Last year began with reports of government bailouts, plunging stocks, a high unemployment rate, and the worst recession this country has seen in decades. It also began with a new administration promising change.

As 2010 begins, not much has changed. Last month, U.S. Treasury Secretary Timothy Geithner announced that the Obama administration extended the $700 billion financial bailout program until October to prevent further turmoil in the banking system. The national unemployment rate was at 10 percent, according to figures released last month, and 15.4 million people were out of a job.

Although some experts have said that the recession is coming to a close, some signs have indicated otherwise, and that is not good news for the club industry, which is dependent on employed people with resources for club memberships and services.

“With 15 million lost jobs now, I still think we are a ways away from saying we are close to turning the economy around,” says Mark Mastrov, co-founder of New Evolution Fitness Co., Lafayette, CA, and the founder of 24 Hour Fitness. “I see 2010 as pretty much the same as 2009. Consumer confidence is growing, but slowly.”

Two other club industry insiders say that the economy — and the fitness club industry — will not show signs of rebounding until the third or fourth quarter of this year, at the earliest. Rick Caro, president of Management Vision, New York, says high unemployment is one of the main factors affecting the industry.

“If I'm in Detroit, and it's [about] 30 percent unemployment, it's unlikely that it's going to get down to 15 percent unemployment just because 2010 arrives,” Caro says. However, even if unemployment is still high but companies start hiring again, then that would be a specific signal that a turnaround is occurring.

“But I think it's going to take more than the first two quarters before this industry is really going to see any kind of positive benefit,” Caro says.

Michael Scott Scudder of the fitness business education Web site CMETO.com says the current recession is reminiscent of the recession of the early 1990s. Just when everyone thought it was OK to declare that recession over, the industry had one of its worst years.

“Our industry got clobbered in the final year of that recession, even as the economy was in fact bottoming and slowly turning up,” Scudder says. “I expect much the same in 2010.”

Success in 2010 may depend mostly on keeping attrition levels low and attracting new members or bringing back former members. According to the International Health, Racquet and Sportsclub Association (IHRSA), between April and June of 2009, there were 1 1/2 times as many former club members (19 percent) in the United States than current members (12 percent). The rest (69 percent), of course, have never been a member of a health club.

“Most clubs do not really understand why members leave,” Caro says. “Attrition is not going to decrease until clubs make changes, changes in understanding what the members are really thinking, and changes in how they re-present the club if they want to bring former members back. A club offering just an amnesty opportunity — come back and we'll waive the initiation fee or enrollment fee — is not enough.”

SURVEY SAYS…

Even though club operators are well aware of the continued economic troubles they will face in 2010, a few of them expressed some optimism in terms of their operations going forward.

A comparison of the last two State of the Industry surveys conducted by Club Industry shows that club operators are less likely to expand this year than they were last year, are willing to spend more on equipment, expect membership levels to remain the same and expect a higher average revenue.

In Club Industry's 2010 State of the Industry report, 25 percent of club operators surveyed said they plan to expand their facilities in the next 12 months. Respondents with two or more clubs (43 percent) are twice as likely to expand as a single-club operator (20 percent). By comparison, in 2009, 33 percent said they would expand in the next 12 months.

Forty-five percent of those who plan to expand in 2010 will do so by expanding their existing building, 42 percent plan to open a new location, 16 percent said they would move to a larger building and 13 percent said they would acquire another club.

“The capital markets are still pretty much shut down, so I do not see a lot of growth in the high-end sector,” Mastrov says about club expansion.

Fitness facility operators are willing to spend more on equipment this year than they were last year, according to the survey. Club operators plan to spend an average of $53,169 in the next 12 months, with operators of two or more facilities spending an average of $130,757 in that time frame. In 2009, club operators were willing to spend an average of $50,932 overall — $93,250 for those with two or more clubs.

Next Page: Survival Techniques

However, equipment spending plans for the next five years dropped this year compared to 2009. In the 2010 report, club operators said they plan to spend an average of $134,282 overall for the next five years, and $229,297 for two or more clubs. Those numbers are down from last year's report, when club operators said they planned to spend an average of $149,430 overall and $235,641 for multi-location clubs for the next five years.

Club operators are optimistic about membership increases in 2010. About 57 percent of those surveyed expect an increase in memberships in 2010 compared to 58 percent in 2009. The biggest difference is in the number of multi-club operators who expect an increase (67 percent in 2010 vs. 52 percent in 2009).

The good news is that fewer club operators expect a decrease in membership levels compared to a year ago. Only 6 percent of 2010 respondents predict a decrease compared to 12 percent in 2009. About 36 percent of 2010 respondents say levels will remain the same compared to 30 percent in 2009.

Revenue projections are somewhat encouraging from this year's survey respondents. About 54 percent say 2010 revenue will increase over 2009 revenue, 34 percent say it will stay the same and about 8 percent say it will decrease. The average 2009 expected revenue is $1.28 million for 2010 respondents ($2.59 million for multi-club operators). About 37 percent say their expected 2009 revenue is more than their 2008 revenue, 33 percent say it's the same and 27 percent say it's less.

In 2009, 53 percent of respondents expected their revenue would increase from the previous year, 29 percent said it would stay the same, and 18 percent anticipated a decrease. The projected 2008 revenue was an average of $949,395 overall ($1.78 million for multi-club operators). About 44 percent of respondents said their 2008 revenue was more than 2007, while 34 percent said it was the same and 18 percent said it was less.

“I do see revenues being slightly above 2009, but nowhere near the prior years,” Mastrov says. “Attrition will remain the same as we saw in 2009, higher than the previous years.”

SURVIVAL TECHNIQUES

The keys to surviving and thriving in the club industry this year, experts say, are pretty much the same as they were last year when the recession hit the industry. Club operators need to focus on attrition, cut back on expenses, initiate new programs and think outside the box. The smart operators, Scudder says, are the ones who have reduced expenses while at the same time increased general membership services.

Last month, the American Council on Exercise (ACE) released its top trends for 2010. Some of those trends include group training, exergaming, programs for Baby Boomers and functional training. (See sidebar on page 25.) Many of the trends are affected by members' tighter budgets and more hectic schedules, ACE reports.

Caro says club operators should not worry about national statistics and surveys. Instead, they should focus on their surrounding environs. They should do more research on their current and prospective members, take into account the area's unemployment rate and factor in the number of competitive clubs within about a 3-mile radius.

“The message has been for all clubs that they need to study, study, study and focus on their own numbers in their own backyard,” Caro says. “Find out if the largest employer in town is laying off people. That may have an impact on them. They need to do more member research and find out what their members are really thinking and what their level of interest is in the club. That often involves regular surveys and other kinds of research.”

Club operators need to examine how they attracted their members and focus on what marketing tools worked, Caro adds. They also need to have a sharper eye when it comes to cutting costs and focus on their bottom line every day rather than evaluating their operations month to month.

“What that will lead to is a lot timelier decision-making, being a little more proactive, reading the early signals and feeling like we're much more in control,” Caro says.

The first quarter of 2010 will be a good gauge for the club industry, Scudder says. If the economy is still struggling over the next two to three months, many clubs will shut their doors, he says.

“If membership sales are not up versus 2009 first quarter, that will be three years in a row of down membership sales in the key first quarter and will be a determining factor in how our industry fares for the rest of the year,” Scudder says. “I personally don't look for too much in 2010 in terms of rebound of our industry. I think it will come in 2011 and beyond.”

Clubs with financial resources will survive in 2010. These clubs, especially independent and multipurpose clubs, could take advantage of real-estate opportunities that weren't present in a more stable economy, Caro says. Small, franchised clubs that do not cost as much to operate also have room to grow, he adds.

Struggling clubs in 2010 will have the same types of problems that struggling clubs had in 2009. They may be in an oversaturated market or may not be differentiated enough from their competitors. These clubs may be poorly capitalized, may have difficult landlords and may struggle to get financing from banks, Caro says.

Scudder adds that now is a good time for the industry to step back from the traditional way of doing business and bring in new ideas. The move to a “wellness” model will begin to emerge in the industry this year, Scudder predicts, and it will be a better fit for members.

“With an economy predicted not to rebound in any serious fashion until at least third quarter 2010, it could be a very rough time for the now-old-fashioned fitness business,” Scudder says. “I also look for some outstanding new entrepreneurs to emerge with totally different ideas about pricing, delivery of services, and how to take care of customers. All are way overdue.”

Next Page: Sidebar: ACE's Top 10 Fitness Trends for 2010

ACE's Top 10 Fitness Trends for 2010

Exercisers will keep time and money in mind when they arrange their fitness regimens in 2010, according to the American Council on Exercise’s (ACE) list of fitness trends for the year. The list was based on the organization’s annual survey of personal trainers, group fitness experts, advanced health and fitness specialists, and lifestyle and weight management consultants.

Tighter budgets and hectic schedules also will bear more unique and efficient workouts, ACE reports.

The following are ACE’s Top 10 trends for 2010:

1. Cost-conscious workouts at fitness clubs and at home: The impact of the economy continues to affect the choices of fitness enthusiasts and health clubs alike. Gyms will alter programming and training to better serve the needs of the cost-conscious member, while in-home workouts utilizing small, portable fitness equipment will be popular among individuals watching their budgets.

2. Group training: Individuals will scale back on personal training sessions to take advantage of small-group training and group class participation as another way to save on expenses. Health clubs may alter some programs to better suit the needs of larger groups. Likewise, individuals may find that the group setting offers additional motivation and support of their fitness efforts.

3. Time-efficient workouts for the time-pressured American: Shorter yet higher-intensity workouts will be more appealing to those with busy schedules because they can reap significant fitness rewards with relatively minimal time investment. Boot-camp style workouts will continue to be one of the most popular of these trends in 2010. Circuit training will also be a time-efficient workout of choice due to its combined strength and endurance activities.

4. Exergaming: Exergames will continue to climb in popularity and be taken to the next level: fitness clubs. By integrating fitness-based video games into their programming, clubs will offer unique exercise sessions for game-lovers and those looking for variety within their workouts.

5. Boomer-specific programs: Special fitness programming for aging adults will remain a strong trend next year. Growing numbers of Boomers recognize the multitude of benefits that come along with regular exercise participation, from lowering blood pressure and cholesterol to maintaining one’s functional independence and overall well-being.

6. Functional training workouts: Functional training workouts will increase in variety, including popular suspension training tools. The portability and time-efficiency of these workouts will appeal to people looking to stay fit at home, the office, the gym or while traveling.

7. Health and fitness awareness: The importance of health and fitness is gaining greater awareness among commercial and governmental organizations. There will be a strong movement towards collaboration between these groups and health and fitness organizations throughout the new year. These diverse groups will work together in the fight against physical inactivity and obesity.

8. Importance of proper professional credentials: Health and fitness clubs are recognizing the need for, and the importance of, hiring trainers who hold high-quality, reputable professional credentials.

9. Specialty exercise classes: Specialty classes such as ethnic dance, hooping, pole dancing and Zumba will remain popular due in part to the continued success of shows such as “Dancing with the Stars” and “So You Think You Can Dance.” Fusion-type classes will be popular among fitness enthusiasts who want to switch up their typical workout programs.

10. Fitness training tools: Technology is continuing to infiltrate the fitness world. The use of tracking and online training and scheduling tools will increase in the coming year with more people looking to better gauge their progress by accessing and monitoring details of their fitness programs.

Source: American Council on Exercise

Next Page: Sidebar: Trends in University Fitness for 2010

Trends in University Fitness for 2010

The following are some of the broad trends that several university recreation center professionals are noticing in the areas of fitness programming, services, facilities and management:

Fitness Programming

Dance: Zumba is “replacing the kickboxing craze,” says Tamra Garstka, director of campus recreation, Student Recreation Complex at Arizona State University (ASU), Tempe, AZ. “In fact, all of the various dance programs—salsa, ballroom, Latin—are really popular here at ASU.”

Mind-body: These programs are “growing more and more every year,” Garstka says. “This speaks, I think, to the stress that many of today’s students are feeling.”

Personal training: Personal training sometimes encompasses small groups, such as 10 students to one trainer during a session. “This enhances camaraderie, too, so we encourage that development,” Garstka says.

Team sports: Doug Milder, director of campus recreation, Idaho State University (ISU), Pocatello, ID, says, “Our intramural sports numbers are still strong and growing, even with increased fees.”

Services

Social opportunities: ASU’s recreation center now runs movies and other programs that foster social engagement opportunities for students, Garstka says.

Wellness programs: ISU has a renewed focus on wellness services. Some health services departments at the university will run programs out of ISU’s new recreation facility, which will open this spring or summer, Milder says.

Massage and swim lessons: “I thought that those fee-based services would suffer in this economy, but they are actually increasing,” Milder says.

Nutrition classes:Howard Taylor, director of the division of recreational sports, Purdue University, West Lafayette, IN, says nutrition classes are popular at Purdue’s recreation center. “I believe they will continue to grow in popularity for students,” Taylor says.

Employee-wellness initiatives: Maureen McGonagle, director of campus recreation, Ray Meyer Fitness and Recreation Center at DePaul University, Chicago, says employee wellness initiatives are becoming a higher priority for universities whether in programming options, incentive-based participation, and/or dedicated spaces for university employees.”

Facilities

Lounge areas: Joseph Lore, director of the department of recreation services, Syracuse University, Syracuse, NY, says students want more places to relax in the recreation center, such as coffee and juice bars and WiFi hotspots.

Green building:LEED-certified construction/green building and sustainable operating initiatives are important to today’s students, many rec center managers say. As such, many of the new facilities currently under construction use environmentally sound materials and principles.

Increased use of technology: University recreation centers are using today’s social networking technologies to assist in areas such as membership services, advertising and communication, McGonagle says. Other university rec center managers say that today’s techno-generation of students generally love anything high-tech to keep them distracted while they exercise.

Management

Efficiency: “There are fewer people running facilities these days,” Milder says. “The design of several new facilities is reflecting that and will save the centers on operating costs.” As one example, some new and renovated facilities are putting the equipment rental spaces behind the front desk instead of in a separate—and separately manned—area of the rec center.

Accountability and entrepreneurial practices: McGonagle says that university recreation departments are bearing a larger responsibility for financing their own operations, either through program fees, expanded membership bases, corporate sponsorship, and/or development programs.

Private-partnership financing: “This was a trend in [university] housing 10 to 15 years ago,” McGonagle says, “and it is now being considered more for recreation because there is less flexibility with capital spending than in the past.”

Community fitness: Milder says that more people in the surrounding community of a university are using rec centers. “This is especially so in areas of the country where the commercial clubs are under-serving the community,” he says. –Donna Loyle, contributing writer