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Profit Designing

Designing the New Club Model for Maximizing Profits

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Bruce CarterBruce Carter

There are substantial changes evolving with clubs, and this is affecting design significantly. The old standard model was primarily dues-based, where clubs offered everything for one price, and the goal was to get as many members as possible. This model usually involved some variation of cardio, free weights, machines, group exercise, and possibly, spinning. The new model is to get as many members as possible, but equally importantly, is to maximize revenue per member through results-based, tiered memberships and fee-based personal training programs, thereby maximizing the average amount of dues per member. To achieve this goal, a new design model is necessary where a club has the optimal space and programs enabling it to charge extra for a variety of different offerings.

When low-price clubs started to flourish, other competing clubs often tended to lower their price while decreasing what they offered. Low-priced clubs obviously provided something that many people wanted. The average person, knowing that they probably wouldn't stick with their exercise, became very attracted to a very low price (with a tipping point of around $10), greatly reducing their fear of losing money on something they most likely would not use.

Then, as more low-priced clubs entered the marketplace, thus reducing the number of members for each club, many clubs started to think of how to get more money per member per month. Things started to get added back into clubs but at an added fee. Concurrently, another major change in the industry is continuing to evolve, the demand and growth of group and personal training. Combined with this is the trend of many small boutique and single purpose clubs opening, charging substantially higher amounts for specialized programming.

The lesson learned is, that although there is a significant market for the low-price, value-based gyms, there continues to be a huge market for those who value results-focused gyms, programs and training. This market is growing and will spend extra for specialized training, often substantially more than their basic dues. Wider ranges of fee-based classes have evolved, such as Barre, Pilates, suspension training, hot yoga, spinning, core training with weights, ropes and boot camp to name a few. Even virtual training is growing in clubs, offering more variety, and some clubs provide this as part of the membership, while others charge for it.

As club operators recognize the need to evolve their business model, their physical plant is set up for an outdated model, and this hinders their ability to maximize profitability. Therefore, creating a club to offer a wide range of fee-based programs must be coordinated and followed up with a staff, operations, pricing structure and sales/marketing that can fully utilize the design. If the old way of operations tries to optimize a new state of the art profit design, then much of the space will be underutilized.

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