As I sit in my northern New Mexico hideaway taking a break from the busiest year of my three-decade career, an ancient adage keeps popping into my head: “The old order changeth, bringing forth the new.” And as I think about that relevant to our business, I reflect on what has been, what is and what may be coming.
A tremendous fitness industry growth record, particularly in the past 20 years — from about 4,500 private clubs and 2,500 not-for-profits of the early 1980s to more than 24,000 privates, some 8,000 not-for-profits and an estimated 10,000 more studios, facilities and other fitness offerings.
10 million facility memberships in the early 1980s to nearly 40 million members today.
Worldwide recognition of regular exercise as a constant in a healthy lifestyle. The past two decades have been banner times for the health and fitness business, with a facility growth rate of more than 600 percent in 20 years and a membership growth rate of more than 400 percent in that same time period.
A rapidly approaching saturation of clubs predicated by a six percent-plus year-to-year growth rate of new facilities.
A leveling off of the net membership growth rate, as evidenced by statistics that show on average fewer members per club than five years ago.
Consumer dissatisfaction, as noted by a 40 percent or higher annual membership attrition rate.
Fragmentation and potential consolidation in the club sector.
More license and franchise entries, particularly in the express club marketplace, and more niche entities.
Rapid entry of mega-clubs, which are killing off ma and pa independents.
Re-emergence of low-price players, this time with solid marketing plans, well-conceived approaches, and dedication to quality.
These factors point to the maturation of the fitness industry, which is positive. They also point to other considerations that may not be so encouraging.
Further fragmentation. As exercise consumers become more sophisticated and particular, it is almost certain that offerings will fragment further. Facilities may evolve into outreach programming, Internet exercise, small community center satellite facilities, and other offerings that barely exist now.
Operators will concentrate on certain demographic/sociographic segments and less on trying to be something for everyone. Group exercise classes will disappear from many facilities.
Commoditization of membership pricing. The $19-a-month players are having a rapid-fire effect on the health club market, predominantly on the mid-price operators that dominate 75 percent or more of the marketplace. As has happened in other service-based retail businesses, there is likely to be the occurrence of an unwritten price ceiling in all but the higher-demographic, more upscale, large multiplex facilities.
Separation of marketing segments. Try to be everything to everybody and you'll end up being nothing to nobody. We are likely to witness the demarcation of two types of marketing segments: club size and membership typing.
There will be large clubs (100,000 square feet plus) in big population centers; there will be small niche clubs and studios (under 6,000 square feet) all over the place; and there will be mid-sized fitness-only offerings (10,000 to 20,000 square feet). Those likely to suffer are the larger-size fitness-only facilities (25,000 to 40,000 square feet) and the older mid-size athletic clubs that were originally racquets-based.
Concentration on achievable results. To survive, the majority of fitness facilities will have to move toward a model of customer service and programming.
Getting away from the membership model. Paralleling the achievable results model of the future facility will be the de-emphasis of membership as the prerequisite for exercise usage.
More vertical markets for fitness. Finally, the club business has enjoyed an unprecedented run. It is probably over. We will be forced to shift our thinking to health and fitness participation and away from club only.
Whatever befalls us, I submit to you that, “The times they are a changin'.”
Michael Scott Scudder is a 30-year veteran of the health club business. He is president of FITNESS FOCUS, a club management training company. He can be reached at 505-690-5974, mss@michaelscottscudder.com or at www.michaelscottscudder.com.