Experts say the health club industry has approached a mature stage for this current 10-year growth cycle. Now that the total number of units has eclipsed 30,000, consultants believe the fitness industry is headed for a 10% to 15% correction. This means 3,000 to 4,500 units will be out of business in the next three years.
Specialty fitness clubs and franchises are opening every day around the country blind to the forecast for our industry. Some examples of these are: Women-Only Clubs, Low-Priced $19 Franchises, Pilates Studios, Personal Training and Sports Performance Clubs. Some operators may dismiss the threat from these new competitors because they believe these clubs are “niche” players that help grow the overall market. To some extent this is true, since only 15% of the U.S. population belongs to health clubs.
But, if you are looking to grow your current fitness business, you should start looking at these niches for yourself. One might make sense for your club and may help accelerate your growth. Why not consider a unique offering inside your facility to capture a new market for your business instead of letting someone else new in your market take it?
One of the important financial barometers that IHRSA utilizes to help determine a club’s financial performance is “revenue per square foot.” When you evaluate your club using this, it demonstrates how effective you are at utilizing your primary asset – your physical plant. Since your physical plant is your most costly investment, and it needs continued reinvestment to stay competitive, it should be maximized for its highest return.
When you calculate this figure, you find out the most profitable space in your club by determining which areas are utilized most by your members. Areas such as cardio, locker rooms, check-in area and circuit training areas are highly profitable and essential areas in your club. To determine the revenue per square foot for these areas, add up the square footage of all the areas, and divide this number by your gross membership revenue.
Once you know your highest values, perform the same exercise for the least profitable square footage of your club. Commonly underutilized spaces may include: racquetball or tennis courts, group exercise rooms with minimum schedules and low-populated classes, and excess distance between pieces of equipment on the training floor. (Just four extra inches between each machine can add up to a large amount of extra square footage for your club!) Add up all the extra revenue you are generating from profit centers utilizing these areas and divide by the total square footage of this area. If this number is not close or equal to your first calculation, then you have areas that are being underutilized. This means you are missing revenue opportunities for your business and leaving it for competitors.
Revenue per square foot is an invaluable way to evaluate your business, and determine whether you are maximizing your initial investment. If you are not generating the revenue per square foot that you should be, or you have underutilized space in your club, it’s time to investigate a niche business that will fit inside your club. Any opportunity under evaluation for your club should fit with your core business philosophy, as well.
Every fitness club offers the same underlying theme, “To provide an environment and means for people to get into shape.” Clubs differentiate themselves by catering to specific market segments such as women only, priceconscious consumers, family clubs, youth and performance-based clubs, etc. One niche that can work in almost any club is “Sports Performance Based Training.” Whether the club is a national chain or a small, private individual in a 1,000- square-foot garage, almost every market has had some form of sports performance business that enters their territory. Some club owners are not fazed by a new sports performance center in their market because they feel this business is not something they offer, and their business would not be affected by the infiltration. I say, think again. You are in the business of getting people fit, and fitness for many people today means becoming better at sports such as tennis, volleyball, basketball, softball, and flag football.
Sports performance training is not just for kids, it is for adults too. Many of the sports performance stand-alone businesses are now marketing heavily toward adults. Some of these adults are your members, and this is a market you cannot afford to lose.
By adding a real sports performance area in your club, you will retain more members and attract new ones. You only need 1,500-square-feet of space to designate for sports performance training in your club. This space can be utilized by all members, when not in use for training sessions, resulting in highly profitable square footage. Sports performance training is the next big wave to hit our industry. If your club is not offering this type of service, your members will take their business to a place that does.
For more information on incorporating a sports performance training area in your club contact Chris Poirier at 800.556.7464, or by email at chris.poirier@performbetter.com.
Bill Parisi is the Founder & Managing Partner of the Parisi Speed School, Parisi Sports Clubs USA, and Parisi Franchise Systems LLC. He can be contacted at 888.GET.FAST, or by email at bparisi@parisiusa.com, or visit www.parisischool.com.
