The Fitness Industry's Response to COVID-19
Insights into the Collective Improvisation, Innovation and Resilience of Global Fitness Operators
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It came out of nowhere, and within just a few months, fostered a level of business disruption never experienced by the fitness industry. In just over a month, the COVID-19 pandemic forced over two-thirds of global fitness operators to temporarily close their doors, and in the U.S., had fitness clubs and fitness studios in 46 States temporarily shuttered. Fitness companies large and small, franchises and independents, clubs and studios, all found themselves in unchartered waters without their motors nor a compass to guide them.
The crisis is one that can be framed in the words of Abraham Lincoln in his 1862 address to the Congress, "We can only succeed by concert. It is not can any of us imagine better but can we all do better. The dogmas of the quiet past are inadequate for the stormy present. The occasion is piled high with difficulty and we must rise with the occasion. As our case is new, we must think anew and act anew."
Taking the lead from Lincoln's words, we decided to bring operators around the globe together to study their collective responses to the challenges steeped on the fitness industry by the rapid and unprecedented number of closures resulting from COVID-19. Our goal, aligned with the words of Lincoln, were to bring forward new ways of thinking and acting as improvised by fitness operators around the globe. We launched our survey to global operators in late March, and by the third week of April released our findings in a report entitled, The Fitness Industry's Response to COVID-19; Insights into the Collective Improvisation, Innovation and Resilience of the Global Fitness Industry. The balance of this article will bring forward some of the most important insights uncovered by the research, along with some strategies for fitness operators seeking to gain a competitive advantage during the crisis.
What follows are some broad insights, driven by the data, that we believe offer fitness operators, as Sun Tzu brought forward in the Art of War, an opportunity in the midst of chaos.
- Digital fitness content emerged as a mainstream tool for engaging members and clients. Digital content included on-demand and streaming group exercise content (ODSGX), as well as on-demand and streaming personal instruction and coaching (ODSFC); 74% of fitness operators indicated they were offering ODSGX and 61% indicated they were offering ODSFC. To frame just how extraordinary this development is, we go back to ClubIntel's 2019 International Fitness Industry Trend Report - What's All the Rage where 13% of fitness operators reported offering ODSGX and 11% ODSFC. While not a valid orange-to-orange comparison, it reflects a nearly six-fold increase in the percentage of clubs and studios that moved to digital content in a matter of a few months because of COVID-19.
- Fitness studios, compared to their siblings, heritage fitness clubs, were more likely to engage their members, often by 10 percentage points or more through digital content, including offering virtual hangouts, virtual parties and virtual competitions to keep their clients socially connected and emotionally engaged.
- Fewer than 50% of operators indicated they proactively froze members' dues/subscription fees upon closing. Of the 44% who froze member dues, 57% did so in an amount equal to one month's fees. Clubs were significantly more likely to offer freezes than fitness studios. As seen in the press, many fitness operators who chose not to extend freezes found themselves at the wrong end of legal action brought on by members. We believe the failure to immediately freeze fees will be an opportunity missed, not to mention a damaging action in members' minds.
- Only 17% of fitness operators indicated they had extended members an in-facility credit they could use once the facility re-opened. Similar to what we saw for membership freezes, clubs were significantly more likely to offer in-facility credits than fitness studios (24% to 7%). We believe extending in-facility credits is an enormous opportunity for bringing people back once the physical doors open, giving the 17% who did it a competitive advantage once fitness facilities re-open.
- We saw a small percentage of operators, both clubs and fitness studios, who offered members equipment they could use at home (24% collectively). From a percentage perspective, fitness studios were nearly twice as likely to provide this type of service to their clients as clubs (40% vs. 23%). In the comments and case studies we received, operators reported lending their equipment to clients and members, either for free, a voluntary donation or for a small fee. Some even partnered with equipment manufacturers to provide special discounts on new equipment. We feel these operators demonstrated a high degree of caring and improvisation that will benefit them upon re-opening.
- When it comes to their employees, approximately 60% of operators indicated they had guaranteed their staff jobs once business re-opened. In this instance, fitness studios were more likely than club operators to extend this offer.
- To provide employees economic security through paid sick-leave, partial compensation, incentive payments, severance payments or extended healthcare coverage, the percentage of operators who indicated they offered one or more of these economic security blankets was between 20% and 37%. We believe that those operators who were able to package some form of economic security blanket for their employees are better positioned for re-opening than those who were unable to offer economic security.
As the earlier quote from Abraham Lincoln stated, "...our case is anew, so we must think anew and act anew." What follows are some of our thoughts on how the fitness industry can act today, and just as importantly, act moving forward.
- Digital content (ODSGX and ODSFC) are no longer operational luxuries; instead, they are a necessity for operators who want to be engaged with members during the crisis and post-crisis.
- Shed the old ways of thinking and acting. The data, not to mention the press, showed us the old ways of thinking (holding clients hostage to contracts, not being proactive in communicating to members, thinking sales before service, not having a digital strategy that includes mobile and streaming content, etc.) are not the pathways to success during the crisis, nor once the brick and mortar business re-opens. Operators need to shift their thinking and acting, including learning a lesson from those operators who engaged their members and clients creatively during the crisis. These lessons offer a window into how business will be conducted in the future.
- Create a crisis plan. COVID-19 caught most operators by surprise. While many operators were able to respond quickly and definitively to the crisis, far more found themselves in unchartered waters. This statement speaks to both small independent fitness studios and clubs to large multi-facility operators. Not having adequate capital reserves, being highly leveraged, not having a strong digital presence and failing to demonstrate caring and empathy during the crisis need to be addressed going forward as part of a well-devised crisis plan.
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In closing, we share the words of Alan Watts who said, "The only way to make sense of change is to plunge into it, move with it and join the dance." We hope more will join the dance and be part of the post-COVID-19 success story.
For those who want to obtain a complimentary copy of the report, they can download it from the ClubIntel website by going to bit.ly/clubinsider91.