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.

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