The health club business is changing, radically. “Why?” you might ask. There are many factors, all based on the mega trend of shifting consumers, rapidly advancing technologies and globalism. Today, however, I’ll just focus on two key symbiotic forces that are underlying this industry change and creating a new and exciting future.
First, economics are behind the widespread expansion of alternate bricks and mortar studios and micro-gym models, as well as digital alternatives. Building a traditional health club costs four times what it did three decades ago, yet average membership dues have not seen much of an increase over that same period of time. The results are lower returns on investment and growth stagnation for traditional full-service clubs.
Brands like LA Fitness and TRT Holding’s Gold’s Gym are finding it prudent to buy existing clubs as opposed to just building new ones. The micro-gym models offer better returns as an alternative, hence the rapid growth of the segment. Budget models, having carved out operating costs while lowering price to gain share, emerged from the same economic pressures. It’s no wonder that Equinox acquired Soul Cycle just a few years back, while also pursuing the budget Blink model. The same is true when considering TSI’s recent launch of its BFX studio concept. These brands, among others, understand the economics at play and are acting accordingly.
Chris Anderson, pictured above, wrote the book “The Long Tail,” which was originally conceived and shared in this Wired article by the same name published in October 2004. In it he wrote, “For too long we’ve been suffering the tyranny of lowest-common-denominator fare, subjected to brain-dead summer blockbusters and manufactured pop. Why? Economics. Many of our assumptions about popular taste are actually artifacts of poor supply-and-demand matching — a market response to inefficient distribution.”
While Anderson was referring to the movie business, his views of a decade ago can apply to many industries today, and the health club business is no exception. The limitation of alternate supply kept our industry from offering a wider array of services based around customer needs. Those barriers are being removed, like they were for entertainment, and we are just beginning to see the impact.
It’s not of course just about economics alone. Anderson’s “Long Tail” was born through the second key trend, technologies, which provide alternative ways for people to obtain services that clubs use to offer almost exclusively. If you don’t believe me, simply check out Fitocracy, RetroFit or Fitorbit, to name but a few of the digital services that are available.
Let’s not forget recent massive investments in wearable devices, which are in their infancy and will result in even more innovation around health and fitness. Competitors from outside the traditional club market see the potential as well, and are also leveraging technologies to provide fitness and wellness solutions. Think of Walgreens and CVS, which have created Internet-based fitness and wellness services today through their over 16,000 U.S.-based locations. This is only the beginning of what’s to come.
Some might worry that this is bad news. While the pain of change will be felt by those unable to adapt to the unstoppable influences of economics and technology, the result will actually be a more robust opportunity for us all. We will be able to realistically serve more people in different ways, and improve the health and well-being of hundreds of millions who were not reachable before. As intelligent retail brands reacted to online shopping, smart club brands will embrace the omni-channel opportunity, providing service to their customers in or outside the club. In the end, the result will be a much larger market with fitness and wellness being a more mainstream solution for the vast majority of people. We are experiencing the dawn of a new era for health clubs and the future, while different, is a very bright one indeed.
Bryan O’Rourke is considered a thought leader on technology, health club, consumer and wellness trends and has been widely published in periodicals around the world. He is a keynote speaker, executive and shareholder in several companies including Fitmarc, Integerus, The Flywheel Group, and Ecofit. Bryan has advised many leading global health and fitness brands. He serves as a member of the GGFA Think Tank, sits on ACE’s Industry Advisory Panel and is CEO of the Fitness Industry Technology Council. To learn more visit bryankorourke.com.
