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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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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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Matrix and Intelivideo have signed a strategic partnership, which will see Intelivideo's fitness content integrated ...
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Nadine Dorries, the recently appointed secretary of state for digital, culture, media and sport at ...
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Mindbody has announced it's buying ClassPass, the consumer wellness subscription service that enables people to ...
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Matt Miller, founder of leading yoga training platform Broga has announced the launch of Earth+Sky – a collection of cinematic virtual wellbeing classes filmed in breath-taking locations around the world.
Featured supplier news
Featured supplier news: Humanising the member app experience
FunXtion has upgraded its White Label Member App with a raft of new features to support its partners in scaling up and keeping up with rising member expectations.
Featured operator news
Featured operator news: Everyone Active generates £342m in social value
Award-winning leisure operator Everyone Active generated £342million in social value at its sites across the country in 2019/20.
Featured operator news
Featured operator news: Being active helps Parkwood Leisure customers save the NHS £16m
Parkwood Leisure, one of the UK’s leading public leisure facilities operators, helped prevent more than 7,000 cases of stroke, dementia, depression and type 2 diabetes in 2019, saving the NHS £16 million, a new social value report has shown.
Company profiles
Company profile: Gympass
On a mission to defeat inactivity, Gympass is a corporate wellness solution that builds mutually ...
Company profiles
Company profile: Xn Leisure Systems Ltd
Xn Leisure is a provider of cutting-edge health and fitness software, offering an exceptional service ...
Catalogue Gallery
Click on a catalogue to view it online
Directory
Spa software
SpaBooker: Spa software
Fitness equipment
Precor: Fitness equipment
Architects/designers
Zynk Design Consultants: Architects/designers
Uniforms
Service Sport: Uniforms
Whole body cryotherapy
Art of Cryo: Whole body cryotherapy
Hydrotherapy / spa fragrances
Kemitron GmbH: Hydrotherapy / spa fragrances
Skincare
Comfort Zone - Davines S.p.A: Skincare
trade associations
International SPA Association - iSPA: trade associations
Independent service & maintenance
Servicesport UK Limited: Independent service & maintenance
Lockers/interior design
Crown Sports Lockers: Lockers/interior design
Property & Tenders
Welwyn Garden City
Welwyn Hatfield Borough Council
Property & Tenders
Newport, Shropshire
Lilleshall Sports Academy
Property & Tenders
Diary dates
01-03 Feb 2022
Coventry Building Society Arena, Coventry, United Kingdom
Diary dates
07-10 Apr 2022
Exhibition Centre , Cologne, Germany
Diary dates
15-16 Jun 2022
ExCeL London, London, United Kingdom
Diary dates
01-07 Dec 2022
tbc, Dunedin, New Zealand
Diary dates
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