ibis us industry report

WWW.IBISWORLD.COM Gym, Health & Fitness Clubs in the US November 2013 1

IBISWorld Industry Report 71394Gym, Health & Fitness Clubs in the USNovember 2013 Sarah Turk

Working out: The industry will remain resilient as demand from health-conscious consumers grows

2 About this Industry2 Industry Definition

2 Main Activities

2 Similar Industries

3 Additional Resources

4 Industry at a Glance

5 Industry Performance5 Executive Summary

5 Key External Drivers

7 Current Performance

9 Industry Outlook

11 Industry Life Cycle

13 Products & Markets13 Supply Chain

13 Products & Services

15 Demand Determinants

15 Major Markets

17 International Trade

18 Business Locations

20 Competitive Landscape20 Market Share Concentration

20 Key Success Factors

20 Cost Structure Benchmarks

22 Basis of Competition

23 Barriers to Entry

24 Industry Globalization

25 Major Companies

28 Operating Conditions28 Capital Intensity

29 Technology & Systems

29 Revenue Volatility

30 Regulation & Policy

31 Industry Assistance

32 Key Statistics32 Industry Data

32 Annual Change

32 Key Ratios

33 Jargon & Glossary

www.ibisworld.com | 1-800-330-3772 | [email protected]


This industry operates fitness and recreational sports facilities that feature exercise and other active physical fitness conditioning or recreational sports

activities, such as swimming, skating or racquet sports. Companies are also involved in facilities management and fitness instruction.

The primary activities of this industry are

Operating aerobic dance and exercise centers

Operating athletic club facilities for physical fitness

Operating body building studios for physical fitness

Operating fitness centers, health clubs and gyms

Operating recreational sports club facilities

Operating ice or roller skating rinks

Operating spas

Operating squash, racquetball or tennis clubs

Operating swimming pools

71399 Golf Driving Ranges & Family Fun Centers in the USEstablishments in this industry operate recreational sports clubs (i.e. sports teams) but do not operate sports facilities.

72111 Hotels & Motels in the USEstablishments are primarily engaged in operating health resorts and spas where recreational facilities are combined with accommodations.

81219a Weight Loss Services in the USEstablishments in this industry are primarily engaged in providing nonmedical services to assist clients in attaining or maintaining a desired weight.

81219c Tanning Salons in the USEstablishments primarily engaged in providing artificial tanning services

Industry Definition

Main Activities

Similar Industries

About this Industry

The major products and services in this industry are

Dance centers

Gyms and fitness centers

Ice and roller rinks

Swimming pools

Tennis centers

Other


About this Industry

For additional information on this industry

www.ballyfitness.com Bally Total Fitness

www.ihrsa.org International Health, Racquet and Sportsclub Association

www.sfia.com Sports and Fitness Industry Association

Additional Resources

IBISWorld writes over 700 US industry reports, which are updated up to four times a year. To see all reports, go to www.ibisworld.com


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Per capita disposable income

SOURCE: WWW.IBISWORLD.COM

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Revenue Employment

Revenue vs. employment growth

Products and services segmentation (2013)

65%Gyms and fitness centers

5%Tennis centers

10%Other

7%Dance centers

7%Swimming pools

6%Ice and roller rinks


Key Statistics Snapshot

Industry at a GlanceGym, Health & Fitness Clubs in 2013

Industry Structure Life Cycle Stage Growth

Revenue Volatility Low

Capital Intensity Medium

Industry Assistance Low

Concentration Level Low

Regulation Level Light

Technology Change Medium

Barriers to Entry Low

Industry Globalization Low

Competition Level High

Revenue

$25.9bnProfit

$2.2bnWages

$8.0bnBusinesses

29,501

Annual Growth 13-18

2.9%Annual Growth 08-13

1.4%

Key External DriversParticipation in sportsPer capita disposable incomeTime spent on leisure and sportsNumber of adults aged 20 to 64

Market ShareThere are no Major Players in this industry

p. 25

p. 5

FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 32



Key External Drivers Participation in sportsWhen an increased number of people become aware of the importance of maintaining physical fitness, gyms and health and fitness clubs will experience an increase in demand. Consequently, growth in sports participation will intensify demand for membership in the Gym, Health and Fitness Clubs industry. Participation

in sports is expected to increase slowly during 2014.

Per capita disposable incomePer capita disposable income measures the amount of spending money that a household retains after paying taxes. The higher household disposable income rises, the more likely that a portion of that income will be allocated to visiting

Executive Summary

The Gym, Health and Fitness Clubs industry has slightly benefited from the recent onslaught of marketing campaigns and consumer trends that fight obesity and advocate for improved health. As a result, health club memberships are anticipated to grow at an annualized rate of 2.0% to 52.6 million, during the five years to 2013. While health club membership has increased considerably since 2008, from about 47.7 million, revenue growth was slightly hampered by low discretionary spending. As per capita disposable income declined at an annualized rate of 0.2% during the

five-year period, consumers became more budget conscious, which stimulated demand for low-cost gym memberships with few amenities. Consequently, during the recession, small-budget gyms with fewer amenities gained popularity compared with expensive, all-inclusive health clubs.

During the period, consumers were also more likely to participate in sports, which benefitted the industry, and subsequently caused the sports participation rate to grow at an annualized rate of 0.9% during the five years to 2013. This trend slightly boosted

revenue, as consumers became more health conscious. In particular, the number of adults aged 20 to 64, the largest gym going demographic, is expected to grow at an annualized rate of 0.7% during the five-year period, which will benefit revenue due to increased participation. Revenue is anticipated to grow at an annualized rate of 1.4% to $25.9 billion during the five years to 2013, and this increase includes 2.5% growth in 2013. However, because of rising competition from industry players that cater to a market niche of local consumers, operators lowered pricing and offered membership on a monthly basis. Therefore, profitability is expected to slightly contract from 9.8% of revenue in 2008 to 8.4% in 2013.

During the five years to 2018, the industry will benefit from an increase in per capita disposable income and growth in the number of baby boomers signing up for health memberships. An increase in discretionary spending, coupled with continued consumer awareness about the health benefits of exercise, will drive revenue growth. Consequently, revenue is anticipated to grow at annualized rate of 2.9% to $29.9 billion during the five-year period. Moreover, consumers will begin to substitute larger, all-inclusive clubs for low-cost memberships, which is anticipated to bolster revenue for the industry.

Industry PerformanceExecutive Summary | Key External Drivers | Current Performance Industry Outlook | Life Cycle Stage

The industry will benefit from an increase in per capita disposable income


Industry Performance

Key External Driverscontinued

health and fitness clubs. Per capita disposable income is expected to increase during 2014, representing a potential opportunity for the industry.

Time spent on leisure and sportsThe total time spent on leisure and sports influences industry demand. The greater the time available for leisure, the more likely that a portion of this time will be allocated to visiting gyms and health and fitness clubs. Nevertheless, time spent on leisure and

sports is expected to decrease slowly during 2014, posing a potential threat to the industry.

Number of adults aged 20 to 64Gyms, health and fitness clubs are used primarily by adults aged 20 to 64. The aging of the baby-boomer generation, and the maturation of their children (i.e. the “echo boomers”) will broaden the market for this industry. The number of adults aged 20 to 64 is expected to increase slowly during 2014.

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1804 06 08 10 12 14 16Year

Time spent on leisure and sports


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1806 08 10 12 14 16Year

Per capita disposable income



Improving sales Industry operators experience the greatest growth in health club memberships during the first three months of the year. New Year’s resolutions incite consumers to implement a healthier lifestyle and correspondingly, about 30.0% of all new members join gym and fitness clubs during the first few months of the year. Although industry operators aim to boost the number of memberships during other months by offering discounts and monthly memberships, January still comprises the largest portion of membership sales.

Over the past five years, the number of health club memberships across the

United States expanded rapidly and total memberships rose from 47.7 million in 2008 to an estimated 52.6 million in 2013. While this trend boosted revenue, industry operators still compete on the basis of price. Operators that offered low-cost, contract-free memberships with fewer amenities became more popular, as consumers grappled with low disposable income over the period. The time spent on leisure and sports remained stagnant, further hampering revenue growth, despite 1.4% increase in 2009, as a result of surging unemployment. Although leisure time remained stagnant, more individuals participated in sports. As participation in

Current Performance

The Gym, Health and Fitness Clubs industry experienced slight growth during the past five years, bolstered by public health initiatives that shed light on the importance of fitness to fight diabetes, obesity and other health ailments. However, revenue growth will be limited by per capita disposable income, which is expected to decline at an annualized rate of 0.2% during the five years to 2013. Nevertheless, health club memberships are anticipated to grow at an annualized rate of 2.0% during the five-year period, as a result of the increased value consumers will place on fitness. The number of individuals aged 20 to 64 is also expected to grow at an annualized rate of 0.7% during the five-year period. Growth in this age demographic will boost revenue in particular, as more individuals advance into the 18 to 34 and 35 to 54 market segments, which account for 35.0% and 33.0% of revenue, respectively.

During the five years to 2013, revenue is anticipated to grow at an annualized rate of 1.4% to $25.9 billion, and will be supported by the trend of more baby boomers and

youth purchasing health memberships. In 2013 alone, revenue is anticipated to grow 2.5%, strengthened by an increasingly active aging population, which propels demand for health club memberships. However, profit contracted from about 9.8% of revenue in 2008 to 8.4% in 2013, as operators increasingly offered low-cost gym memberships without contracts, in an attempt to attract budget-conscious consumers, cutting into industry profitability.

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1905 07 09 11 13 15 17Year

Industry revenue




Improving salescontinued

sports grew at an annualized rate of about 0.9% during the five years to 2013, more individuals substituted individual fitness activities for team sports. This trend sustained revenue, as many time-strapped individuals found it easier and more time efficient to purchase gym memberships, as compared with participating in team sports.

Moreover, demographic trends have helped drive industry growth. For

example, the aging of the baby-boomer generation and the maturation of their offspring, the “echo boomers,” have broadened the market for gyms and health and fitness clubs. Government-sponsored programs, such as Michelle Obama’s “Let’s Move!” initiative, which fights childhood obesity, have increased awareness of the benefits of physical exercise for consumers of all ages, especially families.

Enterprises and employment

As operators try to attract consumers with low-cost, contract-free and low-amenity memberships, some industry players will consolidate or limit establishment expansion to lower operational costs. As a result, during the five years to 2013, the number of companies is anticipated to decline at an annualized rate of 0.5% to 29,501. To address consumers’ preference for local gyms and fitness centers that cater to a specific geographical niche, operators are increasingly substituting

smaller facilities for national chains. For example, from 2007 to 2010, Curves International Inc. closed 2,500 locations, as the franchise was unable to compete with local, low-cost gyms with longer operating hours. Regardless of the broader trend of consolidation, the number of employees in the industry is expected to grow at an annualized rate of 0.8% to 573,328 workers, as demand for fitness instructors increases in line with the growth in health club membership.

Fitness trends Poor economic conditions have caused new trends to emerge within the industry. A growing preference for easily accessible, smaller gyms with fewer amenities has benefited small-franchise gyms that cater to a local market. The market share of smaller-budget gyms is subsequently growing, as consumers substitute gyms with fewer amenities for expensive, all-inclusive clubs (which include related facilities such as tennis centers, racquetball courts, ice rinks and swimming pools).

For example, Planet Fitness experienced strong membership growth during the recession, with some clubs signing up more than 1,000 new members each month in 2009, according to the International Health, Racquet and Sportsclub Association

(IHRSA). Planet Fitness offers inexpensive gym membership fees of $10 to $19 per month depending on the area, and has steadily expanded operations over the past three years. Other growing franchises include Snap and Anytime Fitness, and have demonstrated the popularity of niche gyms that target specific clientele. Moreover, consumers that seek individualized fitness programs, specific fitness goals or are uncomfortable exercising in larger gyms particularly favored small-scale gyms.

Consumer preference has shifted towards smaller gyms with fewer amenities



New demographics During the next five years, population growth and demographic changes will increasingly drive revenue growth. For example, an aging baby boomer population will maintain a more active lifestyle and purchase gym memberships. Additionally, as healthcare costs continue to escalate, insurance providers may implement incentives to promote preventive health practices, such as the use of fitness centers, to lower the risk of type 2 diabetes, heart disease, dementia, cancer, high blood pressure and other health ailments. Many employers are increasingly viewing fitness as a vital component of employee health, especially because studies are showing how fitness can boost worker productivity, a trend that will positively affect industry revenue.

Furthermore, as many families become health and fitness conscious, more consumers aged 17 and younger will purchase gym memberships. Less physical education in schools, coupled with concerns regarding childhood obesity, will prompt membership sales for this age demographic. As consumers become increasingly time strapped, many will purchase either individual or group trainers and fitness

Industry Outlook

The Gym, Health and Fitness Clubs industry will experience growth in the next five years, largely due to an increase in per capita disposable income. As per capita disposable income is anticipated to grow at an annualized rate of 2.5% during the five years to 2018, consumers will increasingly substitute memberships that offer more services, with low-cost gym memberships with fewer amenities. Moreover, health club memberships are anticipated to grow at an annualized rate of 2.0% during the five-year period. As health club memberships grow at the same rate compared with the previous five years, individuals with higher discretionary income will purchase more expensive industry services, such as personal trainers. The number of individuals participating in sports will grow at an annualized rate of about 0.5% during the period, which will further boost revenue as consumers continue to substitute fitness memberships with team sports.

Furthermore, as the number of adults aged 20 to 64 is expected to increase at an annualized rate of 0.4% to 192.0 million, during the five years to 2018, revenue will also grow given that this age demographic comprises the largest market segment for the industry. However, industry operators will contend with time-strapped consumers, as leisure time is expected to decline at an annualized rate of 0.2% during the five-year period. While time-strapped consumers will have difficulty incorporating fitness into their daily routine, more consumers will purchase high-cost gym sessions to achieve fitness goals in a shorter period of time, such as personal trainers or fitness classes. As a result of consumers buying a greater number of high-cost industry services, revenue is forecast to grow at an annualized rate of 2.9% to $29.9 billion during the five years to 2018. Additionally, profit is anticipated to grow from about 8.4% of revenue in 2013 to 9.0% in 2018, as operators offer more high-margin services.

Population growth and demographic changes will increasingly drive revenue growth



New demographicscontinued

classes to obtain fitness goals more efficiently. In the next five years, group classes are expected to increase in

popularity, especially fusion classes that combine yoga, pilates, ballet, dance and surfing.

Future opportunities The number of individuals in the US that are obese is increasing dramatically. According to the US Center for Disease Control and Prevention, obesity has increased significantly among adults. Surveys show that among adults aged 20 to 74 years old, the prevalence of obesity increased from 15.0% (in the 1976 to 1980 survey) to 32.9% (in the 2003 to 2004 survey), with obesity anticipated to become more prevalent in the coming years. Subsequently, the healthcare

system will be unable to cope with the growing number of cases of heart disease, diabetes and other illnesses caused by obesity. As a result, identifying solutions to the obesity epidemic has become a political issue because it directly contributes to increased healthcare costs. As a result, initiatives calling for increased exercise are expected to continue through the next five years, which will positively affect the industry.

Establishments and employees

While large-scale gyms will continue to increase as operators offer a diverse portfolio of services, small operators will persist in attracting a market niche of local customers. In particular, small operators will attempt to entice local customer bases that are time strapped by offering conveniently located establishments. Large industry operators will compete for consumers on the basis of convenience. However, large industry operators can somewhat mitigate this trend by attracting consumers via technology, such as phone applications that allow users to access previous fitness statistics.

During the five years to 2018, the number of companies is anticipated to

slightly grow at an annualized rate of 0.7% to 30,604, as the trend of health consciousness continues to boost demand for industry services. Additionally, the number of employees is anticipated to grow at an annualized rate of 1.6% to 619,989 workers, as industry operators implement a larger workforce to provide additional services, like fitness classes and spa services, to build and maintain clientele.

Small operators will attract consumers by offering convenient establishments


Industry PerformanceIncreased awareness and interest in fitness and health has bolstered industry performanceAlthough industry value added is growing at a slower rate compared with the overall economy, this can be attributed to the recessionGeneral population growth leads to increased demand for facilities

Life Cycle Stage


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-10 -5 0 5 10 15 20

DeclineShrinking economicimportance

Quality GrowthHigh growth in economic importance; weaker companies close down; developed technology and markets

MaturityCompany consolidation;level of economic importance stable

Quantity GrowthMany new companies; minor growth in economic importance; substantial technology change

Key Features of a Growth Industry

Revenue grows faster than the economyMany new companies enter the marketRapid technology & process changeGrowing customer acceptance of productRapid introduction of products & brands

Golf Driving Ranges & Family Fun Centers

Steam & Air-Conditioning Supply

Hotels & Motels

Heating & Air Conditioning

Weight Loss Services

Gym, Health & Fitness Clubs



Industry Life Cycle The Gym, Health and Fitness Clubs is in the growth life cycle stage, because consumers continue to be interested in exercise to boost fitness and health. During the 10 years to 2018, industry value added (IVA), a measure of an industry’s contribution to the overall economy, is expected to grow at an annualized rate of 1.9%. Comparatively, GDP is anticipated to grow at an annualized rate of 2.1% during the ten-year period. While the industry is growing at a slower pace than the economy, this trend can be attributed to the recession. As per capita income declined, more consumers purchased low-cost gym memberships with fewer amenities, which hampered industry profitability. However, this trend will be mitigated in future years as growing per capita disposable income, coupled with less leisure time, will incite time-strapped consumers to purchase personal trainers to accomplish fitness goals.

As public health campaigns spread awareness about the health benefits of fitness, consumers will increasingly perceive gym and fitness club membership as a vital expense. For example, as government programs and businesses support participation in fitness programs, consumers will recognize the benefits of exercise for productivity and health reasons. As gym memberships become more entrenched in the average American’s life, revenue growth will slow to match population growth, bringing the industry from growth to maturity. Future growth areas will likely be in participative sports for women and the older sections of the community; and in individual sports rather than team sports. These factors will support continued growth for gyms and health clubs over the coming five years.

This industry is Growing


Products & Services

The Gym, Health and Fitness Clubs industry offers a wide array of services across a variety of facility types, including gyms, tennis centers, ice-skating rinks and swimming pools. The industry is generally divided into groups based on these types of facilities, but it can also be separated by function or payment. Industry operators generate income from membership dues, admissions or use of facilities, tuition services, rental hire, food and beverage sales, retail sales and other services. Health and fitness clubs

typically derive a large portion of revenue from membership fees, followed by admissions to facilities like pools, courts, rinks and classes. However, the breakdown will vary considerably between different types of clubs, depending on their operations and services offered.

Gyms and fitness centersThe largest product segment is gyms and fitness centers, which make up about 65.0% of revenue in 2013. This segment

Products & MarketsSupply Chain | Products & Services | Demand Determinants Major Markets | International Trade | Business Locations

KEY BUYING INDUSTRIES

99 Consumers in the US Consumers drive the demand for gyms, health and fitness clubs.

KEY SELLING INDUSTRIES

22133 Steam & Air-Conditioning Supply in the US This industry supplies air conditioning for facilities.

23822a Heating & Air Conditioning in the US This industry supplies heating and air conditioning for gyms and fitness centers.

23822b Plumbing in the US This industry supplies plumbing services for changing rooms.

33992a Athletic & Sporting Goods Manufacturing in the US This industry supplies sporting equipment to operators.

33992b Gym & Exercise Equipment Manufacturing in the US This industry supplies sporting equipment to operators.

Supply Chain

Products and services segmentation (2013)

Total $25.9bn

65%Gyms and fitness centers

5%Tennis centers

10%Other

7%Dance centers

7%Swimming pools

6%Ice and roller rinks



Products & Markets

Products & Servicescontinued

dominates the industry due to a high participation rate; 40.0% of people aged seven and older worked out at a club at least once in 2010, according to the latest data available from the National Sporting Goods Association (NSGA). The activity is also nonseasonal because many health and fitness centers offer membership packages on a contractual basis. Members generally join gyms by signing one-year contracts.

Clubs offer a range of activities and continue to offer new classes and recreation options to their members (e.g. yoga, Pilates and spa services). This segment has especially grown in the past five years, as gyms are considered more fitness activities than leisure, appealing directly to the health-conscious population. There are various kinds of health and fitness clubs that cater to different markets; examples include female-only gyms (such as Curves International), premium full-service health clubs, 24-hour gyms and bodybuilding gyms.

Swimming poolsSwimming pools are the second-largest industry segment, which comprises about 7.0% of revenue in 2013. Outdoor pools are more popular in the warmer southern states, but indoor heated pools are common in colder states. Swimming is a popular activity, though outdoor pools tend to be seasonal. According to the latest available data, about 63.5% of the US population went swimming at least once in 2010 (latest data available).

Dance centersDance centers and studios are a growing segment of the industry, generating about 7.0% of industry revenue in 2013. These centers are largely available to the general public for all ages and ability levels. A wide variety of dance classes (e.g. salsa and hip hop) are made available in most

areas, appealing to both beginners and professionals.

Ice rinks and in-line skating rinksIce rinks and in-line skating rinks are another popular industry activity, accounting for about 6.0% of revenue in 2013. Skating rinks are popular, as participants can skate both for leisure and to participate in hockey and figure skating. The NSGA reports that about 10.0% of the population participated in either ice or in-line skating during 2010 (latest available data), and 2.0% participated in ice hockey. IBISWorld estimates that there are about 1,800 ice rinks across the United States.

Tennis centersTennis centers are expected to account for about 5.0% of revenue in 2013. As the popularity of other competing sports has increased in recent years, demand for tennis courts has wavered. In 2010, 12.6% of the population played tennis at least once, up 2.9% from 2007, according to the NSGA. The most popular tennis-playing surfaces are clay and hard courts. Recently, there have been significant technological advances in tennis racquets. These advances have come in areas such as grip shapes, shaft flexibility, string patterns, head size and string gauges. Tennis court surfaces are also changing for both indoor and outdoor tennis courts, with synthetic and artificial surfaces providing a more even and predictable bounce than grass or clay surfaces. Each of these factors will lead to more participants and increased frequency of tennis center attendance in the coming years.

Other centersOther fitness and recreational services include a variety of racket sports, such as handball, racquetball, squash, table tennis and badminton and account for about 10.0% of industry revenue.


Products & Markets

Major Markets Over the past decade, the industry has experienced substantial growth in demand, and as a result, the breakdown of the industry’s markets has also changed. The aging population has encouraged health and fitness clubs to widen their target demographic beyond the traditional market of 18- to 35-year-olds. Industry operators are increasingly expanding their target market to include 35- to 54-year-olds and those aged under 18. The majority of gym and health club members are female, which account for about 57.0% of all membership sales within the health club sector and have

increased in recent years. The growth of female participation is likely a result of the rising number of female-only health club facilities.

Consumers aged 35 and olderThe central characteristic of the Gym, Health and Fitness Clubs industry has been the growth in the population of older members who are joining health clubs. By the end of 2013, IBISWorld estimates that there will be about 52.6 million health club members across the United States. About 20.0% of these members will be older than 55, which

DemandDeterminants

Across the United States, increasing awareness of the need for exercise, weight control, good nutrition and a healthy lifestyle among adults and children is having a positive effect on fitness and recreational sports centers. The demand for services provided by the Gym, Health and Fitness Clubs industry is determined by a number of factors, including household disposable income, consumer confidence, leisure time availability, participation in recreation and sports, seasonal conditions, attitudes towards health and fitness and the cost of services relative to other recreation options.

Household disposable income is particularly relevant to industry demand, as the level of disposable income within a household will determine the amount spent at fitness and recreational sports centers. As discretionary spending rises, demand for gyms and fitness clubs also tends to increase. Similarly, industry growth is impacted by consumer confidence, as an increase leads to higher demand and willingness to spend on the industry’s services.

Overall, demand is also sensitive to seasonal and weather conditions; for example, cold weather can reduce the

level of swimming pool attendance (particularly if the pools are outdoor), while increase attendance at ice-skating rinks. Additionally, the beginning of the calendar year marks the busiest season for new sales. A large portion of new gym members sign on in January or February, often because of New Year’s resolutions.

Leisure time availability also influences demand, with time-poor consumers generally finding it difficult to use the facilities at centers. As work hours decline, people find more ways to attend gyms and use facilities. The link between leisure time and demand relates to health and fitness awareness, as people see fitness as a valuable way to use their spare time. While health crazes generally have a positive effect on the industry, certain fitness trends can have varied effects on the industry. For example, the increase in popularity of yoga, and especially in its muscle toning qualities, reduces demand for weight training among females in particular. Finally, the lower cost of industry services compared with other sport and recreation activities can stimulate demand as well. Conversely, when industry costs are relatively higher than other recreational activities, demand can suffer.


Products & Markets

Major Marketscontinued

totals a 320.0% increase since the early 1990s. The industry has also growth significantly within the 35-to-54 age group, with an estimated 13.4 million members of health clubs (33.0% of the market). This figure has increased by 130.0% from an estimated 6.3 million in 1990. The two segments identified can be generally grouped within baby boomers and generation X profiles. There are about 120 million people within these age categories, accounting for more than 35.0% of the total US population. These segments continue to drive growth in membership numbers and participation in sport and fitness activities. Participation by these age groups is not limited to health clubs, as it extends to home fitness and active recreational and outdoors sports.

Consumers aged 18 to 34This age category is the largest market segment for the Gym, Health and Fitness Clubs industry, accounting for about 35.0% of the total market. Despite its size, this segment has shown little growth over the past decade compared with the other age categories.

In the 1990s, consumers aged 18 to 24 years had about 10.5 million members, which rose to about 14.2 million members in 2010, representing a 35.0% increase, the slowest of any age demographic. However, this segment consistently demonstrates strong demand for fitness options.

Consumers aged 17 and youngerThe 6-to-11 age category accounts for only 4.0% of the market, while the 12-to-17 age category accounts for 8.0%. Growth within these areas (particularly the latter) has been strong over the past decade, as the “echo boom” generation (children of baby boomers) increased in size. Additionally, many parents have been spending large amounts on health club memberships for their children in order to tackle obesity. Youth memberships have become one of the fastest growth areas for the fitness club industry, and many clubs have are shifting their focus to this area. Moreover, the nation’s schools have cut back on physical education classes, causing parents and their children to seek alternatives.

Major market segmentation (2013)

Total $25.9bn

35%Consumers aged

18 to 34

33%Consumers aged

35 to 54

20%Consumers aged

55 and up

8%Consumers aged

12 to 17

4%Consumers aged

6 to 11



Products & Markets

International Trade International trade does not generally apply to the US Gyms, Health and Fitness Clubs industry, as it is a service-oriented sector with no measurable imports or exports. International trading of fitness and exercise

equipment is recorded at the manufacturing level for fitness or sporting goods (IBISWorld report 33992). For more information on global operations, please refer to the Industry Globalization section.


Products & Markets

Business Locations 2013

MO1.9

West

West

West

Rocky Mountains Plains

Southwest

Southeast

New England

VT0.3

MA3.5

RI0.5

NJ4.2

DE0.4

NH0.6

CT1.6

MD2.2

DC0.2

1

5

3

7

2

6

4

8 9

Additional States (as marked on map)

AZ1.5

CA10.8

NV0.6

OR1.5

WA2.6

MT0.4

NE0.7

MN2.0

IA1.1

OH3.8 VA

2.8

FL5.5

KS0.8

CO1.8

UT0.7

ID0.5

TX6.0

OK0.9

NC3.4

AK0.3

WY0.2

TN1.6

KY1.2

GA2.6

IL4.2

ME0.5

ND0.3

WI2.2 MI

3.0 PA4.7

WV0.5

SD0.3

NM0.5

AR0.7

MS0.7

AL1.2

SC1.4

LA1.4

HI0.3

IN2.0

NY7.1 5

67

8

321

4

9


Mid- Atlantic

Establishments (%)

Less than 3% 3% to less than 10% 10% to less than 20% 20% or more

Great Lakes


Products & Markets

Business Locations The four regions that encompass the greatest percentages of gyms and health and fitness clubs include the Southeast (22.9% of establishments), the Mid-Atlantic (18.9%), the West (16.0%), and the Great Lakes (15.2%) regions of the United States. Together these four regions account for 73.0% of total industry establishments. Establishments are particularly concentrated in the following states: with 10.8% of establishments in California, New York (7.1%), Texas (6.0%), Florida (5.5%) and Pennsylvania (4.7%). Typically, highly populated regions have a higher portion of industry establishments. This trend can be attributed to consumer’s lack of willingness to travel excessive distances to perform exercise or become a member of a fitness or recreational sports center.

However, geographical locations can also determine the popularity of a fitness activity as many areas have climates that are not conducive to particular sports. For example, the population of Maine is twice as likely to participate in ice-skating as the national average. Similarly, the population of Arizona is almost twice as likely to participate in swimming at a pool as the national average. As such, areas across the United States will have a greater amount of establishments dedicated to a particular activity depending on climate and other related factors.

Changes in geographic distribution over the past five years have been minimal, with no region increasing or declining in share by more than one percentage point. The West and Southwest regions have experienced slight growth in the past five years, whereas the Rocky Mountains, New England, and Great Lakes observed small declines. These changes can be attributed to shifting demographics and varying demand levels.

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EstablishmentsPopulation

Distribution of establishments vs. population



Cost Structure Benchmarks

ProfitMember retention is a key component in fitness centers’ profitability, as these centers have fixed overhead costs to cover. Studies have found that the average attrition rate for gyms in the United States is 37.0%, meaning that

37 out of 100 people will cancel their memberships each year. Furthermore, the cost of recruiting a new member is more than twice the cost of retaining an existing member. Clubs will continue to direct funds toward retaining existing members in 2013 by

Key Success Factors Easy access for clientsA high profile location offering easy access and parking can provide a competitive advantage for firms in this industry.

Effective product promotionBeing able to promote a business effectively increases awareness and attracts greater membership and local patronage.

Economies of scaleFitness firms that have a large number of establishments and provide a wide range of services are able to attract and retain new and existing members, as well as reduce costs per member.

Provision of appropriate facilitiesProviding appropriate equipment and maintaining it regularly is essential to attracting and retaining customers.

Having a good technical knowledge of the productSkilled employees that can demonstrate the use of various types of equipment and assist participants are important to attract repeat customers.

Business expertise of operatorsThe long-term success of a firm in this industry depends on the skill of the operator in running a business profitably over time.

Market Share Concentration

This industry has a low level of market share concentration, with the top four firms in this industry accounting for about 12.7% of total revenue in 2013. The industry’s low level of concentration can be attributed to many industry operators in the Gym, Health and Fitness Clubs industry developing a local customer base. Additionally, a large number of fitness and gym centers only employ one person or are nonemploying establishments. In 2013, about 36.0% of all establishments were nonemploying, and these establishments are expected to generate only 11.9% of industry revenue. The percentage of nonemployers is substantial because the industry’s low

barriers to entry, making it an attractive industry to enter.

The larger players in this industry have numerous locations throughout the United States, while small players are generally independently owned and operate in one or two states. The industry is highly fragmented, with the majority of employing establishments employing fewer than 20 people. However, over the past five years, the proportion of businesses that employs 20 people or more has increased, indicating that concentration is rising. Increasing concentration is a result of larger firms continuing to consolidate operations to improve economies of scale and enter new markets by acquiring smaller firms.

Competitive LandscapeMarket Share Concentration | Key Success Factors | Cost Structure Benchmarks Basis of Competition | Barriers to Entry | Industry Globalization

Level Concentration in this industry is Low

IBISWorld identifies 250 Key Success Factors for a business. The most important for this industry are:


Competitive Landscape

Cost Structure Benchmarkscontinued

prioritizing excellent customer service and adding amenities.

IBISWorld estimates that industry profit will comprise 8.4% of revenue in 2013. Following a weak year in 2009, profit has steadily grown due to heightened demand and a wider array of services (such as massages, spas, classes and lessons). While membership declined in 2009, operating costs remained virtually the same, which lowered the industry’s profit margin. Prior to 2009, high competition in the industry kept margins under 10.0% of revenue, although prices were still high relative to the discounts after the recession.

WagesWages are the largest cost to this industry, accounting for about 30.7% of revenue in 2013. To minimize this cost, most centers employ part-time employees who are paid on an hourly basis. Companies also hire salaried staff,

including back-office support, personal trainers and other professionals, but the majority of these staff members generate additional revenue streams for fitness and health clubs. These staff members also help attract new clientele, as fitness classes and training programs are important drivers of new business.

The average wage varies between employing and nonemploying establishments, as large businesses require a range of employees to run their operations, including accountants, financial analysts and other back-office support staff. During the next five years, IBISWorld expects the average size of an establishment to increase, thus forcing clubs to hire more full-time staff, which will increase the average wage.

PurchasesPurchases represent the second-highest cost to this industry, comprising about

Sector vs. Industry Costs

■ Profi t■ Wages■ Purchases■ Depreciation■ Marketing■ Rent & Utilities■ Other

Average Costs of all Industries in sector (2013)

Industry Costs (2013)

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Basis of Competition During the past five years, the Gym, Health and Fitness Clubs industry has become increasingly competitive. Well-financed competitors have entered the industry, and existing regional and national operators have expanded their operations. Gym and fitness clubs typically compete for high consumer retention rates on the basis of price, customer service, brand recognition and types of services offered. For example, industry operators may offer additional

services, including nutritional programs, meal planning and facial services. While facials and nutritional programs are not included in industry revenue, operators that offer additional services may increase their consumer retention rates, which boosts industry revenue.

Internal competitionIndustry operators compete for brand recognition and member’s word of mouth to generate revenue. Many

Cost Structure Benchmarkscontinued

20.0% of revenue in 2013. Purchases largely include smaller types of equipment, office requirements, retail products and other miscellaneous items. Purchases can also include food and beverages that are sometimes sold within the fitness and recreational sports centers. Some of the larger centers have negotiated national buying agreements with suppliers to secure low prices, such as fitness equipment.

Rent and utilitiesRent makes up about 12.0% of industry revenue in 2013. Many businesses in this industry do not own their fitness facilities, and as a result they must rent their buildings. Additionally, some equipment used in recreational and fitness centers are not purchased entirely, but on a “rental” basis, thus adding to the cost in this segment. Industry operators incur utility costs that make up 3.5% of revenue, because the industry requires electricity for lighting, treadmills, cross-trainers, steppers and other electronic equipment. To lower utility costs, some centers have implemented energy-efficient lighting fixtures and automatic switches and timers.

AdvertisingThe industry is expected to spend about 10.0% of its revenue on advertising in 2013, as strong marketing support is

essential for attracting new clientele in such a highly competitive market. Firms advertise via TV, direct mail, newspapers, telephone directories, radio, billboards, internet websites, and other promotional activities. Advertisements aim to differentiate firms from competitors by focusing on amenities, prices, services and promotional offers. Operators also try to appeal to the public’s desire to lose weight, look better and improve health.

Depreciation and other costsDepreciation of buildings and equipment represents another significant expense item for the industry, accounting for about 7.5% of revenue in 2013. Expenditure on capital includes purchasing new and replacing old equipment, such as treadmills and weight machines. To operate both efficiently and profitably, firms must continually acquire up-to-date fitness technology to maintain and attract their customer base, which adds to depreciation costs. Other costs include general administration, IT expenses and insurance costs. This category accounts for 7.9% of revenue. Many businesses have had to insure their products against damage, which increases insurance costs as more consumers use fitness equipment frequently.

Level & Trend Competition in this industry is High and the trend is Increasing



Barriers to Entry Overall, barriers to entry are relatively low. Prior to the recession, operators successfully obtained financing from a range of sources, including financial institutions, landlords, equipment manufacturers, private equity sources and the public capital markets. However, in late 2008 the credit markets tightened, which will continue to limit further expansion by many operators over the short term.

Leasing operations provide a relatively lower cost basis for entry. Additionally, average wages in the industry tend to be low, as the staff is typically unskilled. Equipment costs are relatively low as well, and have long life spans. Many start-up gyms use second-hand exercise equipment to cut down on costs.

Barriers to entry in urban markets include restrictive zoning laws, lengthy permit processes and a shortage of

appropriate real estate. New entrants may also incur heavy costs when acquiring or leasing the required equipment for members and participants to use. Access to capital to fund these startup costs are therefore essential. In addition, tight credit markets have made it difficult for small businesses to enter the industry since 2009. Lending practices are expected to loosen in the

Basis of Competitioncontinued

operators rely on retaining and developing large membership rates to cover operational costs. Operators also compete on the basis of price. For example, gym and health clubs that offer low initiation fees and monthly membership will attract first-time gym members in particular. Additionally, low-cost membership on a month by month basis appeals to both budget-conscious consumers and individuals that do not want to lock in a year contract. Also, industry operators may compete for customer service. In particular, strong customer service boosts both member attrition rates but also develops a strong customer base of individuals that may be new to gym memberships.

Firms in this industry also compete with other commercial fitness center and recreational facilities that are established and operated by local governments. Nonprofit and government organizations

have an edge on commercial gyms and fitness clubs because they can obtain land and build centers at lower costs. Additional services offered by hospitals, businesses and salons are another source of competition, adding to the highly competitive environment. These firms typically compete based on location, which is the greatest convenience factor for the consumer.

External competitionFirms also experience external competition from entertainment and retail businesses for the discretionary income of the specific target markets in this industry. Industry operators compete with amenity and condominium clubs, exercise studios, country clubs, weight-loss centers and home fitness equipment businesses. Many other leisure industries, such as bowling alleys and marinas, also compete with this industry for leisure time, albeit without the fitness aspect.

Barriers to Entry checklist Level

Competition HighConcentration LowLife Cycle Stage GrowthCapital Intensity MediumTechnology Change MediumRegulation & Policy LightIndustry Assistance Low


Level & Trend Barriers to Entry in this industry are Low and Steady



Industry Globalization

The Gym, Health and Fitness Clubs industry has a low level of globalization; the majority of firms are small local operators, employing between one and 19 people or are nonemployers, which account for about 85.0% of the industry’s total firms. While the industry is not typified by a high level of globalization, some of the industry’s larger players are increasingly becoming globalized. For

example, Gold’s Gym International Inc. and Curves International Inc. have subsidiaries that operate in global markets. Gold’s Gym International operates in over 25 countries, while 24 Hour Fitness also enjoys a global presence with locations throughout Asia. Globalization is increasing as national and regional competitors expand the scope of their operations, but at this stage, it is relatively low.

Barriers to Entrycontinued

next five years, however, making it easier for new entrants to enter the market.

The high cost and lengthy time it takes to build brand reputation is a potential barrier to entry. Existing players have

already established trade names, and new entrants will have to invest money and time to persuade consumers to shift away from established, brand-name gym and fitness centers.

Level & Trend Globalization in this industry is Low and the trend is Increasing


Other Companies Due to the fragmented nature of this industry, no players hold a market share greater than 5.0%. Moreover, there is limited financial information available for players in this industry because many are private organizations with franchised operations, and as such, annual revenue figures are unavailable.

24 Hour Fitness Worldwide Inc. Estimated market share: 4.9%24 Hour Fitness Worldwide Inc. is a large, privately owned and operated fitness center chain. Established in 1983, the company’s first club location opened in California. With more than 400 clubs across the United States, 24 Hour serves nearly four million members. The company also offers a plethora of gym services, including personal training services, group exercise classes and a variety of strength, cardio and functional training equipment. Furthermore, the company is one of the largest supporters of amateur athletics in the US, serving as the Official Fitness Center Sponsor of the US Olympic and Paralympic Teams. 24 Hour also uses celebrities and professional athletes to advertise its brand, and is partners with the reality TV show The Biggest Loser. As a result, these marketing strategies help differentiate 24 Hour Fitness from its competitors, which allows the company to strengthen its market share.

In 2005, 24 Hour Fitness entered a partnership with New York-based private equity firm Forstmann Little & Co. Financier Theodore J. Forstmann acquired the company for $1.6 billion, and has continued to promote 24 Hour Fitness as a leader within the fitness industry, with the aim of continual expansion. The company has also sponsored the US Olympic team, and was the official fitness center for the team through the 2008 Olympic Games in Beijing. At the 2010 Winter Olympic Games in Vancouver, 24 Hour Fitness

provided fitness ambassadors to NBC staff, including the broadcast teams, production crews, on-air talent and other personnel. Since 24 Hour Fitness is a private company, limited financial information is available, however, IBISWorld estimates that the company will generate revenue of about $1.3 billion for 2013.

Life Time Fitness Estimated market share: 4.1%Life Time Fitness Inc., under the Life Time Fitness and Life Time Athletic brands, operates 102 centers, including sports and athletics, professional fitness, family recreation and resorts and spas. The company offers a range of services such as group fitness, yoga, swimming, running, racquetball, squash, tennis, pilates, kid activities and camps, rock-climbing, among other services. The company designs and develops its own centers, with a focus on providing members with products and services in the areas of exercise, education and nutrition. The company currently operates in 21 states, primarily in suburban locations. Life Time Fitness’ business model includes attracting a larger customer base within the first three years after a center opens, as well as retaining members and controlling expenses. In 2013, IBISWorld estimates that company will generate $1.1 billion in revenue.

Bally Total Fitness Holding Corporation Estimated market share: 3.2%Bally Total Fitness Holding Corporation was incorporated in Delaware in 1983 and is a commercial operator of fitness centers in North America. Bally operates about 60 locations in 18 states and serves one million active members nationwide. In March 2010, Bally launched a new campaign that uses music downloads from partner

Major CompaniesThere are no Major Players in this industry | Other Companies


Major Companies

Other Companiescontinued

Universal Music Group to motivate its members. In 2013, IBISWorld estimates that Bally fitness clubs will generate $829.0 million in revenue.

Most of the company’s locations operate under the flagship Bally Total Fitness brand. Bally’s members have access to pools, aerobic programs, running tracks and racquet courts, as well as personal trainers and sports medicine services. Bally also markets private-label nutritional products and sells health-related products in most of its clubs and about 7,000 retail outlets. Bally has followed a strategy of selling high-margin, multi-club memberships and consolidating its brand. In addition to the private-label nutritional products and in-club retail stores, the company has diversified its revenue stream through branded apparel. The move into the high-end marketplace has caused their customer base to shift toward a more senior demographic in the past five years.

However, the company has also experienced financial difficulty. For example, in 2008, the company owed about $478.0 million in debt to US Bancorp and HSBC Holdings. In July 2009, the company reached an agreement with its lenders to exit bankruptcy and, under the deal, the lenders (including JPMorgan Chase) took a 94.0% share of company equity and reduced Bally’s debt by $660 million.

Town Sports International Holdings Inc. Estimated market share: 1.9%Town Sports International Holdings Inc. (TSI) is the largest owner and operator of fitness clubs in the Northeast and Mid-Atlantic regions of the United States. TSI owns and operates under a number of brands: New York Sports Clubs, Boston Sports Clubs, Washington Sports Clubs and Philadelphia Sports Clubs. Founded in 1974, the company now operates over

160 health and fitness facilities and boasts half a million members. The company’s business strategy involves serving densely populated metropolitan regions and developing locations near TSI’s targeted customer base.

Town Sports notes that they target the “upper value” market segment, comprising individuals in the 21 to 50 years old age group, with income levels between $50,000 and $150,000 per year. In 2013, IBISWorld estimates Town Sports International’s revenue to be about $484.0 million.

Curves International Inc. Estimated market share: 1.8%Founded in 1992, Curves International Inc. developed a market niche in fitness and weight-loss facilities, which targeted women. The company developed a customer base of four million members in 90 countries with over 10,000 Curves for Women fitness centers. Curves is the largest fitness franchise in the world, and the company offers 30 minute health and weight-loss sessions for women in Australia, Canada, the Caribbean, Europe, Mexico, New Zealand, South America and the US.

In 2008 the company opened franchises in the Ukraine, Slovakia, Botswana, Bahrain, Qatar and Saudi Arabia. It also added franchise establishments in Belgium, Finland, Jordan, Malta, and Senegal. Moreover, in 2009 Curves opened centers in China, India and the Philippines. IBISWorld estimates that US segment revenue will reach $466.0 million in 2013.

Gold’s Gym International Inc. Estimated market share: 1.5%Established in 1965, Gold’s Gym International serves more than three million members in 38 US states and 28 countries. The company offers gym services that include cardio and strength training, zumba, yoga, group cycling,


Major Companies

Other Companiescontinued

mixed martial arts, muscle endurance training and pilates.

In addition to opening franchises, the company buys smaller regional health clubs and converts them into Gold’s Gyms. The company also licenses the Gold’s Gym name for products, such as fitness equipment and accessories, luggage, T-shirts and men’s and women’s sportswear. In 2004, TRT Holdings acquired Gold’s Gym for about

$158.0 million. The newly form entity aims to develop a budget-conscious consumer base by developing Gold’s Gym Express, which includes low-cost gym facilities. Gold’s Gym also continues to maintain its core weightlifting tradition, which generated its early success with the company’s initial Venice beach location. In 2013, IBISWorld estimates that the company will generate $389.0 million in revenue.


Capital Intensity Wage costs account for about 30.7% of revenue in 2013, and capital costs, represented by the depreciation expense, account for 7.5% of revenue. Capital costs are moderate for the industry and includes the cost of fitness equipment, buildings, vehicles, furniture and computers. Nevertheless, labor costs remain high because of administration, training, supervision and maintenance requirements. Gyms and fitness centers seek to minimize their labor costs by employing a part-time labor force and employing instructors and personal trainers on an as-needed basis. The industry has moderate capital intensity despite the low barriers to entry; the total startup

costs are low but are split relatively evenly between capital and labor.

Operating ConditionsCapital Intensity | Technology & Systems | Revenue VolatilityRegulation & Policy | Industry Assistance

Tools of the Trade: Growth Strategies for Success


Labo

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veCapital Intensive

Change in Share of the Economy

New Age Economy

Recreation, Personal Services, Health and Education. Firms benefi t from personal wealth so stable macroeconomic conditions are imperative. Brand awareness and niche labor skills are key to product differentiation.

Traditional Service Economy

Wholesale and Retail. Reliant on labor rather than capital to sell goods. Functions cannot be outsourced therefore fi rms must use new technology or improve staff training to increase revenue growth.

Old Economy

Agriculture and Manufacturing. Traded goods can be produced using cheap labor abroad. To expand fi rms must merge or acquire others to exploit economies of scale, or specialize in niche, high-value products.

Investment Economy

Information, Communications, Mining, Finance and Real Estate. To increase revenue fi rms need superior debt management, a stable macroeconomic environment and a sound investment plan.

Golf Driving Ranges & Family Fun Centers

Steam & Air-Conditioning Supply

Hotels & MotelsHeating & Air Conditioning

Weight Loss ServicesGym, Health & Fitness Clubs

Capital intensity

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SOURCE: WWW.IBISWORLD.COMDotted line shows a high level of capital intensity

Capital units per labor unit


Arts, Entertain-ment and Recreation

Economy

Level The level of capital intensity is Medium


Operating Conditions

Revenue Volatility The Gym, Health and Fitness Clubs industry has a low level of revenue volatility. While there are varying degrees of membership rates across centers, which increases revenue volatility, the industry’s diverse array of services and fragmented nature minimizes volatility. Furthermore, general stability in household disposable income over the past five years, despite a sizable decline during the recession, has translated to constant demand for the industry’s

products and services. Steady promotion of the health benefits of exercise by the medical profession has supported a constant rate of growth and minimized volatility. Media attention to fitness and diet considerations has kept levels steady in the industry.

While technically a discretionary service, health and fitness clubs are increasingly viewed by consumers as a vital health expense. Furthermore, the structure of memberships mitigates

Technology& Systems

Fitness centers offer electronic payment options to members. In selecting this option, on about the same date each month, a fixed payment is either automatically transferred via debit from members’ bank accounts or charged to members’ designated credit card. Most fitness centers compete to be the establishment with the most state-of-the-art equipment. This equipment includes the latest cardiovascular and weight-training machines. Entertainment units are also becoming increasingly common in centers. The units are mounted to cardiovascular equipment and are equipped with a color screen for television viewing, links

to MP3 players, hearing aids for television equipment, and other devices that keep customers entertained during fitness activities. Centers use computers to manage operations and to keep a database of members.

Many of the larger firms strive to offer customers state-of-the-art training equipment to aid customer retention. Patrons are looking for added extras to improve their fitness regimens, and so it is important for centers to offer various equipment options that incorporate the latest technology. This has encouraged firms to continually update their equipment. For example, treadmills can become “out of date” within two years.

Level The level of Technology Change is Medium


Volatility vs Growth

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A higher level of revenue volatility implies greater industry risk. Volatility can negatively affect long-term strategic decisions, such as the time frame for capital investment.

When a fi rm makes poor investment decisions it may face underutilized capacity if demand suddenly falls, or capacity constraints if it rises quickly.

Level The level of Volatility is Low



Regulation & Policy The general rules and regulations of the Federal Trade Commission and of other federal, state, provincial and local consumer protection agencies apply to franchising, advertising, sales and other trade practices. State and provincial statutes and regulations relevant fitness industry have been enacted or proposed in all of the states and provinces across the United States. Typically, these statutes and regulations prescribe certain forms and regulate the terms and provisions of membership contracts, including: giving members the right to cancel the contract, in most cases, within three business days after signing; requiring an escrow for funds received from preopening sales or the posting of a bond or proof of financial responsibility; and in some cases, establishing maximum prices and terms for membership contracts and limitations on the financing term of contracts.

Firms are subject to numerous other types of federal, state and provincial regulations governing the sale, financing and collection of memberships, including the Truth-in-Lending Act and Regulation Z, as well as state and provincial laws governing the collection of debts. These laws and regulations are subject to

varying interpretations by a large number of state, provincial and federal enforcement agencies.

Under the “cooling-off” statutes employed in most states and provinces, new members of fitness centers have the right to cancel their memberships for a period of three to fifteen days after the date the contract was entered and are entitled to refunds of any payment made. The amount of time new members have to cancel their membership contract depends on the applicable state or provincial law.

Advertising of nutritional products is subject to regulation by one or more federal agencies, including the Food and Drug Administration (FDA) and the Federal Trade Commission (FTC). For example, the FDA regulates the formulation, manufacture and labeling of vitamins and other nutritional supplements, while the FTC principally regulates marketing and advertising claims. Industry firms are also subject to several state and federal labor laws governing the relationship with employees, such as minimum wage requirements, overtime and working conditions and citizenship requirements.

Revenue Volatilitycontinued

revenue volatility. Gyms and fitness centers have traditionally sought to sign up members for 12 to 24 month periods and typically apply cancelation fees to contracts. These fees often deter customers from cancelling their memberships so that they can avoid

financial penalty. As competition has increased, gyms have begun to offer more flexible membership options, such as shorter contract periods and rolling contracts. These competitive measures will likely lead to increased revenue volatility in future years.

Level & Trend The level of Regulation is Light and the trend is Steady



Industry Assistance The level of industry assistance is low, but it is increasing as more institutions promote the benefits of assistance. Such assistance is a significant benefit for the industry, as it reduces expenses and creates demand. The industry received indirect assistance from the federal government in 2009 under the $787.0 billion stimulus package, or the American Reinvestment and Recovery Act of 2009. The Department of Health and Human Services has been allocated $1.0 billion for a Prevention and Wellness Fund.

The National Association for Health and Fitness (NAHF) is a nonprofit organization that promotes physical fitness and sports and supports Governor and State Councils that promote such activities. The association produces newsletters on strategies and successful approaches to increasing physical activity and improving health. The International Health, Racquet & Sportsclub Association also supports the industry and is a nonprofit trade association representing more than 9,100 health, racquet and

sports clubs worldwide. This association provides media articles and press releases that promote the benefits of keeping fit and active. Therefore, this association helps drive industry demand.

The Fifty-Plus Fitness Association (FPFA) is another nonprofit organization, which was established 20 years ago. This association’s mission is to promote an active lifestyle for the older population. The organization started at Stanford University as an outgrowth of some medical research on the value of exercise for older persons. The FPFA currently has about 1,000 members across the United States. The association also publishes a newsletter and distributes books and videos. In the past, it has offered a six-week “Fifty-Plus Fitness Challenge Camp” on the Stanford University Campus that involved the participants in a variety of physical activities. Some facilities are initially established with the assistance of government grants.

Level & Trend The level of Industry Assistance is Low and the trend is Increasing


Key StatisticsRevenue

($m)

Industry Value Added

($m)Establish-

ments EnterprisesEmployment

(People) Exports ImportsWages ($m)

Domestic Demand

Health Club Memberships

(Mils)2004 21,309.4 10,170.0 30,624 27,593 479,202 -- -- 6,760.5 N/A 47.22005 22,080.6 10,532.6 31,988 28,779 488,795 -- -- 6,867.2 N/A 48.72006 22,783.4 10,765.3 32,432 29,000 507,921 -- -- 7,028.8 N/A 50.32007 24,136.1 11,080.3 33,269 30,154 541,562 -- -- 7,484.0 N/A 48.92008 24,145.4 11,579.7 33,451 30,269 550,634 -- -- 7,499.1 N/A 47.72009 23,707.9 11,023.3 32,864 29,031 536,231 -- -- 7,158.9 N/A 47.52010 24,227.5 10,540.4 32,820 28,912 527,086 -- -- 7,100.1 N/A 48.32011 24,781.4 11,314.8 33,068 29,136 548,375 -- -- 7,325.0 N/A 50.52012 25,269.1 11,557.3 33,385 29,365 561,536 -- -- 7,564.8 N/A 51.42013 25,904.3 12,081.5 33,527 29,501 573,328 -- -- 7,962.7 N/A 52.62014 26,522.4 12,552.8 34,023 29,894 583,075 -- -- 8,309.2 N/A 54.12015 27,339.2 13,069.5 34,331 30,031 594,153 -- -- 8,613.2 N/A 54.82016 28,225.2 13,378.5 34,540 30,199 603,660 -- -- 8,800.4 N/A 56.02017 29,014.0 13,635.7 35,112 30,331 610,225 -- -- 8,906.4 N/A 56.92018 29,913.4 13,915.9 35,498 30,604 619,989 -- -- 9,040.0 N/A 58.2Sector Rank 4/33 5/33 5/33 5/33 3/33 N/A N/A 5/33 N/A N/AEconomy Rank 338/1312 221/1312 197/1311 186/1311 70/1312 N/A N/A 201/1312 N/A N/A

IVA/Revenue (%)

Imports/Demand

(%)

Exports/Revenue

(%)

Revenue per Employee

($’000)Wages/Revenue

(%)Employees

per Est.Average Wage

($)

Share of the Economy

(%)2004 47.73 N/A N/A 44.47 31.73 15.65 14,107.83 0.082005 47.70 N/A N/A 45.17 31.10 15.28 14,049.24 0.082006 47.25 N/A N/A 44.86 30.85 15.66 13,838.37 0.082007 45.91 N/A N/A 44.57 31.01 16.28 13,819.29 0.082008 47.96 N/A N/A 43.85 31.06 16.46 13,619.03 0.092009 46.50 N/A N/A 44.21 30.20 16.32 13,350.40 0.092010 43.51 N/A N/A 45.96 29.31 16.06 13,470.48 0.082011 45.66 N/A N/A 45.19 29.56 16.58 13,357.65 0.092012 45.74 N/A N/A 45.00 29.94 16.82 13,471.62 0.092013 46.64 N/A N/A 45.18 30.74 17.10 13,888.56 0.092014 47.33 N/A N/A 45.49 31.33 17.14 14,250.65 0.092015 47.80 N/A N/A 46.01 31.50 17.31 14,496.60 0.092016 47.40 N/A N/A 46.76 31.18 17.48 14,578.41 0.092017 47.00 N/A N/A 47.55 30.70 17.38 14,595.27 0.092018 46.52 N/A N/A 48.25 30.22 17.47 14,580.90 0.09Sector Rank 10/33 N/A N/A 26/33 11/33 13/33 27/33 5/33Economy Rank 323/1312 N/A N/A 1253/1312 309/1312 582/1311 1252/1312 221/1312

Figures are inflation-adjusted 2013 dollars. Rank refers to 2013 data.

Revenue (%)

Industry Value Added

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Establish-ments

(%)Enterprises

(%)Employment

(%)Exports

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(%)Wages

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Domestic Demand

(%)

Health Club Memberships

(%)2005 3.6 3.6 4.5 4.3 2.0 N/A N/A 1.6 N/A 3.22006 3.2 2.2 1.4 0.8 3.9 N/A N/A 2.4 N/A 3.32007 5.9 2.9 2.6 4.0 6.6 N/A N/A 6.5 N/A -2.82008 0.0 4.5 0.5 0.4 1.7 N/A N/A 0.2 N/A -2.52009 -1.8 -4.8 -1.8 -4.1 -2.6 N/A N/A -4.5 N/A -0.42010 2.2 -4.4 -0.1 -0.4 -1.7 N/A N/A -0.8 N/A 1.72011 2.3 7.3 0.8 0.8 4.0 N/A N/A 3.2 N/A 4.62012 2.0 2.1 1.0 0.8 2.4 N/A N/A 3.3 N/A 1.82013 2.5 4.5 0.4 0.5 2.1 N/A N/A 5.3 N/A 2.32014 2.4 3.9 1.5 1.3 1.7 N/A N/A 4.4 N/A 2.92015 3.1 4.1 0.9 0.5 1.9 N/A N/A 3.7 N/A 1.32016 3.2 2.4 0.6 0.6 1.6 N/A N/A 2.2 N/A 2.22017 2.8 1.9 1.7 0.4 1.1 N/A N/A 1.2 N/A 1.6

2018 3.1 2.1 1.1 0.9 1.6 N/A N/A 1.5 N/A 2.3Sector Rank 9/33 6/33 28/33 26/33 10/33 N/A N/A 3/33 N/A N/AEconomy Rank 702/1312 417/1312 812/1311 726/1311 516/1312 N/A N/A 211/1312 N/A N/A

Annual Change

Key Ratios

Industry Data



Jargon & Glossary

BARRIERS TO ENTRY High barriers to entry mean that new companies struggle to enter an industry, while low barriers mean it is easy for new companies to enter an industry.

CAPITAL INTENSITY Compares the amount of money spent on capital (plant, machinery and equipment) with that spent on labor. IBISWorld uses the ratio of depreciation to wages as a proxy for capital intensity. High capital intensity is more than $0.333 of capital to $1 of labor; medium is $0.125 to $0.333 of capital to $1 of labor; low is less than $0.125 of capital for every $1 of labor.

CONSTANT PRICES The dollar figures in the Key Statistics table, including forecasts, are adjusted for inflation using the current year (i.e. year published) as the base year. This removes the impact of changes in the purchasing power of the dollar, leaving only the “real” growth or decline in industry metrics. The inflation adjustments in IBISWorld’s reports are made using the US Bureau of Economic Analysis’ implicit GDP price deflator.

DOMESTIC DEMAND Spending on industry goods and services within the United States, regardless of their country of origin. It is derived by adding imports to industry revenue, and then subtracting exports.

EMPLOYMENT The number of permanent, part-time, temporary and seasonal employees, working proprietors, partners, managers and executives within the industry.

ENTERPRISE A division that is separately managed and keeps management accounts. Each enterprise consists of one or more establishments that are under common ownership or control.

ESTABLISHMENT The smallest type of accounting unit within an enterprise, an establishment is a single physical location where business is conducted or where services or industrial operations are performed. Multiple establishments under common control make up an enterprise.

EXPORTS Total value of industry goods and services sold by US companies to customers abroad.

IMPORTS Total value of industry goods and services brought in from foreign countries to be sold in the United States.

INDUSTRY CONCENTRATION An indicator of the dominance of the top four players in an industry. Concentration is considered high if the top players account for more than 70% of industry revenue. Medium is 40% to 70% of industry revenue. Low is less than 40%.

INDUSTRY REVENUE The total sales of industry goods and services (exclusive of excise and sales tax); subsidies on production; all other operating income from outside the firm (such as commission income, repair and service income, and rent, leasing and hiring income); and capital work done by rental or lease. Receipts from interest royalties, dividends and the sale of fixed tangible assets are excluded.

INDUSTRY VALUE ADDED (IVA) The market value of goods and services produced by the industry minus the cost of goods and services used in production. IVA is also described as the industry’s contribution to GDP, or profit plus wages and depreciation.

INTERNATIONAL TRADE The level of international trade is determined by ratios of exports to revenue and imports to domestic demand. For exports/revenue: low is less than 5%, medium is 5% to 20%, and high is more than 20%. Imports/domestic demand: low is less than 5%, medium is 5% to 35%, and high is more than 35%.

LIFE CYCLE All industries go through periods of growth, maturity and decline. IBISWorld determines an industry’s life cycle by considering its growth rate (measured by IVA) compared with GDP; the growth rate of the number of establishments; the amount of change the industry’s products are undergoing; the rate of technological change; and the level of customer acceptance of industry products and services.

NONEMPLOYING ESTABLISHMENT Businesses with no paid employment or payroll, also known as nonemployers. These are mostly set up by self-employed individuals.

PROFIT IBISWorld uses earnings before interest and tax (EBIT) as an indicator of a company’s profitability. It is calculated as revenue minus expenses, excluding interest and tax.

VOLATILITY The level of volatility is determined by averaging the absolute change in revenue in each of the past five years. Volatility levels: very high is more than ±20%; high volatility is ±10% to ±20%; moderate volatility is ±3% to ±10%; and low volatility is less than ±3%.

WAGES The gross total wages and salaries of all employees in the industry. The cost of benefits is also included in this figure.

Industry Jargon

IBISWorld Glossary

BABY BOOMER A person born between 1946 and 1964 accounting for a major proportion of the population.

CARDIOVASCULAR EQUIPMENT Equipment used for aerobic exercise, meant to be used at light to medium intensity for a long period of time, e.g. treadmills, elliptical trainers and stationary bikes.

PILATES A physical fitness system developed in the early 20th century by Joseph Pilates with a focus on the strength and endurance on core muscle groups.

RETENTION RATE A rate comparing the number of new gym memberships to canceled gym memberships.

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