ever before. Many clubs are starting to overspend and thus reduce their return on investment, not at all uncommon in growth industries,” says Bruce Carter, president of Get Cyced. “Many smaller clubs are having a harder time than ever maintaining profits. Clubs are opening with more visible, higher rent locations than in the past, adding to costs. Clubs have been raising their prices, but some chains are forcing competitors to drop pricing and that hurts the entire industry.”
While pricing continues to be a touchy subject among club owners, Club Industry found that clubs responding to our state of the industry survey charge an average of $50 per month for membership, with the most common monthly membership ranging between $30 and $39. But some see that changing in 2004. Several respondents say they believe that as the economy grows, membership prices will grow along with it.
Beyond the upswing in the economy and bigger and better clubs, many feel the key to finding, retaining and charging members either through monthly dues or as additional profit centers is targeted programming that reaches specific demographic niches. This is reflected in the survey done by Club Industry that shows that 64 percent of clubs plan on adding to their overall programming this year. Mind/body and senior programming are most likely to be added to multi-location clubs (70% and 60% respectively) while single locations are split between mind/body, children and senior programming (43%, 35%, 32%).
“I see 2004 as the year that a new membership segment evolves — the ‘After Curves’ member,” says WOW's Roma. “I see that we need to develop a logical entry point and programming for these new members. The next great bonanza market has to be the kids. Obesity is at epidemic levels among kids. The kids will have to be tricked into exercising — that's why sports are such a wonderful thing. When exercise, fun and results are tied together the kids will do it; this not only helps bring in them and their parents now, but builds a base for the future.”
In fact, Roma, among others, says this market segmentation may result in more niche clubs popping up in 2004 to go along with the programming boost.
“It would not surprise me to see specific, small fitness centers that cater to the 50-plus market and address the specific programming, supplementation and coaching needs of this type of population,” he says. Get Cyced's Carter agrees.
“I can see more smaller clubs for the deconditioned market on the horizon,” he says. “But soon, the stronger operations will push out the weaker ones that had little competition initially as that market crowds. It will come down to who does business the best.”
Whatever the shakeout the New Year holds in store for the fitness facility and health club industry, one thing is for sure: a look back next year at the 2004 snapshot will show a radically different picture and most likely a stronger pulse.
ACE TOP 10 TRENDS FOR 2004
- Workouts and exercise programs will respond to the critical need for time-starved Americans to get an efficient workout in a short period of time. Trainers will provide simple programs using readily available tools (chairs, steps, even walls) that overcome the common barriers of time and access.
- Mind and body programs blend with traditional workout sessions. Many clubs, personal trainers and group fitness instructors will “infuse” elements of Pilates and yoga into workouts, programs and club offerings for a holistic approach to wellness. By incorporating elements of mental and spiritual fitness, individuals will take better care of their entire being and psychological self, not just their bodies.
- Functional fitness becomes more important. Incorporating functional strength training into any existing exercise program enhances coordination, strength and endurance in everyday activities. This “functional” approach to strength training will result in individuals being able to perform their daily activities and recreational pursuits with greater ease and less discomfort.
- Lifestyle and performance coaching. The phone and Internet now make this highly effective service affordable, using heart rate monitors and other measurement tools that allow downloadable and real-time feedback. These coaches will not only address their clients' fitness concerns, but also stress reduction, time management, and other important health and wellness areas such as sleep and nutrition.
- Health care providers and companies will provide (and, at least, partially subsidize) preventive lifestyle programs. Available research suggests that such programs cost far less than treating lifestyle diseases. Overweight and obese individuals (BMI of 25 and above) are at increased risk for physical ailments such as Type 2 diabetes, hypertension, stroke and coronary heart disease. The easiest and most cost-effective resource a company can provide are web sites that employees can access for important wellness information such as risk factor assessment tools, fitness calculators, guidelines for beginning a fitness program, how to contact certified fitness professionals, etc.
- Fitness equipment manufacturers will make equipment that is “smarter,” more efficient, and geared toward users varied lifestyles. Equipment will now measure and provide feedback on everything from lactic acid accumulation, to adjusting workouts for stress and preparing for an athletic event. Equipment will finally respond to the need for short, effective workouts while delivering information, coaching feedback, even news, via the Internet.
- More clubs will offer pay-as-you-go pricing to their members in lieu of the usual three-year contracts. More customers are demanding alternative pricing systems that are more flexible and many clubs are responding. Private studios and YMCAs are offering direct competition for larger clubs and are listening to their customers' needs.
- Back to basics for weight loss and nutrition. The millions of Americans who have followed various restrictive diets have not experienced long-term or lasting success. Properly trained fitness professionals will be perfectly positioned to provide these individuals with an option that works — regular exercise and sensible eating.
- Exercise will continue to become preventive care for a growing senior population. These programs condition muscles, tendons, ligaments and bones to help fight osteoporosis, keep seniors more limber and stabilize joints, lowering the risk of everyday injury. Regular physical activity will help maintain independence.
- Increased emphasis on simple programs aimed at unseating the sedentary. Many states and cities will have walking programs, and several communities will be adding sidewalks, walking trails and parks to make it easier for people to be physically active. If individuals start making small changes in their activity habits, they can reap significant health benefits.
Five to Watch:
- Bally's Total Fitness — “Troubles and speculation surround the company.”
- 24 Hour Fitness — “IPO may be on the horizon.”
- Lifetime Fitness — “Probably the next public company.”
- LA Fitness — “Don't be surprised if they beat others to Wall Street.”
- Curves — “Continues to grow and bring new participants to fitness.”
Five Trends Of 2003:
- Express workouts.
- Expansion of yoga, Pilates and personal training.
- Series pay programs.
- Women-only centers.
- Small, express clubs.
Five Trends Of 2004:
- Companies going public.
- Consolidation among clubs (M&A activity).
- Price increases as economy improves.
- More children's and sports programming.
- Increasing focus on weight-loss/weight management.