I research emerging trends, fitness fads, industry changes and economic historical referencing every month. Also, being nearest in age to that constantly-in-the-news-set called Boomers, I devote substantial study to the largest of our consumer groups. Recently, I read several articles that described best what was likely to happen as this 76-million-person marketplace shifted its focus during the next few years.
Although the research came from magazines, studies of economics, stock market reports and a host of other sources, they all basically said the same thing: Boomers are going to ratchet down their spending, tighten their belts, simplify their lifestyles and go a more conservative route over the next 10 to 15 years. This change will profoundly affect the North American health club industry.
Investment specialists on many fronts are predicting that Boomers will soon begin a massive switch from growth stocks to dividend-paying equities. Why? Simple. Whereas capital gains may be taxed at as much as 35 percent, the maximum tax on dividends is just 15 percent. What this means is that Boomers will take trillions out of growth-stock portfolios and shift those monies over to higher-cash-payback shares of more conservatively run companies. This is a likely end to the stock market's go-go syndrome of the past decade. Eventually, it should mean a more stable stock market.
Why will Boomers go this route? Because they need additional dollars from investments to offset the difference between what they're currently earning and what their retirement incomes will be. Social Security and pensions simply will not make up enough of that shortfall.
Predictable outcomes accompanying this phenomenon will be that Boomers will look to downsize their spending in discretionary-purchase categories. Since gas and heating fuel prices are not negotiable, it is likely that Boomers will trim outlays for food, entertainment, vacations, socializing, charities and fitness facilities. They probably will cash out on their homes and move to warmer climates where living expenses are cheaper and social/vacation/entertainment comes with the territory. This means a continued boom for the Southeastern and Southwestern regions of the United States.
Shopping clubs, housing areas that feature multi-faceted leisure-living amenities, group vacation clubs and the like will flourish in the next decade-and-a-half. It is highly probable that national fast-food chains will switch to healthier menus in an effort to benefit from Boomer reduced-spending tendencies. Future Boomers are likely to go out less and attempt to get their entertainment in-home from cable, satellite and subscription-type programs.
Thousands of operators in the national health club business likely will go into a coma within the next few years as this Boomer market changes its spending habits. Boomers — who represent more than 40 percent of the entire 41-million-plus health club membership roster in the United States and who tend to patronize mid-size, mid-priced clubs up to larger, more expensive facilities — are apt to begin looking for lower-priced clubs that offer clean, well-equipped fitness floors but are devoid of generally non-used group exercise classes, child care and executive lockers. The savvy consumer understands that he/she is paying for all those extras in monthly dues — whether or not they are being used. Evidence from value-priced operators in several regions of the country show that this has already begun.
I have been saying for some time that we no longer dictate how fitness will play out — the consumer does. Fitness has become a consumer-driven entity. Whenever that has happened in all except very-high-luxury-purchase industries, prices have generally dropped. In other words, commoditization of pricing occurs as a natural result. Combine that with a slower economy and less discretionary income availability to the record-highest-spending group ever in the world and you have the seeds for a substantial and dramatic change. Undoubtedly, that change will also have an effect on our businesses.
When? It's anybody's guess. Mine is that it will accompany key economic indicators and that it is just around the corner. Value-pricers in most areas will be happy. All the others may be in for a very rough road ahead.
Michael Scott Scudder owns and operates MSS FitBiz Connection, an online-based club consulting and training service. Scudder can be reached at 505-690-5974 or mss@michaelscottscudder.com.