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Health Club Management

Health Club Management

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UNITING THE WORLD OF FITNESS
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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,
Latest News
Mid Ulster District Council (MUDC) in Northern Ireland has won a landmark VAT case, which ...
Latest News
The government has pledged to invest £100m in supporting public leisure centres this winter, as ...
Latest News
Gyms in Liverpool,UK, have been given the go-ahead to reopen, following a dramatic week of ...
Latest News
Be Military Fit (BMF) has completed a restructuring project, designed to transform the outdoor fitness ...
Latest News
Rod Hill, former president of TRIB3 and director general of Anytime Fitness Iberia, has signed ...
Latest News
Persistent and rising levels of lifestyle disease across the world have exacerbated the effects of ...
Latest News
Customer experience software provider, AskNicely, has announced it will host a new virtual event called ...
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Opinion
promotion
In a post-Covid world, member experience is more important than ever before. Your customers’ expectations have been heightened as the coronavirus continues to dominate our everyday lives.
Opinion: Why member experience is more important now than ever before
Opinion
promotion
Our world has changed since March and together, we are learning and adapting to how this sector can continue to thrive in this COVID conscious world.
Opinion: Why fitness clubs and facilities need to evolve in a COVID-conscious world
Featured supplier news
Featured supplier: Annual Fitness & Active Brands Summit offering invaluable insight from over 40 leading industry speakers
Join the second Annual Fitness & Active Brands Summit and walk away with the expertise you need to transform your business model and maximise the US$59.23bn virtual fitness market opportunity.
Featured supplier news
Featured supplier: Gympass sees success after pivoting to digital
As the COVID-19 lockdown forced the temporary closure of businesses across the country, the outlook for companies supplying services to corporate partners looked precarious.
Video Gallery
Freemotion CoachBike™
FreeMotion Fitness
Give your members the immersive cycling experience that keeps your members engaged – today and tomorrow. Read more
More videos:
Company profiles
Company profile: BLK BOX
The BLK BOX product range is built for athletes by athletes, includes modular storage systems, ...
Company profiles
Company profile: Life Fitness
Through our Life Fitness Solutions Partners, we can deliver design and build services, finance solutions, ...
Supplier Showcases
Supplier showcase - Ultimate locker install
Catalogue Gallery
Click on a catalogue to view it online
Directory
Fitness equipment
TRX Training: Fitness equipment
Trade associations
International SPA Association - iSPA: Trade associations
Direct debit solutions
Harlands Group: Direct debit solutions
Software
Volution.fit: Software
Management software
fibodo Limited: Management software
Gym flooring
REGUPOL/Berleburger Schaumstoffwerk (BSW): Gym flooring
Wearable technology solutions
MyZone: Wearable technology solutions
Flooring
Total Vibration Solutions / TVS Sports Surfaces: Flooring
Lockers/interior design
Safe Space Lockers Ltd: Lockers/interior design
Hydrotherapy / spa fragrances
Kemitron GmbH: Hydrotherapy / spa fragrances
Property & Tenders
11 - 25 Union St, London SE1 1SD
Bankside Open Spaces Trust
Property & Tenders
Waltham Abbey, Essex
Lee Valley Regional Park Authority
Property & Tenders
Diary dates
03-06 Nov 2020
Online,
Diary dates
12 Nov 2020
Virtual, United States
Diary dates
17 Nov 2020
Loughborough University, Loughborough, United Kingdom
Diary dates
27-28 Nov 2020
Athena, Leicester, United Kingdom
Diary dates
03-03 Dec 2020
Virtual,
Diary dates
08-09 Dec 2020
Raffles City Convention Centre, Singapore, Singapore
Diary dates
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Ericsson Exhibition Hall, Ricoh Arena, Coventry, United Kingdom
Diary dates
23-26 Feb 2021
IFEMA, Madrid, Spain
Diary dates
03-04 Mar 2021
NEC, Birmingham, United Kingdom
Diary dates
03-06 Jun 2021
Expo Centre & Riviera di Rimini, Italy
Diary dates
16-17 Jun 2021
ExCeL London, London, United Kingdom
Diary dates
01-07 Dec 2022
tbc, Dunedin, New Zealand
Diary dates
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