In an effort to independently determine just how much influence the present early recession is having on our businesses, I turned to my network of clients, friends and contributors. They were kind enough to allow me to anonymously “mine” data from them and come up with my own conclusions.
Since the end of the first quarter 2008, attrition from cancellations, non-renewals and bad debt has gone up more than 25 percent versus the same second-quarter period in 2007, according to an independent study of more than 100 clubs performed by a database management company this summer. In other words, if a club was suffering 3 percent attrition per month last year, this year it may now be agonizing over as much as 3.75 percent attrition monthly. That is a negative change of 9 percent over an annualized period. For the average club, this represents close to $100,000 in additional lost revenues.
Since the end of the first quarter 2008, new membership sales have gone flat compared to the same period last year, according to an independent study of more than 200 clubs that I conducted from May through July of this year. To put it another way, clubs are not selling enough replacement memberships to offset the increases in member attrition.
Regarding group fitness classes in clubs, an online survey of 167 clubs that I conducted through my company showed some interesting statistics. While 46 percent of club owners said they thought their group fitness classes were doing a good job of taking care of people, only 19 percent said their group fitness programs were making a profit. Thirty-two percent of respondents said their group fitness program was losing money, 31 percent said they break even on group fitness, and 18 percent said they didn't know. Thirty-eight percent of clubs polled said their monthly group fitness attendance compared to total club monthly attendance exceeded 15 percent. Seventeen percent of clubs averaged about 12 percent of total attendance in group classes, and 15 percent polled said their attendance in group fitness classes was less than 10 percent of total attendance. Thirty percent did not answer the question. Only one in every three clubs surveyed has a full-time group fitness manager.
Nineteen percent of the more than 200 clubs polled online for another study I conducted with my company reported “doing worse this year to date compared to the same period last year,” 36 percent reported “doing about the same,” 35 percent are “doing better this year to date compared to the same period last year” and 10 percent “did not know.” Eighty percent of the more than 200 clubs I polled online reported that the recession is definitely affecting membership sales, retention and ancillary purchases.
What can we extract from these somewhat-limited, albeit pertinent, statistics? The recession is affecting clubs of all sizes and at most economic levels. About one out of three club owners is holding his or her own. However, nearly two in 10 club owners are having a tough time making a go of it. Attrition, which in the last recession did not escalate until nearly the end of the economic downturn, is occurring at a much faster rate in the beginnings of this recession. American consumers are likely pulling back from committing to membership purchases as stagflation deepens. Group fitness is inching its way up the ladder of club offerings, but predictably one in three clubs is losing money at it, and only one in three clubs sees fit to employ full-time management in this area of club programming.
Combined with the recently revised International Health, Racquet and Sportsclub Association reports that show net memberships down more than 3 percent in 2007 versus 2006, I have to guess that the second half of this year will show equally dismal results for the majority of U.S. fitness facilities.
Club owners are now being forced to address the attrition problem. Realizing that they no longer can sell enough memberships “through the front door” to cover those “exiting out the back door,” club owners are turning to retention efforts, and that invariably spells better member service in the long run. Shakeouts in an industry are always tough, but they are also necessary.
Michael Scott Scudder operates MeetingZone, an online-based consulting and training service. He can be contacted at 505-514-0294, on Skype at michael.scott.scudder or by e-mail at email@example.com.