Health Club Consumer Behavior Sheds Light On Industry's Future
The 2013 IHRSA Health Club Consumer Report
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IHRSA, with analysis and insights provided by ClubIntel, recently finalized the 2013 Health Club Consumer Report (to be released by IHRSA at the end of November and can be acquired at www.ihrsa.org/research-reports). The 2013 Health Club Consumer Report, like its predecessors, delves into the attitudes and behaviors of health club consumers, seeking to understand the impact these current practices might have on how club operators shape their business in the future. In 1919, Marcel Proust, in his book, A L'ombre Des Jeunesfilles En Fleurs, was quoted as saying, "What we call our future is the shadow that our past projects in front of us." Well, in the case of the health club industry, the health club consumer behaviors brought forth in IHRSA's 2013 Health Club Consumer Report tell a vivid story of the recent past and present, providing an excellent compass for operators to follow for 2014 and beyond.
The report provides a detailed look at how consumers use their clubs, looking at a host of variables ranging from what members practice to how they spend their discretionary dollars in the health club environment. In this year's report, IHRSA has also taken a look at how health club consumer behavior tracks against larger national demographic and economic trends. In the report's last section, IHRSA brings forth eight key insights accompanied by actions that operators might consider in leveraging the report's insights.
The first, and possibly the most powerful insight brought forward by the report is the fact that the health club industry has reached what business authorities call the "mature stage" of its lifecycle; the point in time when the public's demand for an industry's offering is fulfilled by the existing supply. In the case of the health club industry, membership levels have been relatively flat for the past six years* (membership actually dropped slightly from 2011 to 2012), with the total number of club members exceeding 50 million since 2010. The percentage of the American population who possesses a health club membership has remained relatively stable, ranging from 16% to 17.5% over the past five years. Why this is significant is because of what occurs when any industry, like the health and fitness club industry, reaches maturity. First, business models become more standardized, or as some would say, "copycat." Second, industry players compete more on price, and finally, in an effort to "break out," some industry players evolve their business models, focusing on niches, segmenting and creating wholly different value propositions. This last approach, one of segmentation and differentiation allows a mature industry to continue growing, albeit slowly.
In today's health club market, we see all three patterns taking hold. We see a proliferation of copycat club models, whether it's in the low-price, high-volume sphere (e.g., Planet Fitness, Blink, Crunch franchises, Gold's Express), mid-market arena (e.g., LA Fitness, 24 Hour Fitness, Gold's, New York Sports) or franchise business (e.g., Anytime Fitness, Snap Fitness). Price has always been the great battleground for our industry. But, over the past few years, especially since the "economic crisis," price discounting has amplified. Possibly the most visible example of this pricing battleground has been the proliferation of low-price, high-volume club models that have exploded on the scene in the past three to five years. Finally, the industry has seen an explosion of growth in niche boutique offerings (e.g., Barre, personal training, Pilates, Yoga, sports performance, functional performance). These boutique studios have created new and exciting value propositions that have managed to pull members away from some of the industry's existing business models, as well as attracted consumers who previously may not have joined one of the industry's more established business models. Looking to the future, health club operators need to start considering how to innovate and differentiate their offerings, creating signature experiences that will engender greater loyalty from existing members and attract the newer health and fitness consumers who have migrated to the new boutique offerings.
Another powerful insight, one we imagine many health club operators already are aware of, is the challenge of member participation and member tenure in the health club industry. Over the past five years, the number of times a club member visits their club has remained stable, ranging from 99 to 102 times annually or approximately twice weekly. Furthermore, membership tenure for the industry has remained relatively constant over the past five years, with approximately 80% of all members having tenure of less than five. The average tenure of a health club member is approximately four years, the equivalent of having an annual industry churn rate of 25%. A potential alarm signal for the industry is the fact that the percentage of members who have held a membership for 10+ years has actually declined over the past four years. This two-headed monster of short-term tenure and low participation are two challenges the industry must find a way to overcome if it wants to continuously grow membership, revenues and profitability. Research ClubIntel has conducted with clients, independent of the IHRSA research, clearly shows that members who use their club more frequently tend to be more loyal, spend more and remain longer. If the industry can encourage members to use their club more often (e.g., create more emotionally engaging experiences rather than transactional ones), they in turn will be more successful at keeping them as members, and consequently, will experience continuous growth and profitability. Again, in our work with clients, we have found that members who indicate they are delighted with their club experience are 5 - 6 times more likely to remain a member.
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