What “Industry Numbers” Are Telling Us
By: Michael Scott Scudder
Founder/CEO of Fitness Business Council
In the past couple years, one of my most frequent “inquiry/response” areas is the following: “Michael, my membership numbers, profits and retention are down again. Is this going on across the industry, or is it just my business?” Perhaps a brief look at some industry statistics will shed some light on this subject for readers.
With the exception of growth in number of clubs, most industry benchmarks are at a relative standstill.
Number of net members per club has not moved significantly in 10 years. At the end of 2004, the average number of members per average club stood at 1,646. At the end of 2013, that number was 1,645.
Why? While there has been 36% increase in memberships nationwide in the past decade, there has been an equal 36% increase in the number of clubs. In other words, supply/demand has balanced.
National increase in new member sales topped out in 2009. By formulating annual membership sales for “re-buys” and actual “new membership” sales, we can see that actual new membership sales as part of overall sales reached a peak five years ago at approximately 18.4 million. Said another way, actual “new” membership sales have dropped 14% in the past five years.
Another reality check is that approximately 40% of all national memberships are “owned” by 9% of clubs…with the “bigs” (corporate clubs and franchisors) taking greater market share each year.
Retention across the industry is declining once again. While the efforts of 2011, 2012 and into mid-2013 worked to bolster net member numbers, monthly membership attrition is now hovering at about 3 ¼% (39% annually) and threatening to get worse. This places additional pressure on independents to produce yet more new memberships in an economic environment that is less than favorable.
In general, pre-tax profits (not EBITDA) are at approximately 8%. Just two years ago, quarterly Fitness Business Council surveys evidenced double-digit margins in most sectors, but no longer. While studios, micro-gyms, and mid-size higher-pricers are faring pretty well, the other by-size segments are struggling to maintain margins. Approximately 30% of respondents each quarter are operating in the red.
Does this mean that a “death knell” is being sounded for the health club business? Absolutely not! What it does point out is that those clubs that have gravitated to more and more program sales and training revenues are still flourishing and in many cases growing profits. Those that have stuck with a now-outdated “members-members-members-only” philosophy are pushing a big rock up a bigger hill.
What’s your “take” on this subject? Email Michael with your opinions.
(Michael Scott Scudder is Founder/CEO of Fitness Business Council, the independent club business network. He can be contacted at 575-751-1212 or firstname.lastname@example.org.)