Fitness Facilities Survey Results For First Half Of 2011

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Michael Scott Scudder's Survey Of 495 US and 14 Canadian Fitness Facilities' Results Through The First Half Of 2011. Provides An Overview Of The Shape of The Fitness Facility Industry - Both For Profit and Not For Profit.

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Fitness Facilities Survey Results For First Half Of 2011

  1. 1. 2011  Six  Months  (JAN-­‐JUN)  Fitness  Facilities   Business  Results  Survey  Report   A   first  6  months  of  2011    from  a  survey  conducted  by  FITNESS  BUSINESS   COUNCILTM    in  July,  2011.    Detailed   business  can  be  obtained  by  contacting  Michael  Scott  Scudder  at  michaelscottscudder@yahoo.com  or  by   telephoning  Michael  at  575-­‐751-­‐4220.    There  is  a  nominal  coaching  fee  for  detailed  information.    All  rights   reserved  by  Michael  Scott  Scudder.    Any  re-­‐publication,  distribution  and/or  use  of  the  materials,  statistics   and  presentations  in  this  report  are  prohibited  without  the  express  prior  written  consent  of  the  author.      
  2. 2. TABLE  OF  CONTENTS PAGE  1:  TITLE  PAGE   PAGE  17:  PRICE  POINTS:  HIGH  PRICE  ($50-­‐$69   MONTHLY)   PAGE  2:  TABLE  OF  CONTENTS   PAGE  18:  PRICE  POINTS:  LUXURY  PRICE  ($70+   MONTHLY)   PAGE  3:  HOW  TO  USE  THIS  REPORT  EFFECTIVELY   PAGE  19:  MEMBERSHIPS:  4,000+   MEMBERS   PAGE  4:  THE  SURVEY:  RESPONSES  (1)   PAGE  20:  MEMBERSHIPS:  3,000-­‐3,999   MEMBERS   PAGE  5:  THE  SURVEY:  RESPONSES  (2)   PAGE  21:  MEMBERSHIPS:  2,500-­‐2,999   MEMBERS   PAGE  6:  THE  SURVEY:  RESPONSES  (3)   PAGE  22:  MEMBERSHIPS:  2,000-­‐2,499   MEMBERS   PAGE  7:  THE  SURVEY:  RESPONSES  (4)   PAGE  23:  MEMBERSHIPS:  1,500-­‐1,999   MEMBERS   PAGE  8:  FOR-­‐PROFIT  RESPONSES  RESULTS   PAGE  24:  MEMBERSHIPS:  1,000-­‐1,499   MEMBERS   PAGE  9:  NOT-­‐FOR-­‐PROFIT  RESPONSES  RESULTS   PAGE  25:  MEMBERSHIPS:  500-­‐999   MEMBERS   PAGE  10:  SEGMENT:  35,000FT2+   FACILITIES   PAGE  26:  MEMBERSHIPS:  UNDER  500   MEMBERS   PAGE  11:  SEGMENT:  20,000   TO  34,999FT2   FACILITIES   PAGE  27:  SMALL  STUDIOS:  DON T  SELL  MEMBERSHIPS   PAGE  12:  SEGMENT:  10,000   TO  19,999FT2   FACILITIES   PAGE  28:  COMMON  ATTRIBUTES  OF  HIGH-­‐PROFIT  CLUBS   PAGE  13:  SEGMENT:  5,000   TO  9,999FT2   FACILITIES   PAGE  29:  COMMON  ATTRIBUTES  OF  STRONG-­‐PROFIT  CLUBS   PAGE  14:  SEGMENT:  UNDER  5,000FT2   FACILITIES   PAGE  30:  COMMON  ATTRIBUTES  OF  GOOD-­‐PROFIT  CLUBS   PAGE  15:  PRICE  POINTS:  LOW  PRICE  (UNDER  $30   MONTHLY)   PAGE  31:  COMMON  ATTRIBUTES  OF  BREAKEVEN/MONEY-­‐ PAGE  16:  PRICE  POINTS:  MODERATE  PRICE  ($30-­‐$49   LOSING  CLUBS   MONTHLY)   PAGE  32:  COMMENTS  FROM  MICHAEL    2
  3. 3. Tips  on  how  to  use  this  report  most  effectively  for  your  company:       REVIEW  PAGES  4-­‐7  FIRST,  THEN  EITHER  PAGE  8  (FOR-­‐PROFIT  RESPONSES)  OR  PAGE  9  (NOT-­‐FOR-­‐PROFIT  RESPONSES)   NEXT,  REVIEW  PAGES  28-­‐31  (ATTRIBUTES  OF  PROFITABLE   CLUBS  AND  BREAKEVEN/MONEY-­‐LOSING  CLUBS)   THEN  REVIEW  PAGE  32  (OVERALL  SUMMARY  OF  MEMBERSHIP   PRICES,  INITIATION  FEES,  MEMBERSHIP   SALES,   RETENTION,   ANCILLARY  INCOME,  NET  PROFITS,   UNBUNDLING  MEMBERSHIPS,   OPERATORS SENTIMENT,   OPERATORS CONFIDENCE,  PRICING  CONFIDENCE  AND   PROFIT   CONFIDENCE)     NEXT  DETERMINE  THE  BENCHMARKS/METRICS   FOR  YOUR  CLUB.   FOR  EXAMPLE,  IF  YOUR  CLUB  IS  22,000  FT2  WITH  A  SINGLE  MEMBERSHIP   MONTHLY  PRICE  POINT  OF  $39   AND  2,600  MEMBERS:   PAGE  11:  20,000  TO  34,999FT2  FACILITIES   PAGE  16:  MODERATE  PRICE  ($30-­‐$49  MONTHLY)   PAGE  21:  MEMBERSHIPS  (2,500-­‐2,999)     BY  FOLLOWING  THE  ABOVE  STEPS,  YOU  WOULD  HAVE   COMPLETE  COMPARATIVE   BENCHMARK/METRIC   SNAPSHOTS  OF   CLUBS  OF  YOUR  PARTICULAR   SIZE,  PRICE  AND  MEMBERSHIP.    3
  4. 4. The  Survey:  Responses  (1)   THE  SURVEY  WAS  DEPLOYED  FOR  3  WEEKS  IN  JULY,  2011   USING  ICONTACTTM    AN  ONLINE  SURVEY  TOOL   LICENSED  TO  MR.  SCUDDER.     TOTAL  RESPONSES  RECEIVED  REPRESENTED  495  U.S.  AND   14  CANADIAN  FITNESS  FACILITIES.       80%   RESPONSE  FROM  FOR-­‐PROFIT  FACILITIES.   20%   RESPONSE  FROM  NOT-­‐FOR-­‐PROFIT  FACILITIES.   89%  OF  RESPONDENTS  ARE   DECISION-­‐MAKERS WITH   KNOWLEDGE  OF  AND  ACCESS  TO  COMPANY  BUDGETS  AND   P&LS.   OWNER  AND/OR   PARTNER;  GENERAL  MANAGER  OR  CLUB  MANAGER;   EXECUTIVE  DIRECTOR  OR  ASSISTANT  DIRECTOR;  REGIONAL  MANAGER  OR  DIRECTOR    4
  5. 5. The  Survey:  Responses  (2)   MONTHLY  PRICES.       AVERAGE   MONTHLY   PRICE:  $49.   MEDIAN   MONTHLY   PRICE:  $45.   INITIATION  FEES.       AVERAGE   INITIATION   FEE:  $49.   MEDIAN   INITIATION   FEE:  $40.     PERCENTAGE  ANCILLARY  INCOME/GROSS  REVENUES.       30%   AND   HIGHER:  31%   OF  RESPONDENTS   25%   TO  29.9%:  13%   OF  RESPONDENTS   20%   TO  24.9%:  14%   OF  RESPONDENTS   15%   TO  19.9%:  13%   OF  RESPONDENTS   10%   TO  14.9%:  10%   OF  RESPONDENTS   5%   TO  9.9%:  12%   OF  RESPONDENTS   LESS  THAN  5%:  7%   OF  RESPONDENTS    5
  6. 6. The  Survey:  Responses  (3)   NET  PROFIT  BEFORE  TAXES  (NOT  EBITDA    GROSS  INCOME  LESS   GROSS  EXPENSES).       20%  AND  HIGHER:  14%  RESPONDENTS   15%  TO  19.9%:  11%  RESPONDENTS   10%  TO  14.9%:  16%  RESPONDENTS   5%  TO  9.9%:  20%  RESPONDENTS   1%  TO  4.9%:  11%  RESPONDENTS   BREAKEVEN:  12%  RESPONDENTS   UNPROFITABLE:  16%  RESPONDENTS     AVERAGE  NET  PROFIT:  8%   MEDIAN  NET  PROFIT:  6%     HAVE  SWITCHED  TO   UNBUNDLED OR   A  LA  CARTE MEMBERSHIP  PRICING:  25%  RESPONDENTS     IF  ECONOMY  STAYS  SAME  FOR  ANOTHER  12  MONTHS:   MONTHLY  PRICES  WILL  BE  SUBSTANTIALLY  LOWER:  5%  RESPONDENTS   MONTHLY  PRICES  WILL  BE  SLIGHTLY  LOWER:  22%  RESPONDENTS     MONTHLY  PRICES  WILL  BE    ABOUT  THE  SAME:    68%  RESPONDENTS     MONTHLY  PRICES  WILL  BE  SLIGHTLY    HIGHER:    5%  RESPONDENTS    6
  7. 7. The  Survey:  Responses  (4)   1  YEAR  FROM  NOW  (SUMMER  2012),  FITNESS  BUSINESSES  IN  YOUR   MARKETPLACE:   WILL  BE  SUBSTANTIALLY  OR  SLIGHTLY  WEAKER:  20%  RESPONDENTS     WILL  BE    ABOUT  THE  SAME:    50%  RESPONDENTS     WILL  BE  SUBSTANTIALLY  OR  SLIGHTLY  STRONGER:    30%  RESPONDENTS     LOW  PRICES  WILL  TAKE  OVER  THE  MAJORITY  OF  HEALTH   CLUB  MARKETS:   YES,  BIG-­‐TIME:  12%  RESPONDENTS   YES,  SLIGHTLY:  54%  RESPONDENTS   EVERYTHING  WILL  BE  ABOUT  THE  SAME:  17%     NO,  SLIGHTLY:    13%  RESPONDENTS     NO,  NOT  AT  ALL:    4%  RESPONDENTS     3  YEARS  FROM  NOW  (SUMMER  2014),  THE  HEALTH   CLUB  INDUSTRY:   WILL  BE  IN  WORSE  PROFIT  SHAPE  THAN   IT  IS  NOW:  7%   RESPONDENTS   EVERYTHING  WILL  BE  ABOUT  THE  SAME  AS  IT  IS  NOW:  17%     WILL  BE  IN  BETTER  OR  SLIGHTLY  BETTER  SHAPE  THAN  NOW,  BUT  NOT  WITH   PRE-­‐RECESSION  PROFITS:    71%   RESPONDENTS     WILL  RETURN  TO  THE  PROFIT  MARGINS  IT  ENJOYED  PRE-­‐RECESSION:    5%   RESPONDENTS    7
  8. 8. The  Sectors:  For-­‐Profit  Facilities   PROFITABLE:  76%   BREAKEVEN:  9%   UNPROFITABLE:  15%     MEMBERSHIP  SALES  UP:  79%   ANCILLARY  SALES  UP:  80%   MEMBERSHIP  RETENTION  BETTER:  74%   MEMBERSHIP  RETENTION  SAME  OR  WORSE:  26%   MORE  COMPETITION:  48%   SAME  OR  LESS  COMPETITION:  52%   DOING  BETTER  FINANCIALLY  6  MO.  2011  VS.  6  MO.  2010:  80%   DOING  SAME/WORSE  FINANCIALLY  6  MO.  2011  VS.  6  MO.  2010:   20%   HAVE  YOU  UNBUNDLED?:  28%   MSS  COMMENTARY:   LOWEST  PERCENTAGE  OF  FOR-­‐PROFITS  OPERATING  AT  BREAKEVEN  OR  LOSSES   IN  THE  LAST  3  YEARS.   MEMBERSHIP  RETENTION  HAS  IMPROVED  PROFITABILITY  FOR  MAJORITY.   KEY  HAS  BEEN  FIRST  6  MONTHS  FINANCIAL  IMPROVEMENT  VERSUS  SAME   TIME  LAST  YEAR.  8
  9. 9. The  Sectors:  Not-­‐For-­‐Profit  Facilities   PROFITABLE:  41%   BREAKEVEN:  32%   UNPROFITABLE:  27%     MEMBERSHIP  SALES  UP:  86%   ANCILLARY  SALES  UP:  77%   MEMBERSHIP  RETENTION  BETTER:  91%   MEMBERSHIP  RETENTION  SAME  OR  WORSE:  9%   MORE  COMPETITION:  27%   SAME  OR  LESS  COMPETITION:  73%   DOING  FINANCIALLY  BETTER  6  MO.  2011  VS.  6  MO.  2010:  91%   DOING  FINANCIALLY  SAME/WORSE  6  MO.  2011  VS.  6  MO.  2010:  9%   HAVE  YOU  UNBUNDLED?:  14%   MSS  COMMENTARY:   NOT-­‐FOR-­‐PROFITS  IMPROVING  MEMBERSHIP  SALES  AND   ANCILLARY  SALES;   CONTINUE  EXCELLENCE  IN  RETENTION;  BUT  BREAKEVEN  AND   UNPROFITABILITY  IN  HIGHER  NUMBERS  THAN  THIS  TIME  LAST  YEAR.   THE  SECTORS PERCEPTION  OF  LOWERED  COMPETITION  MAY  BE  INACCURATE.   NEXT  6  MONTHS  WILL  BE  KEY  TIME  FOR  MOST  NOT-­‐FOR-­‐PROFITS.  9
  10. 10. Size  Segments:  35,000ft2+  Facilities   PROFITABLE:  82%   BREAKEVEN:  4%   UNPROFITABLE:  14%     MEMBERSHIP  SALES  UP:  84%   ANCILLARY  SALES  UP:  84%   MEMBERSHIP  RETENTION  BETTER:  82%   MEMBERSHIP  RETENTION  SAME  OR  WORSE:  18%   MORE  COMPETITION:  42%   SAME  OR  LESS  COMPETITION:  58%   DOING  BETTER  FINANCIALLY  6  MO.  2011  VS.  6  MO.  2010:  91%   DOING  SAME/WORSE  FINANCIALLY  6  MO.  2011  VS.  6  MO.  2010:  9%   HAVE  YOU  UNBUNDLED?:  16%   MSS  COMMENTARY:   BEST-­‐PERFORMING  SEGMENT  OVERALL  IN  THE  HEALTH  CLUB  INDUSTRY  AT   PRESENT.   KEY  FACTOR  HAS  BEEN  FIRST  6  MONTHS  FINANCIAL  IMPROVEMENT  VERSUS   SAME  TIME  LAST  YEAR.    MARGINS  MOVING  BACK  UP  SLOWLY  FOR  THE  FIRST   TIME  IN  3  YEARS.  10
  11. 11. Size  Segments:  20,000-­‐34,999ft2+  Facilities   PROFITABLE:  65%   BREAKEVEN:  24%   UNPROFITABLE:  11%     MEMBERSHIP  SALES  UP:  82%   ANCILLARY  SALES  UP:  71%   MEMBERSHIP  RETENTION  BETTER:  71%   MEMBERSHIP  RETENTION  SAME  OR  WORSE:  29%   MORE  COMPETITION:  41%   SAME  OR  LESS  COMPETITION:  59%   DOING  FINANCIALLY  BETTER  6  MO.  2011  VS.  6  MO.  2010:  71%   DOING  FINANCIALLY  SAME/WORSE  6  MO.  2011  VS.  6  MO.  2010:   29%   HAVE  YOU  UNBUNDLED?:  6%   MSS  COMMENTARY:   MEMBERSHIP  SALES  GENERALLY  IMPROVED;  ANCILLARY  SALES  AND   RETENTION  NEED  TO  BE  STRONGER  IN  THIS  SEGMENT    IT S  KEY  TO   CONTINUED  FINANCIAL   IMPROVEMENT.   STILL  HAVE  1/3  OF  CLUBS  IN  THIS  SEGMENT  AT  BREAKEVEN  OR  LOSS   OPERATIONAL  STATUS.  11
  12. 12. Size  Segments:  10,000-­‐19,999ft2+  Facilities   PROFITABLE:  69%   BREAKEVEN:  25%   UNPROFITABLE:  6%     MEMBERSHIP  SALES  UP:  69%   ANCILLARY  SALES  UP:  63%   MEMBERSHIP  RETENTION  BETTER:  75%   MEMBERSHIP  RETENTION  SAME  OR  WORSE:  25%   MORE  COMPETITION:  63%   SAME  OR  LESS  COMPETITION:  37%   DOING  FINANCIALLY  BETTER  6  MO.  2011  VS.  6  MO.  2010:  69%   DOING  FINANCIALLY  SAME/WORSE  6  MO.  2011  VS.  6  MO.  2010:   31%   HAVE  YOU  UNBUNDLED?:  38%   MSS  COMMENTARY:   THIS  SEGMENT  STRUGGLING  WITH  OVERALL  MEMBERSHIP  SALES  AND   ANCILLARY  SALES  IMPROVEMENT.    MEMBERSHIP  RETENTION  ON  THE   INCREASE,  HOWEVER.   A  PARTICULAR  SEGMENT  WITH  A  LOT  OF  COMPETITION  AND  INCREASING   COMPETITION.   STILL  HAVE  1/3  OF  CLUBS  IN  THIS  SEGMENT  AT  BREAKEVEN  OR  LOSS   OPERATIONAL  STATUS  AND  1/3   THAT  ARE  NOT  DOING  BETTER  FINANCIALLY.  12
  13. 13. Size  Segments:  5,000-­‐9,999ft2+  Facilities   PROFITABLE:  63%   BREAKEVEN:  25%   UNPROFITABLE:  12%     MEMBERSHIP  SALES  UP:  88%   ANCILLARY  SALES  UP:  88%   MEMBERSHIP  RETENTION  BETTER:  63%   MEMBERSHIP  RETENTION  SAME  OR  WORSE:  37%   MORE  COMPETITION:  63%   SAME  OR  LESS  COMPETITION:  37%   DOING  FINANCIALLY  BETTER  6  MO.  2011  VS.  6  MO.  2010:  88%   DOING  FINANCIALLY  SAME/WORSE  6  MO.  2011  VS.  6  MO.  2010:   12%   HAVE  YOU  UNBUNDLED?:  37%   MSS  COMMENTARY:   EVEN  THOUGH  MEMBERSHIP  SALES  AND   ANCILLARY  SALES  HAVE  IMPROVED,   RETENTION  IS  STILL  AN  ISSUE  FOR  1/3   OF  CLUBS  IN  THIS  SEGMENT.    KEY  TO   CONTINUED  FINANCIAL   IMPROVEMENT  IS  RETENTION.   COMPETITION  IS  HEAVY  AND  GETTING  HEAVIER  IN  THIS  SEGMENT.   STILL  HAVE  BETTER  THAN  1/3   OF  CLUBS  IN  THIS  SEGMENT  AT  BREAKEVEN  OR   LOSS  OPERATIONAL  STATUS.   THIS  SEGMENT  IS  SEEING  A  DRAMATIC  NEGATIVE  TURN.   A  LOT  OF  UNBUNDLING   IN  THIS  SEGMENT IS  IT  WORKING?  13
  14. 14. Size  Segments:  under  5,000ft2+  Facilities   PROFITABLE:  58%   BREAKEVEN:  16%   UNPROFITABLE:  26%   MEMBERSHIP  SALES  UP:  74%     ANCILLARY  SALES  UP:  79%   MEMBERSHIP  RETENTION  BETTER:  74%   MEMBERSHIP  RETENTION  SAME  OR  WORSE:  26%   MORE  COMPETITION:  32%   SAME  OR  LESS  COMPETITION:  68%   DOING  FINANCIALLY  BETTER  6  MO.  2011  VS.  6  MO.  2010:  74%   DOING  FINANCIALLY  SAME/WORSE  6  MO.  2011  VS.  6  MO.  2010:   26%   HAVE  YOU  UNBUNDLED?:  53%   MSS  COMMENTARY:   MEMBERSHIP  SALES,  ANCILLARY  SALES  AND   RETENTION  GREATLY  IMPROVED.   FINANCIAL  IMPROVEMENT  ACCOMPANIED  BY  SUCH  A  HIGH  RATIO  OF   BREAKEVEN/UNPROFITABILITY  MAY  INDICATE   KEY  CLUBS NOT  YET  MATURE.   40%+   OF  CLUBS  IN  THIS  SEGMENT  AT  BREAKEVEN  OR  LOSS  OPERATIONAL   STATUS NEGATIVE  INDICATIONS  FOR  2ND  HALF  OF  2011.   HUGE  UNBUNDLING   IN  THIS  SEGMENT IS  IT  WORKING?  14
  15. 15. Price  Points:  Low  Price  (under  $30  monthly)   PROFITABLE:  71%   BREAKEVEN:  12%   UNPROFITABLE:  17%     MEMBERSHIP  SALES  UP:  82%   ANCILLARY  SALES  UP:  65%   MEMBERSHIP  RETENTION  BETTER:  76%   MEMBERSHIP  RETENTION  SAME  OR  WORSE:  24%   MORE  COMPETITION:  41%   SAME  OR  LESS  COMPETITION:  59%   DOING  FINANCIALLY  BETTER  6  MO.  2011  VS.  6  MO.  2010:  82%   DOING  FINANCIALLY  SAME/WORSE  6  MO.  2011  VS.  6  MO.  2010:  18%   HAVE  YOU  UNBUNDLED?:  47%   MSS  COMMENTARY:   FOLLOWING  FOUR  (4)  YEARS  OF  SURVEYS,  IT S  BECOMING  CLEAR  THAT   LOW   PRICE IS  UNDER  $30   MONTHLY  FOR  A  SINGLE  MEMBERSHIP.    ANOTHER   CATEGORY BARGAIN  PRICE UNDER  $20   MONTHLY),  MIGHT  BE   WARRANTED.   NUMBERS  SPEAK  FOR  THEMSELVES,  BUT  THERE S  STILL  NEARLY  1/3   IN  THIS   PRICE  POINT  OPERATING  WITH  NO  PROFITS.   EVEN  BETTER  GROWTH  IN  MEMBERSHIP  SALES  AND/OR  ATTENTION  TO   ANCILLARY  SALES  MAY  BE  NECESSARY,  EXCEPT  FOR  HIGH-­‐VOLUME  BARGAIN   PRICE  PLAYERS.  15
  16. 16. Price  Points:  Moderate  Price  ($30-­‐$49  monthly)   PROFITABLE:  70%   BREAKEVEN:  15%   UNPROFITABLE:  15%     MEMBERSHIP  SALES  UP:  81%   ANCILLARY  SALES  UP:  77%   MEMBERSHIP  RETENTION  BETTER:  71%   MEMBERSHIP  RETENTION  SAME  OR  WORSE:  29%   MORE  COMPETITION:  48%   SAME  OR  LESS  COMPETITION:  52%   DOING  FINANCIALLY  BETTER  6  MO.  2011  VS.  6  MO.  2010:  73%   DOING  FINANCIALLY  SAME/WORSE  6  MO.  2011  VS.  6  MO.  2010:  27%   HAVE  YOU  UNBUNDLED?:  29%   MSS  COMMENTARY:   DITTO  COMMENTARY  ABOUT  4  YEARS  OF  SURVEYS     MODERATE  PRICE IS   ESTABLISHING  ITSELF  IN  THIS  RANGE  FOR  A  SINGLE  MEMBERSHIP.   NUMBERS  HAVE  IMPROVED  SINCE  THIS  TIME  LAST  YEAR,  BUT  THERE S  STILL   NEARLY  1/3   IN  THIS  PRICE  POINT  OPERATING  WITH  NO  PROFITS.   ATTENTION  TO  ANCILLARY  SALES  AND  STRONGER  RETENTION  IS  KEY  FOR  THIS   PRICE  POINT  SEGMENT.  16
  17. 17. Price  Points:  High  Price  ($50-­‐$69  monthly)   PROFITABLE:  68%   BREAKEVEN:  16%   UNPROFITABLE:  16%     MEMBERSHIP  SALES  UP:  68%   ANCILLARY  SALES  UP:  88%   MEMBERSHIP  RETENTION  BETTER:  80%   MEMBERSHIP  RETENTION  SAME  OR  WORSE:  20%   MORE  COMPETITION:  44%   SAME  OR  LESS  COMPETITION:  56%   DOING  FINANCIALLY  BETTER  6  MO.  2011  VS.  6  MO.  2010:  84%   DOING  FINANCIALLY  SAME/WORSE  6  MO.  2011  VS.  6  MO.  2010:  16%   HAVE  YOU  UNBUNDLED?:  8%   MSS  COMMENTARY:   IGH  PRICE IS  ESTABLISHING  ITSELF  AT  LOWER  GENERAL  PRICE  RANGES   THAN  HAS  HISTORICALLY  BEEN  TRUE  FOR  THIS  SEGMENT  .   THERE S  1/3   OF  CLUBS  IN  THIS  PRICE  POINT  OPERATING  WITH  NO  PROFITS.   GROWTH  IN  ANCILLARY  SALES  AND  RETENTION  IS  HELPING  WITH  FINANCIAL   IMPROVEMENT  VS.  THIS  TIME  LAST  YEAR.  17
  18. 18. Price  Points:  Luxury  Price  ($70+  monthly)   PROFITABLE:  84%   BREAKEVEN:  8%   UNPROFITABLE:  8%     MEMBERSHIP  SALES  UP:  85%   ANCILLARY  SALES  UP:  92%   MEMBERSHIP  RETENTION  BETTER:  85%   MEMBERSHIP  RETENTION  SAME  OR  WORSE:  15%   MORE  COMPETITION:  31%   SAME  OR  LESS  COMPETITION:  69%   DOING  FINANCIALLY  BETTER  6  MO.  2011  VS.  6  MO.  2010:  92%   DOING  FINANCIALLY  SAME/WORSE  6  MO.  2011  VS.  6  MO.  2010:  8%   HAVE  YOU  UNBUNDLED?:  15%   MSS  COMMENTARY:   VE  NAMED  A  NEW  CATEGORY  FOR  THIS  SEGMENT LUXURY  PRICE   BEST-­‐PERFORMING  PRICE  POINT  SEGMENT  AT  PRESENT  IN  THE  INDUSTRY   (OTHER  THAN  BARGAIN-­‐PRICERS).   NUMBERS  IN  PROFITABILITY,  INCREASED  MEMBERSHIP  SALES,  ANCILLARY   SALES  AND  RETENTION  POINT  TO  RENEWED  STRENGTH  IN  THIS  PRICE  POINT   SEGMENT.   BREAKEVEN  AND  UNPROFITABILITY  NUMBERS  IN  THIS  SEGMENT  ARE  MAINLY   DUE  TO  REPORTS  FROM  NOT-­‐FOR-­‐PROFITS  IN  THIS  PRICE  POINT  CATEGORY.  18
  19. 19. Memberships:  4,000+  members   PROFITABLE:  86%   BREAKEVEN:  7%   UNPROFITABLE:  7%     MEMBERSHIP  SALES  UP:  90%   ANCILLARY  SALES  UP:  93%   MEMBERSHIP  RETENTION  BETTER:  83%   MEMBERSHIP  RETENTION  SAME  OR  WORSE:  17%   MORE  COMPETITION:  40%   SAME  OR  LESS  COMPETITION:  60%   DOING  FINANCIALLY  BETTER  6  MO.  2011  VS.  6  MO.  2010:  93%   DOING  FINANCIALLY  SAME/WORSE  6  MO.  2011  VS.  6  MO.  2010:  7%   HAVE  YOU  UNBUNDLED?:  20%   MSS  COMMENTARY:   NOTHING  TO  BE  SAID  BEYOND   VERY  STRONG  SEGMENT  19
  20. 20. Memberships:  3,000-­‐3,999  members   PROFITABLE:  67%   BREAKEVEN:  11%   UNPROFITABLE:  22%     MEMBERSHIP  SALES  UP:  78%   ANCILLARY  SALES  UP:  78%   MEMBERSHIP  RETENTION  BETTER:  89%   MEMBERSHIP  RETENTION  SAME  OR  WORSE:  11%   MORE  COMPETITION:  67%   SAME  OR  LESS  COMPETITION:  33%   DOING  FINANCIALLY  BETTER  6  MO.  2011  VS.  6  MO.  2010:  89%   DOING  FINANCIALLY  SAME/WORSE  6  MO.  2011  VS.  6  MO.  2010:  11%   HAVE  YOU  UNBUNDLED?:  22%   MSS  COMMENTARY:   GENERALLY  DECENT  NUMBERS  OVERALL  IN  THIS  SEGMENT  WITH  INCREASES  IN   FINANCIAL   IMPROVEMENT  A  REAL  POSITIVE.   TOO  MANY   BREAKEVENS  AND   UNPROFITABLES  IN  THIS  SEGMENT  (33%).   INTENSE  COMPETITION  ENTERING  INTO  THIS  SEGMENT  AND   IT  WILL   ESCALATE.   LOOKS  LIKE  A  LOT  OF  CLUBS  IN  THIS  SEGMENT  NEED  TO  MOVE  THEIR   MEMBERSHIP  NUMBERS  TO  4,000+   TO  ACHIEVE  COMFORTABILITY.  20
  21. 21. Memberships:  2,500-­‐2,999  members   PROFITABLE:  84%   BREAKEVEN:  8%   UNPROFITABLE:  8%     MEMBERSHIP  SALES  UP:  75%   ANCILLARY  SALES  UP:  92%   MEMBERSHIP  RETENTION  BETTER:  75%   MEMBERSHIP  RETENTION  SAME  OR  WORSE:  25%   MORE  COMPETITION:  42%   SAME  OR  LESS  COMPETITION:  58%   DOING  FINANCIALLY  BETTER  6  MO.  2011  VS.  6  MO.  2010:  75%   DOING  FINANCIALLY  SAME/WORSE  6  MO.  2011  VS.  6  MO.  2010:  25%   HAVE  YOU  UNBUNDLED?:  17%   MSS  COMMENTARY:   OVERALL  GOOD   NUMBERS  IMPROVEMENT  ACROSS  THE  BOARD  IN  THIS   SEGMENT.   PERCENTAGE  OF  CLUBS  WITH  NO  POSITIVE  CHANGE  IN  MEMBER  RETENTION  IS   A  BIT  OF  A   RED  FLAG  ALONG   WITH  SAME  PERCENTAGE  IN  NO  FINANCIAL   IMPROVEMENT.  21
  22. 22. Memberships:  2,000-­‐2,499  members   PROFITABLE:  78%   BREAKEVEN:  22%   MEMBERSHIP  SALES  UP:  56%     ANCILLARY  SALES  UP:  56%   MEMBERSHIP  RETENTION  BETTER:  78%   MEMBERSHIP  RETENTION  SAME  OR  WORSE:  22%   MORE  COMPETITION:  33%   SAME  OR  LESS  COMPETITION:  67%   DOING  FINANCIALLY  BETTER  6  MO.  2011  VS.  6  MO.  2010:  89%   DOING  FINANCIALLY  SAME/WORSE  6  MO.  2011  VS.  6  MO.  2010:  11%   HAVE  YOU  UNBUNDLED?:  0   MSS  COMMENTARY:   A  SEGMENT  THAT  NEEDS  STRONG  IMPROVEMENT  IN  MEMBERSHIP  SALES  AND   ANCILLARY  SALES.   RETENTION  IMPROVEMENT  AND   FINANCIAL  PERFORMANCE  IMPROVEMENT   ARE  POSITIVE  INDICATORS.   THE  PERCEPTION  OF  COMPETITION  MAY  BE  INACCURATE  FROM  THOSE   REPORTING  IN  THIS  SEGMENT.  22
  23. 23. Memberships:  1,500-­‐1,999  members   PROFITABLE:  80%   BREAKEVEN:  20%   MEMBERSHIP  SALES  UP:  100%     ANCILLARY  SALES  UP:  80%   MEMBERSHIP  RETENTION  BETTER:  80%   MEMBERSHIP  RETENTION  SAME  OR  WORSE:  20%   MORE  COMPETITION:  20%   SAME  OR  LESS  COMPETITION:  80%   DOING  FINANCIALLY  BETTER  6  MO.  2011  VS.  6  MO.  2010:  80%   DOING  FINANCIALLY  SAME/WORSE  6  MO.  2011  VS.  6  MO.  2010:  20%   HAVE  YOU  UNBUNDLED?:  20%   MSS  COMMENTARY:   VERY  STRONG  NUMBERS  IMPROVEMENT  ACROSS  THE  BOARD  IN   PROFITABILITY,  INCREASED  MEMBERSHIP  SALES,  ANCILLARY  SALES  AND   RETENTION  POINT  TO  RENEWED  STRENGTH  IN  THIS  SEGMENT.   IT  IS  POSSIBLE  THAT  THESE  ARE  10,000   TO  12,000   FT2  OPERATORS  WHO   ARE  LEARNING  TO  MAXIMIZE  SALES  AND   SERVICE  CUSTOMERS.  23
  24. 24. Memberships:  1,000-­‐1,499  members   PROFITABLE:  58%   BREAKEVEN:  28%   UNPROFITABLE:  14%     MEMBERSHIP  SALES  UP:  86%   ANCILLARY  SALES  UP:  71%   MEMBERSHIP  RETENTION  BETTER:  86%   MEMBERSHIP  RETENTION  SAME  OR  WORSE:  14%   MORE  COMPETITION:  57%   SAME  OR  LESS  COMPETITION:  43%   DOING  FINANCIALLY  BETTER  6  MO.  2011  VS.  6  MO.  2010:  57%   DOING  FINANCIALLY  SAME/WORSE  6  MO.  2011  VS.  6  MO.  2010:  43%   HAVE  YOU  UNBUNDLED?:  28%   MSS  COMMENTARY:   WHILE  MEMBERSHIP  SALES,  ANCILLARY  SALES  AND   RETENTION  ARE   STRONGLY  IMPROVED  IN  THIS  SEGMENT  GENERALLY,  THERE  IS  FAR  TOO  HIGH   A  PERCENTAGE  (42%)  OF  OPERATORS  WITH  NO  PROFITABILITY.   THIS  SEGMENT  SUFFERED  ONE  OF  THE  WORST  DOWNTURNS  ON  AVERAGE  IN   IMPROVED  FINANCIAL   PERFORMANCE  IN  THE  FIRST  HALF  OF   NOT   A   GOOD  INDICATOR.   THIS  IS  A  SEGMENT  THAT  BEARS  CLOSE  OBSERVATION  FOR  THE  SECOND  HALF   OF  THE  YEAR.  24
  25. 25. Memberships:  500-­‐999  members   PROFITABLE:  62%   BREAKEVEN:  13%   UNPROFITABLE:  25%     MEMBERSHIP  SALES  UP:  81%   ANCILLARY  SALES  UP:  63%   MEMBERSHIP  RETENTION  BETTER:  69%   MEMBERSHIP  RETENTION  SAME  OR  WORSE:  31%   MORE  COMPETITION:  63%   SAME  OR  LESS  COMPETITION:  37%   DOING  FINANCIALLY  BETTER  6  MO.  2011  VS.  6  MO.  2010:  62%   DOING  FINANCIALLY  SAME/WORSE  6  MO.  2011  VS.  6  MO.  2010:  38%   HAVE  YOU  UNBUNDLED?:  25%   MSS  COMMENTARY:   THIS  SEGMENT  HAS  DONE  ONLY  ONE  THING  REALLY  WELL,  AND  THAT  IS  TO   IMPROVE  MEMBERSHIP  SALES.   IT S  ONE  OF  THE  WORST-­‐LOOKING  SEGMENTS  IN  IMPROVEMENT  IN   PROFITABILITY  AND   ANCILLARY  SALES.   MEMBERSHIP  RETENTION  IS  AN  ISSUE  FOR  1/3   OF  CLUBS  IN  THIS  SEGMENT.   NEARLY  40%   OF  CLUBS  ARE  OPERATING  WITH  NO  PROFIT A  NEGATIVE   INDICATOR  FOR  THE  2ND  HALF  OF  THE  YEAR.   COMPETITION  IS  INTENSE  AND   INCREASING  FOR  THIS  SEGMENT IT  BEARS   CLOSE  WATCHING.  25
  26. 26. Memberships:  under  500  members   PROFITABLE:  44%   BREAKEVEN:  25%   UNPROFITABLE:  31%     MEMBERSHIP  SALES  UP:  56%   ANCILLARY  SALES  UP:  69%   MEMBERSHIP  RETENTION  BETTER:  56%   MEMBERSHIP  RETENTION  SAME  OR  WORSE:  44%   MORE  COMPETITION:  31%   SAME  OR  LESS  COMPETITION:  69%   DOING  FINANCIALLY  BETTER  6  MO.  2011  VS.  6  MO.  2010:  75%   DOING  FINANCIALLY  SAME/WORSE  6  MO.  2011  VS.  6  MO.  2010:  25%   HAVE  YOU  UNBUNDLED?:  50%   MSS  COMMENTARY:   THIS  SEGMENT  HAS  IMPROVED  FINANCIALLY,   BUT  FROM  WHAT?   IT S  THE  WORST-­‐LOOKING  SEGMENT  FOR  PROFITABILITY OVER  HALF  OF   CLUBS  ARE  OPERATING  WITH  NO  PROFITS.   MEMBERSHIP  RETENTION  IS  A  HUGE  ISSUE  FOR    40%+   OF  CLUBS  IN  THIS   SEGMENT AND   UNBUNDLING MAY  NOT  HAVE  WORKED  IN  MOST  CLUBS  IN   THIS  SEGMENT.   THE  PERCEPTION  OF  COMPETITION  IN  THIS  SEGMENT  IS  INACCURATE.   THIS  IS  A  SEGMENT  THAT  HAS  DRAMATICALLY  TURNED  DOWN  IN  JUST  THE   LAST  12  MONTHS  AND  MAY  BE  IN  REAL  TROUBLE!  26
  27. 27.   PROFITABLE:  67%   UNPROFITABLE:  33%     ANCILLARY  SALES  UP:  100%   MORE  COMPETITION:  33%   SAME  OR  LESS  COMPETITION:  67%   DOING  FINANCIALLY  BETTER  6  MO.  2011  VS.  6  MO.  2010:  67%   DOING  FINANCIALLY  SAME/WORSE  6  MO.  2011  VS.  6  MO.  2010:  33%   MSS  COMMENTARY:   VERY  LIMITED  RESPONSES  IN  THIS  SEGMENT  (LESS  THAN  3%  OF  OVERALL   SURVEY  RESPONSES HARD  TO  EVALUATE  AT  THIS  POINT.   PERCEPTION  OF  COMPETITION  IS  PROBABLY  ACCURATE,  BECAUSE  THESE   PLAYERS  ARE  PERSONAL  TRAINING  AND   GROUP  TRAINING  STUDIOS.    THEY   ARE,  IN  GENERAL ,  DOING  AN   EXCELLENT  JOB  OF  SALES  INCREASES  AND   TAKING  CARE  OF  A  VERY  LIMITED  NUMBER  OF  CUSTOMERS.   SOME  PLAYERS,  HOWEVER,  ARE  NOT  DOING  WELL  AT  ALL  (33%).  27
  28. 28. Common  attributes  of  high-­‐profit  clubs  (20%+)   ***  MEMBERSHIP  SALES  UP:  87%     ****  ANCILLARY  SALES  UP:  100%   ***  MEMBERSHIP  RETENTION  BETTER:  87%   MORE  COMPETITION:  33%   ****  DOING  FINANCIALLY  BETTER  6  MO.  2011  VS.  6  MO.  2010:  100%   HAVE  YOU  UNBUNDLED?:  13%   MSS  COMMENTARY:   THE  ABOVE  ILLUSTRATES  CLEARLY  WHAT  IT  TAKES  IN  ORGANIZATIONAL,   MANAGEMENT  AND  MARKETING  SKILLS  TO  OPERATE  AT  HIGH-­‐PROFIT  LEVELS.  28
  29. 29. Common  attributes  of  strong-­‐profit  clubs  (15-­‐19.9%)   ***  MEMBERSHIP  SALES  UP:  82%     ***  ANCILLARY  SALES  UP:  82%   MEMBERSHIP  RETENTION  BETTER:  55%   MORE  COMPETITION:  73%   ****  DOING  FINANCIALLY  BETTER  6  MO.  2011  VS.  6  MO.  2010:  91%   HAVE  YOU  UNBUNDLED?:  9%   MSS  COMMENTARY:   OBVIOUSLY,  MANAGEMENT,  MARKETING  AND  ORGANIZATIONAL  SKILLS  ARE   EVIDENT  IN  THESE  STRONG-­‐PROFIT  CLUBS.   EVEN  THOUGH  THERE  IS  EVIDENCE  OF  HIGHLY-­‐INCREASED  COMPETITION,   THESE  CLUBS  KEEP  DEVELOPING  DOUBLE-­‐DIGIT  PROFIT  MARGINS!   INTERESTING  THAT  PERHAPS  ATTENTION  TO  RETENTION  COULD  TAKE  THIS   SEGMENT  UP  TO  THE  HIGH-­‐PROFIT  LEVEL.  29
  30. 30. Common  attributes  of  good-­‐profit  clubs  (10-­‐14.9%)   **  MEMBERSHIP  SALES  UP:  79%   **  ANCILLARY  SALES  UP:  79%     MEMBERSHIP  RETENTION  BETTER:  55%   MORE  COMPETITION:  36%   **  DOING  FINANCIALLY  BETTER  6  MO.  2011  VS.  6  MO.  2010:  71%   HAVE  YOU  UNBUNDLED?:  29%   MSS  COMMENTARY:   GOOD-­‐PROFIT  CLUBS  ARE  STRONG  ORGANIZATIONALLY,   MANAGEMENT-­‐WISE,   AND   HAVE  MORE  THAN   ADEQUATE  MARKETING  SKILLS.   ATTENTION  TO  RETENTION  WOULD  HELP  CLUBS  IN  THIS  SEGMENT  MOVE  UP   TO  THE   STRONG-­‐PROFIT LEVEL.  30
  31. 31. Breakeven/money-­‐losing  clubs:  what  common  attributes?   MEMBERSHIP  SALES  UP:  31%   ANCILLARY  SALES  UP:  58%     MEMBERSHIP  RETENTION  BETTER:  65%   MORE  COMPETITION:  35%   DOING  FINANCIALLY  BETTER  6  MO.  2011  VS.  6  MO.  2010:  58%   HAVE  YOU  UNBUNDLED?:  27%   MSS  COMMENTARY:   HERE  WE  SEE  EVIDENCE  OF  WHAT  DOESN T  WORK.    IF  YOU  WANT   TO   GUARANTEE  NO-­‐PROFIT  BUSINESSES,  NEGLECT  ATTENTION  TO  MEMBERSHIP   AND   ANCILLARY  SALES.   IMPROVED  MARKETING  SKILLS  ARE  AN   ABSOLUTE  NECESSITY  FOR  THIS   SEGMENT.   THE  GENERAL  LACK  OF  FINANCIAL   IMPROVEMENT  INDICATES  THAT  CLUBS  IN   THIS  CONDITION  (ABOVE)  WILL  BE  THE  ONES  TO  LIKELY  CLOSE  THEIR  DOORS   WITHIN  THE  NEXT  12  MONTHS.  31
  32. 32.   M i chael S cott S cudder FITNESS  BUSINESS  COUNCIL   Comments  from   FITNESS  BUSINESS  RADIO   WELLNESS  BUSINESS  COUNCIL  (Sept.   11)     Michael 575-­‐751-­‐4220   ms s @fitnessbusinesscouncil.com   www.michaelscottscudder.com     MEMBERSHIP  PRICES:  AVERAGE  AND  MEDIAN  MONTHLY  PRICES  ARE  UP  FROM  BOTH  1ST  HALF  2010   AND  1ST  QUARTER  2011.    POSITIVE.   INITIATION  FEES:  AVERAGE  AND   MEDIAN  COLLECTED  INITIATION  FEES  ARE  DOWN  SLIGHTLY  FROM  BOTH  1ST  HALF  2010   AND  1ST  QUARTER  2011.    NEUTRAL.   MEMBERSHIP  SALES  ARE  UP  SUBSTANTIALLY  FROM  BOTH  1ST  HALF  2010   AND  1ST  QUARTER  2011.    VERY  POSITIVE.   RETENTION  IMPROVED  IN  MOST  SEGMENTS  FROM  REPORTS  IN  BOTH  1ST  HALF  2010   AND  1ST  QUARTER  2011.    POSITIVE.   ANCILLARY  INCOME  IMPROVED  IN  MOST  SEGMENTS  FROM  REPORTS  IN  BOTH  1ST  HALF  2010   AND  1ST  QUARTER  2011.    POSITIVE.   NET  PROFITS  WERE  UP  ONLY  SLIGHTLY  VERSUS  1ST  HALF  2010,   BUT  SUBSTANTIALLY  VERSUS  1ST  QUARTER  2011.    VERY  POSITIVE.   UNBUNDLING   OR  A  LA  CARTING  MEMBERSHIPS  IN  ON  THE  INCREASE OF  CLUBS  REPORTED  APPLYING   THESE  METHODS  IN  THE  1ST  HALF  2011.     NEUTRAL.   SENTIMENT:  ONLY  27%   OF  RESPONDENTS  THINK  PRICES  WILL  GO  LOWER  IF  ECONOMIC  CONDITIONS  STAY  THE  SAME  FOR  THE  NEXT  12  MONTHS.    NEUTRAL.   CONFIDENCE:  80%   OF  RESPONDENTS  BELIEVE  THAT  OUR  INDUSTRY  WILL  EITHER  STAY  ABOUT  THE  SAME  OR  SLIGHTLY  IMPROVE  WITHIN  THE  NEXT  YEAR.     POSITIVE.   PRICING  CONFIDENCE:  66%  OF  RESPONDENTS  THINK  THAT  MEMBERSHIP  PRICES  WILL  GENERALLY  CONTINUE  TO  DECREASE.    POSSIBLE  NEGATIVE.   PROFIT  CONFIDENCE:  76%   OF  RESPONDENTS  BELIEVE  THAT  OUR  INDUSTRY  WILL  BE  IN  BETTER  SHAPE  BY  2014.    HOWEVER,  ONLY  5%   BELIEVE  THAT  PROFIT   MARGINS  WILL  RETURN  TO  PRE-­‐RECESSION  LEVELS.    7%  BELIEVE  THAT  THE  INDUSTRY  WILL  BE  WORSE  OFF.    17%   BELIEVE  IT  WILL  BE  ABOUT   THE  SAME  AS  IT  IS   AT  PRESENT.    71%   THINK  THAT  IT  WILL  BE  IN  BETTER  SHAPE,  BUT  THAT  PROFIT  MARGINS  WILL  NOT  RETURN  TO  PRE-­‐RECESSION  LEVELS.    NEGATIVE.       SIX  (6)   POSITIVE   THREE  (3)   NEUTRAL AND  ONLY  TWO   NEGATIVE INDICATORS  POINT  OUT  THE  EMERGING  RECOVERY  OF  THE  FITNESS  FACILITY  INDUSTRY  FOLLOWING   THE  CONSISTENTLY-­‐CHALLENGING  YEARS  OF  2008,  2009,   AND  2010.    WHILE  MANY  BUSINESS  CLOSINGS    EVIDENCED  THAT  THE  INDUSTRY  IS  NOT   RECESSION-­‐PROOF AND   LIKELY  MANY  MORE  CLOSINGS  ARE  PROBABLY  YET  TO  OCCUR,  OVERALL  THE  NORTH  AMERICAN  FITNESS  BUSINESS  APPEARS  TO  HAVE  TURNED  THE  CORNER.        32

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