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UNITING THE WORLD OF FITNESS
Health Club Management

Health Club Management

features

Industry research: Boutique boom

The boutique studio market continues to grow and evolve, as the latest Association of Fitness Studios report shows. Stephen Tharrett and Mark Williamson report

Published in Health Club Management 2017 issue 1
A huge 63 per cent of revenue is spent on staffing fitness studios
A huge 63 per cent of revenue is spent on staffing fitness studios

Over the last few years, boutique fitness studios have emerged as a disruptive force in shaping the delivery of fitness around the globe. In the US alone, there are approximately 100,000 fitness studios – three times the number of traditional commercial fitness facilities (source: Association of Fitness Studios – AFS).

To further advance the story of how fitness studios are changing the industry’s landscape, data generated by IHRSA’s 2016 Health Club Consumer Report indicates that, in 2015, consumers spent approximately US$4bn more on fitness studio privileges than on membership to traditional commercial fitness facilities.

Further insight is provided by the AFS’ Fitness Studio Financial and Operating Benchmarking Report, now in its second year. Produced in co-operation with ClubIntel, the report offers a snapshot of this growing segment of the market.

KEEPING IT PERSONAL
While barre studios (such as Pure Barre and Bar Method), cycling studios (including Boom Cycle and SoulCycle) and HIIT studios (such as Orangetheory and 1Rebel) receive a tremendous amount of press, they remain in the minority among studios. Personal training and small group training studios are the most prominent studio type; just over 40 per cent of studio operators report operating this type of studio.

DIVERSIFIED OFFER
The percentage of fitness studios focused on delivering a singular, specialist experience is giving way to more multi-disciplined experiences – i.e. sites are increasingly offering at least two different programming formats such as cycling and yoga, cycling and HIIT, HIIT and yoga or personal training and barre.

Approximately 30 per cent of studios in this year’s study said they specialise in two or more modalities or offerings.

RETURN OF SUBS
Fitness studios appear to be shifting from pay-as-you-go to a subscription model.

When the fitness studio segment first burst onto the scene, one of the novel aspects of the business model was its variety of flexible, pay-as-you-go packages. The founders of the studio boom focused on providing transparent, simple and convenient options to take part (single drop-in rates, five-class packs, 20-packs and so on).

But the 2015 data shows a shift toward a membership model – i.e. payment of a monthly fee for unlimited access to the studio’s services. In fact, 71 per cent of studios now offer a membership option of at least one month’s duration.

Membership encompasses a range of options, from unlimited group exercise classes to unlimited small group training, or indeed a combination of unlimited small group training with a limited number of personal training sessions.

This directional shift – while affording studios an additional means of generating value for consumers – could misfire with many fitness consumers by limiting the flexibility associated with the pay-as-you-go approach.

RETENTION LEVELS
Fitness studios are more effective at retaining clients than their counterparts in the traditional fitness industry. The average attrition level for fitness studios in 2015 was 24 per cent. Within that, personal training/small group training studios reported attrition levels of 20 per cent, compared to group exercise-orientated studios (such as barre, cycling, HIIT and yoga) that had attrition levels of 27 per cent.

EBITDA EFFICIENCY
The average EBITDA margin for studios in 2015 was 24 per cent, compared to a range of 16 – 20 per cent for traditional health and fitness clubs (data from IHRSA’s 2015 Profiles of Success).

Studios under 2,000sq ft and those measuring 5,001– 10,000sq ft were the most efficient, with EBITDA margins of 37 per cent and 34 per cent respectively.

SMALL IS BEAUTIFUL
A small footprint is associated with greater revenue productivity and earnings efficiency.

Studios measuring less than 2,000sq ft generate revenue of US$104 per square foot and EBITDA of US$38 per square foot. Studios between 2,001sq ft and 5,000sq ft generate revenue of US$104 per square foot and EBITDA of US$23 per square foot.

The data shows these smaller studios combine excellent revenue productivity with lower staffing costs, lower rental costs and lower investment and reinvestment costs. These smaller studios have a powerful blend of attributes that all speak to their capacity for greater profitability.

CLEAR WINNERS
Studios in the top quartile significantly outperform the industry average in terms of revenue per square foot, generating US$189 per square foot compared to the industry average of US$77, and EBITDA of US$38 per square foot compared to the industry average of US$18.

PRICE OF PEOPLE
Staff and rent represent the two largest costs for studios. The average studio spends 63 per cent of revenue on staffing and 21 per cent of revenues on rent.

Interestingly, though, the top quartile of fitness studio operators spend 51 per cent of revenues on staff and 13 per cent on rent – another indication of what drives best-in-class performance.

ACTIVE INVESTMENT
In 2015, the average fitness studio spent US$9,500 investing in new equipment and US$23,000 reinvesting in the facility. This represents 11 per cent of average studio revenues.
While these numbers represent industry averages, they demonstrate a strong commitment by studios to reinvesting in the capital assets of the business.

LOW SET-UP COSTS
Fitness studios have a low capital barrier to entry and are asset light. The average fitness studio invested a total of US$166,000 to open its business. This cost represents the total capital investment, including hard costs such as tenant improvements and equipment, along with pre-opening expenses.

When viewed by studio type, studios that are group exercise-driven spent approximately US$208,000 to launch their businesses, while personal training/small group-driven studios spent approximately US$117,000.

FINAL THOUGHTS
Metrics related to net client growth, operating efficiency and revenue productivity of studios all point to a sector outperforming its larger, more established competitors in the traditional fitness sector.

As studio operators evolve to leverage their competitive strengths, this sector will be well positioned to capture a larger share of fitness consumer spend.

About the authors

Stephen Tharrett and Mark Williamson
Stephen Tharrett and Mark Williamson

Stephen Tharrett and Mark Williamson are co-founders of brand insights firm ClubIntel.

www.club-intel.com

Sign up here to get HCM's weekly ezine and every issue of HCM magazine free on digital.
PT and SGT studios dominate, while barre, cycling and HIIT studios remain in the minority
PT and SGT studios dominate, while barre, cycling and HIIT studios remain in the minority
The boutique sector is outperforming the more established, traditional clubs
The boutique sector is outperforming the more established, traditional clubs
https://www.leisureopportunities.co.uk/images/324922_536568.jpg
A new study assesses the trends in the ever-evolving boutique segment
Stephen Tharrett and Mark Williamson co-founders of brand insights firm ClubIntel,Stephen Tharrett, Mark Williamson, ClubIntel, Association of Fitness Studios, IHRSA, 2016 Health Club Consumer Report, Fitness Studio Financial and Operating Benchmarking Report, SoulCycle, Pure Barre,
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13-14 Jun 2021
Online,
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Locations worldwide,
Diary dates
21-24 Sep 2021
Messe Stuttgart, Germany
Diary dates
28-29 Sep 2021
ExCeL London, London, United Kingdom
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04-07 Nov 2021
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01-07 Dec 2022
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Diary dates

features

Industry research: Boutique boom

The boutique studio market continues to grow and evolve, as the latest Association of Fitness Studios report shows. Stephen Tharrett and Mark Williamson report

Published in Health Club Management 2017 issue 1
A huge 63 per cent of revenue is spent on staffing fitness studios
A huge 63 per cent of revenue is spent on staffing fitness studios

Over the last few years, boutique fitness studios have emerged as a disruptive force in shaping the delivery of fitness around the globe. In the US alone, there are approximately 100,000 fitness studios – three times the number of traditional commercial fitness facilities (source: Association of Fitness Studios – AFS).

To further advance the story of how fitness studios are changing the industry’s landscape, data generated by IHRSA’s 2016 Health Club Consumer Report indicates that, in 2015, consumers spent approximately US$4bn more on fitness studio privileges than on membership to traditional commercial fitness facilities.

Further insight is provided by the AFS’ Fitness Studio Financial and Operating Benchmarking Report, now in its second year. Produced in co-operation with ClubIntel, the report offers a snapshot of this growing segment of the market.

KEEPING IT PERSONAL
While barre studios (such as Pure Barre and Bar Method), cycling studios (including Boom Cycle and SoulCycle) and HIIT studios (such as Orangetheory and 1Rebel) receive a tremendous amount of press, they remain in the minority among studios. Personal training and small group training studios are the most prominent studio type; just over 40 per cent of studio operators report operating this type of studio.

DIVERSIFIED OFFER
The percentage of fitness studios focused on delivering a singular, specialist experience is giving way to more multi-disciplined experiences – i.e. sites are increasingly offering at least two different programming formats such as cycling and yoga, cycling and HIIT, HIIT and yoga or personal training and barre.

Approximately 30 per cent of studios in this year’s study said they specialise in two or more modalities or offerings.

RETURN OF SUBS
Fitness studios appear to be shifting from pay-as-you-go to a subscription model.

When the fitness studio segment first burst onto the scene, one of the novel aspects of the business model was its variety of flexible, pay-as-you-go packages. The founders of the studio boom focused on providing transparent, simple and convenient options to take part (single drop-in rates, five-class packs, 20-packs and so on).

But the 2015 data shows a shift toward a membership model – i.e. payment of a monthly fee for unlimited access to the studio’s services. In fact, 71 per cent of studios now offer a membership option of at least one month’s duration.

Membership encompasses a range of options, from unlimited group exercise classes to unlimited small group training, or indeed a combination of unlimited small group training with a limited number of personal training sessions.

This directional shift – while affording studios an additional means of generating value for consumers – could misfire with many fitness consumers by limiting the flexibility associated with the pay-as-you-go approach.

RETENTION LEVELS
Fitness studios are more effective at retaining clients than their counterparts in the traditional fitness industry. The average attrition level for fitness studios in 2015 was 24 per cent. Within that, personal training/small group training studios reported attrition levels of 20 per cent, compared to group exercise-orientated studios (such as barre, cycling, HIIT and yoga) that had attrition levels of 27 per cent.

EBITDA EFFICIENCY
The average EBITDA margin for studios in 2015 was 24 per cent, compared to a range of 16 – 20 per cent for traditional health and fitness clubs (data from IHRSA’s 2015 Profiles of Success).

Studios under 2,000sq ft and those measuring 5,001– 10,000sq ft were the most efficient, with EBITDA margins of 37 per cent and 34 per cent respectively.

SMALL IS BEAUTIFUL
A small footprint is associated with greater revenue productivity and earnings efficiency.

Studios measuring less than 2,000sq ft generate revenue of US$104 per square foot and EBITDA of US$38 per square foot. Studios between 2,001sq ft and 5,000sq ft generate revenue of US$104 per square foot and EBITDA of US$23 per square foot.

The data shows these smaller studios combine excellent revenue productivity with lower staffing costs, lower rental costs and lower investment and reinvestment costs. These smaller studios have a powerful blend of attributes that all speak to their capacity for greater profitability.

CLEAR WINNERS
Studios in the top quartile significantly outperform the industry average in terms of revenue per square foot, generating US$189 per square foot compared to the industry average of US$77, and EBITDA of US$38 per square foot compared to the industry average of US$18.

PRICE OF PEOPLE
Staff and rent represent the two largest costs for studios. The average studio spends 63 per cent of revenue on staffing and 21 per cent of revenues on rent.

Interestingly, though, the top quartile of fitness studio operators spend 51 per cent of revenues on staff and 13 per cent on rent – another indication of what drives best-in-class performance.

ACTIVE INVESTMENT
In 2015, the average fitness studio spent US$9,500 investing in new equipment and US$23,000 reinvesting in the facility. This represents 11 per cent of average studio revenues.
While these numbers represent industry averages, they demonstrate a strong commitment by studios to reinvesting in the capital assets of the business.

LOW SET-UP COSTS
Fitness studios have a low capital barrier to entry and are asset light. The average fitness studio invested a total of US$166,000 to open its business. This cost represents the total capital investment, including hard costs such as tenant improvements and equipment, along with pre-opening expenses.

When viewed by studio type, studios that are group exercise-driven spent approximately US$208,000 to launch their businesses, while personal training/small group-driven studios spent approximately US$117,000.

FINAL THOUGHTS
Metrics related to net client growth, operating efficiency and revenue productivity of studios all point to a sector outperforming its larger, more established competitors in the traditional fitness sector.

As studio operators evolve to leverage their competitive strengths, this sector will be well positioned to capture a larger share of fitness consumer spend.

About the authors

Stephen Tharrett and Mark Williamson
Stephen Tharrett and Mark Williamson

Stephen Tharrett and Mark Williamson are co-founders of brand insights firm ClubIntel.

www.club-intel.com

Sign up here to get HCM's weekly ezine and every issue of HCM magazine free on digital.
PT and SGT studios dominate, while barre, cycling and HIIT studios remain in the minority
PT and SGT studios dominate, while barre, cycling and HIIT studios remain in the minority
The boutique sector is outperforming the more established, traditional clubs
The boutique sector is outperforming the more established, traditional clubs
https://www.leisureopportunities.co.uk/images/324922_536568.jpg
A new study assesses the trends in the ever-evolving boutique segment
Stephen Tharrett and Mark Williamson co-founders of brand insights firm ClubIntel,Stephen Tharrett, Mark Williamson, ClubIntel, Association of Fitness Studios, IHRSA, 2016 Health Club Consumer Report, Fitness Studio Financial and Operating Benchmarking Report, SoulCycle, Pure Barre,
Latest News
Thousands of health clubs, swimming pools and leisure centres are under the threat of permanent ...
Latest News
Fully vaccinated people in the US no longer need to wear a face mask whether ...
Latest News
Anytime Fitness UK has revealed that April was its busiest month for new memberships since ...
Latest News
HCM understands that Fitness International, which operates more than 700 health clubs under the LA ...
Latest News
A court has given Virgin Active the green light to erase the rent arrears it ...
Latest News
The Swimming Teachers' Association (STA) has partnered with a psychologist to provide new mindfulness and ...
Latest News
A report commissioned by Parkrun has estimated that allowing mass-participation outdoor events carries an "exceptionally ...
Latest News
Jan Spaticchia, founder and chair of énergie Fitness has died aged 51 following a short ...
Latest News
A new pioneering approach looks to help cancer patients prepare for and respond to treatment ...
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Peloton is recalling all of its Tread and Tread+ machines in the US, after striking ...
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Health club operator Bannatyne is repositioning itself as a wellness provider, as it looks to ...
Opinion
promotion
The UK’s first dedicated leisure development framework has completed its first four-year term with £144m committed investment in public leisure projects.
Opinion: UK’s first leisure framework celebrates £144m investment in public leisure
Featured supplier news
Featured supplier news: Gympass platform expands to offer customers access to over 2,600 UK facilities
One of the world’s largest corporate wellbeing platforms Gympass has gained a new partner every month since the start of 2021, taking its total to more than 2,600 bricks and mortar UK gym facilities.
Featured supplier news
Featured supplier news: Connect for success with Precor
Members are returning post-lockdown expecting a fully integrated service, meaning digital connectivity has never been more important.
Company profiles
Company profile: Parkwood Leisure
Parkwood Leisure is a family-owned leisure management company working with local authority partners across England ...
Company profiles
Company profile: Physical Company
Physical Company’s mission statement is ‘First for Fitness Solutions’ – a statement that reflects the ...
Catalogue Gallery
Click on a catalogue to view it online
Directory
Salt therapy products
Saltability: Salt therapy products
Spa software
SpaBooker: Spa software
Management software
Premier Software Solutions: Management software
Architects/designers
Zynk Design Consultants: Architects/designers
Whole body cryotherapy
Art of Cryo: Whole body cryotherapy
Fitness equipment
Precor: Fitness equipment
Flooring
Total Vibration Solutions / TVS Sports Surfaces: Flooring
Red Light Therapy
 Red Light Rising: Red Light Therapy
Hydrotherapy / spa fragrances
Kemitron GmbH: Hydrotherapy / spa fragrances
Wearable technology solutions
MyZone: Wearable technology solutions
Property & Tenders
Pendine Sands, Carmarthenshire
Carmarthenshire County Council
Property & Tenders
Diary dates
07-09 Jun 2021
Virtual summit,
Diary dates
12 Jun 2021
Worldwide, Various,
Diary dates
13-14 Jun 2021
Online,
Diary dates
01-04 Jul 2021
Expo Centre & Riviera di Rimini, Italy
Diary dates
18-19 Sep 2021
Locations worldwide,
Diary dates
21-24 Sep 2021
Messe Stuttgart, Germany
Diary dates
28-29 Sep 2021
ExCeL London, London, United Kingdom
Diary dates
04-07 Nov 2021
Exhibition Centre , Cologne, Germany
Diary dates
01-07 Dec 2022
tbc, Dunedin, New Zealand
Diary dates
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