What Is The Relationship Between Club Design And The Prices It Can Charge?
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There's a purchase psychology saying that the "Eye Buys." In other words, what someone "sees" strongly determines what he buys. Relating to clubs, things like facilities, programs and price are all key. Yet, what a club looks like plays heavily in someone's decision to join or not.
When opening a new club or renovating an existing club, a decision has to be made on how much to spend. Often the question comes up, can a better club design (in this case we are referring to primarily what a club looks like) and spending a higher amount to build a club result in higher club prices? If so, is there a relationship between the amount spent to build or renovate a club and how much more prices can increase?
The initial answer to this is yes, but very importantly, only to a point. The formula of, "if you spend more and more, you can then charge more and more," does not hold up. It appears that, at some point, you cannot charge more, no matter how much you spend to build. And, this relates to both membership dues and non-dues revenue sources.
Why is this? Primarily because the health club industry sells a product that most people dislike: Exercise. Yes, there are many who love exercise. But, most of the population does not put a high value on health clubs. They put a high value on their health and on the "need" for exercise (and clubs) but not on the "doing" of exercise and joining clubs. As a result, the health club industry is a very price sensitive industry. One of the reasons lower priced clubs have increased is that they appeal to the low value people put on clubs. The, "If I don't go, it does not cost me much, so I don't worry about it." mindset prevails.
Now, it is understood that a certain percentage of people, about 10% - 15% of the population, loves exercise and will pay more for better clubs. The growth of boutique clubs, smaller facilities that offer group and personal training (but not the traditional memberships of larger clubs) are able to charge upwards of $100 - $300 per month. They seek out those people in the marketplace who have the ability and desire to pay more to get a better, more specialized club and programs. These type of clubs should definitely look upscale to help justify their higher fee, in addition to their specialty programming. The range of build-out (from a vanilla box starting point) should be $50 - $75 per square foot or more for this type of club.
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