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The IHRSA Global 25
t’s now official. The health club industry—comprised, in large part, of thousands of dedicated, hard-working, highly professional
IHRSA members—is truly recession-resilient. Figures for 2010 confirm that the U.S. industry has successfully navigated one of the worst and most trying economic downturns of the last century. Many club operators in other parts of the world have also stayed the course, but, admittedly, some continue to struggle in this most uneven of recoveries. A year ago, CBI noted that the industry had breathed a collective sigh of relief, as there was a real sense that things
were finally beginning to improve, despite the fact that a full recovery remained elusive. That positive sentiment is even stronger now. “We can be proud that many people in this industry worked very hard to improve their clubs under difficult
circumstances,” observes Rick Caro, the president of Management Vision, Inc., a consulting firm based in New York City. “In 2010, the number of net members increased, and attrition is under control again—closer to the 2008 num- bers, following a difficult 2009. Nondues revenue came back; EBITDA margins are now closer to 2008 levels, though not as high as in 2007; and we saw the first growth in members in several years.” Results from IHRSA’s annual membership survey, conducted in January, indicate that U.S. club membership
reached 50.2 million in 2010, a healthy 10.8% increase over 45.3 million in 2009. That jump is even more impres- sive considering the fact that the number of Americans belonging to a club was flat—between 45 and 46 million— from 2006 to 2009. In addition, the total number of health club consumers—i.e., members and nonmember users and visitors—reached 58 million in 2010, up 10.4% from 52.6 million in 2009. Finally, total U.S. industry revenues were $20.3 billion in 2010, up 4% over the previous year, and the number of
clubs totaled 29,890, a slight increase from 29,750 in 2009. Worldwide, the industry generated an estimated $70 billion in revenues, the result of the efforts of more than 128,000 clubs.
TURNING THE CORNER “I’m definitely seeing more optimism on the part of club owners, compared to the ‘bunker mentality’ of the last two years, and, I think, for good reason,” says Duane Stullich, managing director at FocalPoint Partners, an investment banking firm based in Los Angeles. “Operators with balance-sheet issues who took the steps needed to fix them have created opportunities for growth. Crunch Fitness is a good example of this.” “Groups including LA Fitness, Urban Active, and XSport continue to build highly attractive, multisport boxes and
maintain large memberships at reasonable membership prices,” says Pete Moore, the managing partner at Integrity Square, a boutique investment firm based in New York City that focuses on the active-lifestyle, health, and wellness sector. “Equinox and Life Time Fitness, on the high end, are exceeding expectations. And Planet Fitness and WOW! Work Out World are performing extremely well at lower-priced memberships.” One of the principal factors contributing to the relatively stable number of clubs in
“We can be proud that many people in this industry worked very hard to improve their clubs under difficult circumstances.”
the U.S., and the increase in the number of club members, both in the U.S. and world- wide, is the ongoing success story of Anytime Fitness and Snap Fitness. By the end of 2010, Anytime Fitness had a total of 1,496 facilities, a 20% increase over 2009, and placed No. 2 on the Number of Franchises list; Snap Fitness had 1,122, a 17% increase over ’09, and placed No. 3 on the list. Anytime Fitness’ five-year unit growth rate (2006-2010) was 397%, and Snap Fitness’ was 783%. Together, the two companies now serve some 1.3 million members. Still, there were no big deals in the U.S. last year for three principal reasons, Caro explains. “Strategic buyers haven’t been willing to pay the prices of three years ago, so potential sellers have been holding off. Debt financing has been hard to obtain for cash-based borrowers who couldn’t get the leverage that was available in 2008. It was also difficult for asset-based- borrowers because banks have tightened their requirements in general or because
they have problems with this industry. However, due to changes in some SBA loan requirements, things may pick up by the end of this year.” “Fitness facilities definitely require cash-flow loans, which was a class of lending that dried up in 2009, but
experienced some loosening in 2010,” notes Brent Knudsen, a managing partner at Partnership Capital Growth in San Francisco. “It’s now available primarily to larger, stronger operators such as LA Fitness, which raised a $300-million acquisition line earlier this year, and 24 Hour Fitness, which also restructured its debt recently. In addition, more local and regional operators have accessed improved credit facilities with lenders willing to support higher debt levels for growth and acquisitions.”
38 Club Business Internat ional | JULY 2011 | www.
ihrsa.org
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