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Club Industry Financials 2012: A Different Year
At this year’s IHRSA Financial Panel, presenters from North Castle Partners, Pulse Equity, LNK Partners and TEKA Capital reflected on 2012 and discussed future trends.
BY RICK CARO
as “recession resilient,” not “recession resistant.” It has been affected by the economy, but not in a significant way. For many clubs, their bottom lines and margin levels are still not back to 2007 levels. Theoretically, high unemployment levels are still having an impact on the club industry. Looking back to 2008, this
T
was when the club industry saw its very first weakness. It wasn’t until 2011 that posi- tive changes were seen, and 2012 continued on that path. Some clubs closed or sold at distressed prices while others strug- gled along during this recessionary period. Attrition levels got back under control, but for many the new-joiner patterns were still not consistent.
2012 headlines This year was one of slight improve-
ment, but still no consistent upward trend line. IHRSA’s Index once again showed that total revenues were up slightly. The net membership levels also had slight improvements. The non-dues (or ancillary) revenue cat- egories experienced real growth again. This may be a combined function of greater penetration of the club’s exist- ing membership and some selective price increases. The EBITDA margins were now holding steady, but nowhere near the percentages from 2007.
26 Fitness Business Canada May/June 2013
he North American club industry has been officially classified by financial pundits
In 2010, the total health club mem-
bership level rose dramatically, but only slightly in 2011. Then, in 2012 it fell back slightly. However, with sta- tistical rounding errors inputted, the overall conclusion for the last two years is that total membership levels were flat. At the same time, the total number of commercial clubs in the U.S. also remained at similar levels to past years.
Continued missed opportunities The opportunities for new builds
continued to grow, as an increasing number of real estate landlords woo the club industry. However, many
small club company owners were un- able to locate growth capital from a combination of equity and debt sourc- es. This caused further frustration as construction costs leveled off in many areas. Club leaders were once again in- creasing capital expenditures in their existing clubs at pre-recession levels. The challenge in recent years for
club owners has been the debt mar- kets. The level of leverage for cash flow-based borrowers has been less than the 2007 levels. However, in 2012 this form of lending for many of the larger club companies became very desirable again. Very attractive debt deals were consummated at very low interest rates. For medium-size and smaller club companies who were asset-based
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