Ihrsa/cybex State Of The Industry Report

US Industry Growth Stalls at 41.3 Million Members But Is It Bad News?

(Saturday, April 15, 2006) - 8 Reasons Why This Year's Hiatus in US Industry Growth is Not Entirely Negative This year, for the first time in 10 years, US health club membership stalled. It didn't increase. It didn't decline. It stayed exactly where it was on 1/1/05. This is not altogether bad news. For eight different reasons, it can be viewed positively. First, every industry needs a periodic pruning. After ten years of growth in the number of US clubs, such a pruning is overdue. In the 12 months between 1/1/05 and 1/1/06, the number of American health clubs rose from 26,831 to 29,061. In the six years between 1/1/00 and 1/1/06, it rose 89% from 15,372 to 29,061. It's time for a 'weeding out' of marginal operations - a 'weeding out' that will be helpful to those that are stronger. Second, the fact that demand has stalled sends a message to first-time club developers. It tells them that this is not an easy game. As such, it discourages haphazard development and irresponsible investment...a message that is long overdue. Third, it advises everyone - veterans as well as newcomers - that we have entered the Age of Precision, an age in which location, scale, size, price, visibility, accessibility, development costs, etc. - all need to be precisely right. The cost for compromising on any of these fundamentals is prohibitive. Room for error is less than ever before. Fourth, it underlies the fact that whereas for every club the number of memberships will always be fundamental, revenue per membership is more important than ever. 'Share of market' is always fundamental; 'share of wallet' is increasingly vital. This is especially true in light of the industry axiom that 'the more they spend, the longer they stay.' Fifth, as never before, it puts a premium on membership retention. As with every passing year the cost and difficulty of acquiring new members increases, so too does the importance and economic benefit of retaining an ever increasing percentage of existing members. Sixth, regarding mature clubs (defined here as clubs 3 years of age or older) that have continued to exceed industry averages in terms of membership and revenue growth, it says that they are the true masters of this game. It is easy to grow when the wind is blowing at your back. It's more difficult when the wind has stilled, and 10 to 25 competitors, many of them new, are competing for the same new members as you are. Seventh, it rationalizes the expectations of investors, and tells them that mature clubs (defined as above) that consistently manage to grow their membership by 2% to 4% per year and grow their revenues by 6% to 9% are doing well. Given the competitive environment in which most clubs exist, to demand more is unreasonable. Eighth, it highlights the fact that everyone has a stake in industry growth. A growing industry attracts investment. A slowing industry does not. It is incumbent upon the industry collectively to figure out new ways to expand the market of health club members. Finally, it is important to note that this compression of the market has happened before. Industry growth stalled between '89 and '90, between '91' and '92, and again between '94 and '95. After each of these periods, industry growth resumed its upward course.
John McCarthy: Executive Director: IHRSA

This message brought to you by IHRSA and CYBEX in the interest of reaching 100 Million members by the year 2010 Source: American Sports Data, Inc., of Mount Kisco, NY

View all Anytime Fitness Press Releases

This article has been read 644 times.

Printer Friendly