Evaluating the Hidden Costs of your Group X Program

Since the early 1970s when Jazzercise and aerobic dance made their way into health clubs, and the late 80s when “step” was first introduced, organized group exercise has been progressively proving itself as one of the most influential drivers of health club engagement and retention.

As of 2011, there were over 22.1 million people participating regularly in group fitness (43 percent of total health club members) and in 2012 that number continued to grow. According to IRHSA’s 2012 Consumer Report, group fitness ranks as the fastest growing in-club activity — growing faster than cardio machines, weights or resistance training.

This participation translates to greater customer engagement, as well as more frequent visits to the health club, ultimately increasing the probability of client retention. IHRSA states that half of all active group participants attend their club around 100 times per year — twice as often as the average member, who attends only 51 times per year. The Retention People estimate that each extra visit a member makes to their health club during the month reduces the risk of their cancellation in the subsequent month by 33 percent, and increases the likelihood of money spent within the club.

Based off of IHRSA and TRP’s assumptions, if a member made one extra visit to the gym per week to participate in group fitness, facilities could assume a 132 percent increased probability of retaining that customer’s business in the subsequent months. Additionally, satisfied group fitness members are three times as likely to refer a new prospect!

It’s statistics like these that bring to light the vast indirect revenue opportunity that group fitness presents, as well as the importance for facilities to make calculated investments in their programs. As one of the largest departmental expenses for facilities, it is worthwhile for decision makers to take a strategic look at how to optimize fitness program expenses to ensure the highest possible return on investment.

For facilities considering either building new group fitness programs or supplementing existing offerings, there are two tiers of costs that generally get consideration: fixed (overhead) costs and variable (per class) costs.

For most facilities, the variable expenses mentioned earlier become the driving force behind decisions to limit their offerings. Variable program expenses are traditionally measured one of two ways: CPC (cost per class) or CPH (cost per head).

Most facilities only measure CPC, which includes all the costs incurred by offering a single class, and is closely related to an instructor’s rate per hour or per class. In a standard facility, the cost for one class might be around $25.00, but can rise as high as $65.00.

Cost per head, on the other hand, is what clubs use to gauge the efficiency of their program spending. The cost per head for a good group fitness program is $1.25, or about 20 participants per class. In this model, facilities become slaves to the pressure of CPH — predicting attendance levels and making schedules that react to consumer demand rather than creating it. The end result is that during the peak demand hours of the day, facilities reach space capacity and are forced to turn class participants away. Conversely, during low usage times of the day, there’s not enough demand to justify additional classes, so rooms sit empty.

This space issue leads to a third category of costs that is often overlooked: the opportunity cost of an empty room.

Even if a facility is able to offer 8-10 classes per day, that still translates to anywhere from 50-100 or more hours per week of downtime in fitness rooms. In the past, facilities have viewed this downtime as necessary due to the lack of perceived demand that would justify adding more classes.

Ironically, fitness facilities fail to realize that the true cost of an empty room is the cost of lost opportunity — the chance to engage members and drive loyalty and retention through increased availability of programs throughout the day. Facilities must recognize the need within their facility to plug the revenue leaks of empty aerobics rooms and create demand for fitness programs rather than just react to ever-shifting facility attendance levels.

This will lead savvy fitness facility operators to identify cost-effective ways to maximize space utilization and program participation.

Dave Kraai is the founder of Fitness On Request. He can be contacted at 612.520.7500, or by e-mail at dkraai@fitnessonrequest.com.