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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

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 tell us more

Published in Health Club Handbook 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
71 per cent of studios now offer a membership option of at least one month’s duration

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 around 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 as part of IHRSA’s 2016 Health Club Consumer Report indicates that, in 2015, consumers spent approximately US$4bn more on fitness studio privileges than they did 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 useful snapshot of this growing segment of the market.

PT & SGT
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.

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

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

The boutique sector was founded on the principle of delivering singular, specialist experiences to unique tribes of consumers. This shift towards a broader offering indicates a new focus on multiple tribes.

Return of a subs model
Fitness studios appear to be shifting from a pay-as-you-go (PAYG) model 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 PAYG 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 etc).

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 former PAYG 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 with group exercise-orientated studios (such as barre, cycling, HIIT and yoga) which had 27 per cent attrition levels.

EBITDA efficiency
The average EBITDA margin for studios in 2015 was 24 per cent, compared with 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 measuring 2,001–5,000sq 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 for their capacity for greater profitability.

Clear winners
The top quartile significantly outperforms the industry average in terms of revenue per square foot. Fitness studios in the top quartile generated US$189 per square foot compared with the industry average of US$77. Furthermore, the top quartile of fitness studios generated EBITDA of US$38 per square foot compared with the industry average of US$18.

Price of people
Staff and rent represent the two largest costs for the fitness studio industry. The average fitness 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.

Keep it up
Fitness studios actively reinvest in their businesses. In 2015, the average fitness studio invested US$9,500 in new equipment and reinvested US$23,000 in the facility: 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 like tenant improvements and equipment, along with pre-opening expenses.

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

Final thoughts
The fitness studio industry continues to evolve. Metrics related to net client growth, operating efficiency and revenue productivity all point to a growing sector which is outperforming its larger and more established competitors in the traditional fitness arena.

The data shows that studio operators are evolving their business approach to leverage their competitive strengths. We believe that as the industry matures, it 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 ClubIntel – a brand insights firm offering branding, consumer insight and strategic consulting solutions for the fitness and private club industry.

www.club-intel.com

Sign up here to get HCM's weekly ezine and every issue of HCM magazine free on digital.
Studios are increasingly offering at least two different programming formats. London’s Heartcore offers pilates, yoga, TRX and barre
Studios are increasingly offering at least two different programming formats. London’s Heartcore offers pilates, yoga, TRX and barre
Barre, cycling and HIIT studios remain in the minority, whereas
PT and SGT studios dominate
Barre, cycling and HIIT studios remain in the minority, whereas PT and SGT studios dominate
Boutiques are outperforming more established, traditional fitness clubs / Photo: SHUTTERSTOCK.COM
Boutiques are outperforming more established, traditional fitness clubs / Photo: SHUTTERSTOCK.COM
https://www.leisureopportunities.co.uk/images/126910_488951.jpg
The boutique studio market continues to grow and evolve, as the Association of Fitness Studios’ report shows. Stephen Tharrett and Mark Williamson tell us more about how this sector is maturing
Stephen Tharrett and Mark Williamson are co-founders of ClubIntel,Boutique studio market, Association of Fitness Studios, Stephen Tharrett and Mark Williamson are co-founders of ClubIntel, IHRSA’s 2016 Health Club Consumer Report
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features

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 tell us more

Published in Health Club Handbook 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
71 per cent of studios now offer a membership option of at least one month’s duration

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 around 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 as part of IHRSA’s 2016 Health Club Consumer Report indicates that, in 2015, consumers spent approximately US$4bn more on fitness studio privileges than they did 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 useful snapshot of this growing segment of the market.

PT & SGT
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.

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

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

The boutique sector was founded on the principle of delivering singular, specialist experiences to unique tribes of consumers. This shift towards a broader offering indicates a new focus on multiple tribes.

Return of a subs model
Fitness studios appear to be shifting from a pay-as-you-go (PAYG) model 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 PAYG 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 etc).

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 former PAYG 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 with group exercise-orientated studios (such as barre, cycling, HIIT and yoga) which had 27 per cent attrition levels.

EBITDA efficiency
The average EBITDA margin for studios in 2015 was 24 per cent, compared with 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 measuring 2,001–5,000sq 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 for their capacity for greater profitability.

Clear winners
The top quartile significantly outperforms the industry average in terms of revenue per square foot. Fitness studios in the top quartile generated US$189 per square foot compared with the industry average of US$77. Furthermore, the top quartile of fitness studios generated EBITDA of US$38 per square foot compared with the industry average of US$18.

Price of people
Staff and rent represent the two largest costs for the fitness studio industry. The average fitness 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.

Keep it up
Fitness studios actively reinvest in their businesses. In 2015, the average fitness studio invested US$9,500 in new equipment and reinvested US$23,000 in the facility: 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 like tenant improvements and equipment, along with pre-opening expenses.

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

Final thoughts
The fitness studio industry continues to evolve. Metrics related to net client growth, operating efficiency and revenue productivity all point to a growing sector which is outperforming its larger and more established competitors in the traditional fitness arena.

The data shows that studio operators are evolving their business approach to leverage their competitive strengths. We believe that as the industry matures, it 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 ClubIntel – a brand insights firm offering branding, consumer insight and strategic consulting solutions for the fitness and private club industry.

www.club-intel.com

Sign up here to get HCM's weekly ezine and every issue of HCM magazine free on digital.
Studios are increasingly offering at least two different programming formats. London’s Heartcore offers pilates, yoga, TRX and barre
Studios are increasingly offering at least two different programming formats. London’s Heartcore offers pilates, yoga, TRX and barre
Barre, cycling and HIIT studios remain in the minority, whereas
PT and SGT studios dominate
Barre, cycling and HIIT studios remain in the minority, whereas PT and SGT studios dominate
Boutiques are outperforming more established, traditional fitness clubs / Photo: SHUTTERSTOCK.COM
Boutiques are outperforming more established, traditional fitness clubs / Photo: SHUTTERSTOCK.COM
https://www.leisureopportunities.co.uk/images/126910_488951.jpg
The boutique studio market continues to grow and evolve, as the Association of Fitness Studios’ report shows. Stephen Tharrett and Mark Williamson tell us more about how this sector is maturing
Stephen Tharrett and Mark Williamson are co-founders of ClubIntel,Boutique studio market, Association of Fitness Studios, Stephen Tharrett and Mark Williamson are co-founders of ClubIntel, IHRSA’s 2016 Health Club Consumer Report
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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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In breaking news, HCM understands the UK government has removed gyms and fitness facilities from ...
Latest News
Globally, gyms have, on average, seen nearly 70 per cent of their pre-lockdown members return ...
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A UK government U-turn – just announced – will see gyms and leisure centres staying open ...
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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: Volution explains how to drive the lifetime value of members through virtual engagement
In April 2020, two-thirds of the world’s gyms went into temporary closure due to COVID-19.
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 FUSION Team Training
FreeMotion Fitness
The High-Intensity Cardio-Strength Training. Read more
More videos:
Company profiles
Company profile: Core Health & Fitness
Core Health & Fitness is more than gym equipment, we offer innovative solutions for all ...
Company profiles
Company profile: BLK BOX
The BLK BOX product range is built for athletes by athletes, includes modular storage systems, ...
Catalogue Gallery
Click on a catalogue to view it online
Directory
Skincare
Sothys: Skincare
Whole body cryotherapy
Zimmer MedizinSysteme GmbH / icelab: Whole body cryotherapy
Fitness Software
FunXtion International BV: Fitness Software
Gym flooring
REGUPOL/Berleburger Schaumstoffwerk (BSW): Gym flooring
Red Light Therapy
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Management software
fibodo Limited: Management software
Design consultants
Zynk Design Consultants: Design consultants
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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
17-23 Oct 2020
Pinggu, Beijing, China
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
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Virtual,
Diary dates
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Diary dates
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Diary dates
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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
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