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Health Club Management

Health Club Management

features

Report: Why the boutique studio market continues to grow

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

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
http://www.leisureopportunities.com/images/324922_536568.jpg
A new study assesses the trends in the ever-evolving boutique segment
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features

Report: Why the boutique studio market continues to grow

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

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
http://www.leisureopportunities.com/images/324922_536568.jpg
A new study assesses the trends in the ever-evolving boutique segment
Latest News
New York’s Blum Center for Health, a functional health facility, is offering a personalised, non-invasive, ...
Latest News
US-based fitness franchise UFC Gym has opened its first European club. The 18,000sq ft (1,670sq ...
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Public Health England (PHE) and the Centre for Ageing Better (CAB) have set out their ...
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Physical activity bodies ukactive and EuropeActive have agreed to strengthen their partnership in the event ...
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The first-ever FIBO Southeast Asia fitness event will be held in Singapore next year. Taking ...
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Featured supplier: Eleiko makes deadlifting more accessible with the Öppen Deadlift Bar
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Featured supplier news
Featured supplier: The secrets to designing a stand-out fitness studio
The design and construction of a group fitness or exercise studio can have a big impact on the success of your gym.
Opinion
promotion
An ever-increasing number of Brits are engaging in sporting events, setting themselves goals and looking to increase their fitness levels....
Opinion: Dr Crionna Tobin on nutritional training for PTs and fitness experts
As an industry, we still underestimate the power of a truly varied fitness regime - and the growing appetite for it, especially among emerging customer segments.
Opinion: Collaboration vs aggregation - what’s the difference?
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Company profile: Keiser UK Ltd
Keiser began its history of visionary sports science leadership over 40 years ago, rejecting the ...
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Company profile: TVS Group
The TVS Group supply and install sports and fitness flooring to a wide range of ...
Catalogue Gallery
Click on a catalogue to view it online
Directory
Fitness software
Go Do.Fitness: Fitness software
Wearable technology solutions
MyZone: Wearable technology solutions
Skincare
Sothys: Skincare
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Zimmer MedizinSysteme GmbH / icelab: Whole body cryotherapy
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Move GB: Member access schemes
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International SPA Association - iSPA: Trade associations
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Governing body
EMD UK: Governing body
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Diary dates
28-30 Oct 2019
Hotel Royal Savoy, Lausanne, Switzerland
Diary dates
30-31 Oct 2019
NEC, Birmingham, United Kingdom
Diary dates
05-08 Nov 2019
Koelnmesse, Cologne, Germany
Diary dates
21-22 Nov 2019
JW Marriott Miami Turnberry Resort, Aventura,
Diary dates
29 Nov 2019
The King’s Fund, London, United Kingdom
Diary dates
29-30 Jan 2020
Holiday Inn San Francisco-Golden Gateway, San Francisco, United States
Diary dates
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Hilton, Barcelona, Spain
Diary dates
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Diary dates
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ExCeL London, London, United Kingdom
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