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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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Catalogue Gallery
Click on a catalogue to view it online
Directory
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International SPA Association - iSPA: Trade associations
Independent service & maintenance
Servicesport UK Limited: Independent service & maintenance
Spa software
SpaBooker: Spa software
Lockers/interior design
Crown Sports Lockers: Lockers/interior design
Skincare
Sothys: Skincare
Wearable technology solutions
MyZone: Wearable technology solutions
Management software
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Hydrotherapy / spa fragrances
Kemitron GmbH: Hydrotherapy / spa fragrances
Fitness equipment
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Property & Tenders
Hillingdon
Hillingdon Borough Council
Property & Tenders
Diary dates
12 Jun 2021
Worldwide, Various,
Diary dates
13-14 Jun 2021
Online,
Diary dates
16-17 Jun 2021
ExCeL London, London, United Kingdom
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
04-07 Nov 2021
Exhibition Centre , Cologne, Germany
Diary dates
01-07 Dec 2022
tbc, Dunedin, New Zealand
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
Basic-Fit lost 10 per cent of its members during Q1 2021, as 94 per cent ...
Latest News
A bid to engage politicians in exercise has inspired the launch of a new global ...
Latest News
The International Health, Racquet & Sportsclub Association (IHRSA) has moved its Annual International Convention & ...
Latest News
Undertaking regular physical activity could cut the risk of dying from infectious diseases – such ...
Latest News
PureGym saw its group-wide revenue decline by £177m during 2020, as it lost 37 per ...
Latest News
Outdoor workouts have become increasingly popular over the past year, as pandemic lockdowns – and ...
Latest News
Wyre Council in Lancashire has revealed plans to begin charging PTs and fitness instructors for ...
Latest News
Health clubs and gyms will be able to open their doors to individual training sessions ...
Latest News
As health clubs and gyms reopen following lockdowns, it is "absolutely crucial" operators take a ...
Latest News
IHRSA and Fitness Brasil say they have signed a partnership agreement that will see the ...
Latest News
EuropeActive has joined the All Policies for a Healthy Europe (APHE) initiative, as part of ...
Featured supplier news
Featured supplier news: Bounce back faster with a new risk-free joiner channel
The industry is eagerly awaiting the reopening of health clubs and leisure centres in another year affected by COVID-19, where the only thing that’s been certain is uncertainty.
Featured supplier news
Featured supplier news: Engaging smart technology helps gyms and fitness professionals get their leading role back
Safety, quality of service, and member engagement are key in order to offer a unique fitness experience that will boost the re-start.
Company profiles
Company profile: Matrix Fitness
Matrix provides innovative commercial fitness equipment to facilities in all market sectors including private health ...
Company profiles
Company profile: Gympass
On a mission to defeat inactivity, Gympass is a corporate wellness solution that builds mutually ...
Catalogue Gallery
Click on a catalogue to view it online
Directory
Uniforms
Service Sport: Uniforms
Trade associations
International SPA Association - iSPA: Trade associations
Independent service & maintenance
Servicesport UK Limited: Independent service & maintenance
Spa software
SpaBooker: Spa software
Lockers/interior design
Crown Sports Lockers: Lockers/interior design
Skincare
Sothys: Skincare
Wearable technology solutions
MyZone: Wearable technology solutions
Management software
fibodo Limited: Management software
Hydrotherapy / spa fragrances
Kemitron GmbH: Hydrotherapy / spa fragrances
Fitness equipment
Precor: Fitness equipment
Property & Tenders
Hillingdon
Hillingdon Borough Council
Property & Tenders
Diary dates
12 Jun 2021
Worldwide, Various,
Diary dates
13-14 Jun 2021
Online,
Diary dates
16-17 Jun 2021
ExCeL London, London, United Kingdom
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
04-07 Nov 2021
Exhibition Centre , Cologne, Germany
Diary dates
01-07 Dec 2022
tbc, Dunedin, New Zealand
Diary dates
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