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Club Industry Financials: Some Optimism For the Future


The following is a wrap-up of the Financial Panel presentation at the 2016 IHRSA Conference and Trade Show.


increased participation levels amongst the members. Although EBITDA (earn- ings before interest, taxes, depreciation and amortization) margins are improv- ing, they have not reached the levels of 2006-2007. Overall membership levels are still growing slightly. Several segments have benefitted


from substantial new-builds, including HV/LP (high-volume, low-priced) clubs and 24-hour, 7-day-a-week all-access clubs. Continuing significant growth was


seen in the studio market. This in- cluded new facilities in the barre class, HIIT, yoga, boxing/kickboxing, group cycling and small-group training categories. There are always new personal


training studios being created. In some markets, treadmill or rowing-only con- cepts have been introduced. These stu- dio concepts are growing faster via the franchise vehicle than independent clubs. Construction costs are increas- ing after years of flat levels.


American clubs forecasting slightly better bottom lines for 2016


BY RICK CARO


cautious optimism with key indicators on the revenue side trickling up. Landlords are wooing experienced


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club operators as retailing trends have been somewhat unfavourable. There has been an ease of entry for clubs with financing available under a va- riety of means. Few clubs are closing. Even struggling ones are replaced by others. The U.S. economy in 2015 was


strong and unemployment rates con- tinue to decline. But the geographi- cal areas tied to the oil industry are


24 Fitness Business Canada May/June 2016


lubs in all segments have overcome the economic challenges of the recession and are seemingly upbeat about 2016. The tone is


showing some declines in member- ship and in revenue levels. Consumer confidence is strong. There are a series of underlying positive trends at work, but few are predicting major upward swings.


2015 Headlines Various trend sources highlight key


club metrics in an upward direction. The comparison of club revenues com- pared to 2014 showed upward signs. However, some of the larger club groups indicated a flat trend for both revenues and net memberships. Many clubs are reluctant to increase dues pricing. The non-dues revenue categories


continue to grow following a strong previous year. Many are finding new sources of products, services and pro- grams and are successfully gaining


Debt Markets Changing In previous years, the debt markets


have been very attractive for all ex- cept pure first-time start-ups with no track records. Clubs have been able to fund new-builds and acquisitions with leveraged debt. Although the markets are still attractive for asset-based lend- ers, interest rates may tend to creep up a little. Many have refinanced suc- cessfully over the last year. Cash-flow- based lending has become more diffi- cult and at lesser leverage values. This may mean that private-equity-backed club companies may grow at a lesser level, may have to pay more for debt, may have to provide more equity and may have clubs pay less for potential acquisitions.


Fewer Club Transactions Several companies converted from


franchised companies to independents. Several clubs were able to attract pri- vate equity funding, both from compa- nies previously in this space as well as new ones.


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