| CBI Interview |
CBI: You predict that the industry will expand at an annualized rate of 2.6% through 2016, reaching 47.5 million members and $28.2 billion in revenues by then. What factors do you see contributing to this growth?
MN: Population growth and demo- graphic changes are expected to help the industry grow over the next few years. As baby boomers continue to age and strive to maintain active lifestyles, an increasing number of them are expected to join clubs. Also, as childhood obesity continues
to be of great concern to many parents, and as many schools continue to cut back on their physical education programs, more kids—members of the under-17 market segment—are expected to become members, espe- cially if their parents already belong.
are slowly gravitating toward smaller, neighborhood gyms because they believe they’re less likely to be overcrowded. People are also seeking a greater
sense of belonging, and, at smaller facilities, they’re more likely to develop relationships with the staff, and see the same members on a day-to-day basis. Smaller clubs may also be better than larger ones at responding to the needs of the neighborhood. For instance, a club located in a somewhat affluent, urban neighborhood with young adults is likely to offer the yoga and group cycling classes that those members want.
CBI: On the other hand, you note that, in this increasingly competitive market, larger club chains are seeking to squeeze out
“Although some consumers continue to view club memberships as a ‘luxury,’ others have become more health- conscious, and, for them, exercise and remaining healthy have become true priorities—a virtual necessity.”
In addition, the 18–34-year-old
segment generally has the largest amount of free time, and people in this cohort tend to show a strong interest in staying active, often at clubs.
CBI: The report also notes that there’s a growing preference for smaller, easily accessed facilities that cater to local markets. What’s fueling this shift?
MN: As Americans’ schedules continue to become more hectic, they’ll want to work out at clubs that can easily accommodate their everyday routine— ones that are close to their homes or workplaces. In addition, consumers
36 Club Business Internat ional | APRIL 2012 |
smaller companies. What statistics support this conclusion?
MN: According to IBISWorld research and estimates, the number of club companies fell at an average annual rate of 1.3% in 2008, 2009, 2010, and 2011. Although some of this decline occurred because marginal gyms left the market during the recession, other clubs were acquired by large chains in an attempt to increase their presence in promising locations. For instance, in 2010, LA Fitness acquired 10 Pure Fitness locations in the metropolitan Phoenix area. Eight of those locations were closed, and LA Fitness transferred those members to its existing clubs.
ihrsa.org
CBI: A number of industry observers have suggested that the mid- market clubs face the greatest threat in the current economic environment. Do you agree?
MN: Absolutely! Our research shows that price-conscious consumers are choosing to join smaller facilities with fewer amenities, and avoiding larger ones that tend to be more expensive. Consumers who are willing to spend more are demanding facilities that cater to a niche market or have exceptional perks. Mid-market gyms don’t fit into either category, so, if they want to attract more customers, they’re going to have to diversify their services.
CBI: Your report points out that most regions in the U.S. have a good clubs-to-population-density ratio; however, it skews toward a higher concentration of facilities in the Mid-Atlantic. What might account for this?
MN: The Mid-Atlantic region is not only densely populated, but it’s also affluent. In areas with more disposable income, consumers are more likely to be willing to pay for a membership. This region also has a significant number of large cities, including New York, Philadelphia, and Baltimore. Urban consumers tend to join clubs that are convenient and accessible.
CBI: Today, at this point, the top four chains account for nearly 13% of all sales. Do you see that percentage changing over the next four years? Why, or why not?
MN: I believe that figure will remain essentially the same. The larger com- panies will continue to acquire smaller sites to increase their presence and membership numbers in their target markets. However, niche gyms will continue to enter the sector and provide unique products and services for the customers who want them.
CBI: Industry consolidation is another hot issue that’s frequently discussed. Given the current
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