Club Insider

Eleven Predictions for the Fitness Industry in 2018

Part I

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Stephen TharrettStephen Tharrett

On the eve of each New Year, industry experts and fortune tellers hunker down over their computers studying fitness industry benchmarks and trends, along with cultural and socioeconomic happenings to extrapolate pearls of wisdom in order to forecast, or at least predict, what may happen in the New Year. For these individuals, the goal is to be the voice of the future, an industry prophet of hope and to provide a degree of clarity on what might be expected in the upcoming year, or as T.S. Eliot so eloquently said, "For last year's words belong to last year's language, and next year's words await another voice."

Our goal with this article is to lend an informed and possibly controversial voice for the fitness industry in 2018. We understand our prophecies are as likely to be right as wrong, and with any luck, they will bring forward insights to help industry professionals map out their expectations and strategies for 2018, including those that, at the moment, are unforeseen. So, it is with humility, and a touch of thoroughly modern intellect, that we offer up our forecast on what the fitness industry might expect, or might not expect, in 2018.

Mark WilliamsonMark Williamson

Eleven Predictions for 2018

1. Business Model Migration to the Poles Accelerates. Industry data clearly shows the industry has shifted to a polar structure, where pricing your value proposition in the middle is a form of business purgatory. According to data from IHRSA's 2017 Health Club Consumer Report, budget clubs grew by approximately 60% over the past few years, boutiques by over 90% and premium commercial clubs by over 20%, while mid-market commercial clubs and non-profits experienced sluggish to negative growth. The U.S. economy and the global economy are earmarked by their incredible level of income inequality. Consequently, consumers either have a lot to spend or very little to spend, and as is the case in the United States, there are a far larger number of consumers with very little to spend. This polarity does not necessarily speak to a drive for uniqueness or differentiation but more to a "spooked herd response" to avoid business dormancy and to follow the money. The question becomes: Which path will industry players take? At the end of 2017, budget clubs and boutique fitness studios were all the rage among investors and operators. These two business models epitomize the shift to either cheap, self-directed fitness or high-touch, affordable luxury fitness. What operators need to ask themselves in 2018 is: Do I migrate to one of the two poles, or do I stake out an entirely different position?

2. Cut Rate Clubs Get Cut Throat. As brought forward in Point #1, the budget club, or cut-rate business model, appears to be growing faster than any other, while also experiencing high turnover. In the U.S., there are a host of players, most of whom are franchise-driven and financed by private equity (e.g., Blink, Chuze, Crunch, Fitness Evolution, Planet Fitness and YouFit). In Europe and Latin America, the two largest industry players by club count are budget club operators (Basic Fit in Europe and Smart Fit in Latin America). We postulate the markets can't support the ongoing glut of budget players whose business model is heavily dependent on generating high volume sales to overcome low price points and high customer turnover. Already, we are seeing markets where the consumer base is not sufficient to support multiple budget players without one or more losing out. We reckon the market response to this will be two-fold.

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