Currently, 41 million Americans--about 13.9%--have health club memberships, a number that has remained flat for the past two years. And while revenues--up 10.7%, to $17.6 billion in 2006--have been gaining, so have the number of new clubs being built, says Dave Remick, director, and author of the report.
The likely winners are smaller clubs, such as Curves and Planet Fitness, where monthly dues can be as low as $20, with no initiation fee. "These clubs have done a great job of finding an underserved market--the people who were either intimidated by all the equipment of larger gyms, or who just know exactly what they want," he says, by zeroing in on such niches as women-only, one-on-one training, or fitness-only. Another appeal is that there are often no contracts--a big plus for the many people who have yo-yoed their way out of more than one gym contract and are wary of commitment.
Other winners, he says are larger gyms--ranging from 15,000 to 225,000 square feet--tempting new members with everything from swimming pools to elaborate rock-climbing walls to daycare facilities. "By adding services that boost revenues per member, they are also well positioned," he says; fees from personal training, lessons, spa amenities and other extras beef up the bottom line. In addition, these larger gyms have done well by targeting family memberships. Overall, Mercanti predicts that revenue will continue to gain at about 6% a year through 2010.
That means the run-of-the-mill neighborhood fitness clubs are the likely losers. "Often," he says, "clubs like Bally's--with about 4 million members--have dropped monthly fees to legacy members, which lowers revenue. And it's expensive to maintain a club well--clubs will lose members as soon as machines start to break, or locker-room areas start to look run down."
Even in ideal circumstances, he says, keeping members is tough: "People relocate, they get divorced, they take up a new sport. In the best circumstances, there's usually 25 percent turnover in membership, and in many clubs, it's more like 50 percent."
The largest, in terms of revenues, is 24 Hour Fitness, with 370-plus clubs and $1.3 billion in revenues--followed by Bally Total Fitness, with 400-plus clubs and $1.1 billion in revenues in 2006. But the four largest players account for just 18% of the market in terms of revenue, leaving plenty of room for consolidation.
And eventually, Remick predicts, the ever-increasing health awareness of consumers will lead them to gym memberships. "There's still only a relatively small segment of the population with memberships," he says, "and people are only getting more conscious of the role exercise plays in keeping you healthy."