We’ve Entered A New Chapter in the Fitness Industry

March 31, 2015

What Do Recent Health Club And Fitness Industry Announcements And Transactions Mean? We’ve Entered A New Chapter As The Industry Reinvents Itself Around A Future With Awesome Potential

By: Bryan O’Rourke

In January of 2011 I wrote a blog post titled, “Has The Health Club Industry Reached Maturity ? It Has And That’s Not So Bad”. (http://www.bryankorourke.com/journal/2012/1/16/has-the-us-health-club-industry-reached-maturity-it-has-that.html) Three years ago the view that maturity, the point at which future growth is limited so that firms must grow by taking sales from competitors or by diversifying, wasn’t popular for some veterans but since that time events have reinforced my beliefs. Basically the notion of monthly fees for membership at traditional types of health clubs is coming to an end as the most significant means in which people will seek and obtain health and fitness. Don’t get me wrong, health clubs are hardly going away, but there is more to the story which in the end is great news so please read on.

The recent acquisition of Life Time Fitness by private equity, the announced sale of TSI and the exploration of public offerings by both Planet Fitness and Soul Cycle all point to underlying trends. The entry of Apple into the health and fitness space, the surge in mobile and digital health and fitness services in general and the success of business models like Class Pass also point to these underlying trends. We have entered a reinvention phase following maturity which will grow the market tremendously because of changing consumers and increasing digital options. Here is the bottom line: customers are going to experience a surge in alternatives for their health and fitness needs and the health club industry is realigning around this new reality to maintain their relevance in what will be a massive growth opportunity in the coming decade.  Consider this, Inc. Magazine’s recent ranking of the fastest growing industries for 2015 included Telehealth Services as the second fastest growing and we’re just getting started. Customers are going to be able to enter the health and fitness journey more easily than was every possible before and thus create a massive market. Companies that are playing in these arenas won’t be seeking to go private or be sold, they’ll be seeking to go public or obtain more capital because their growth stories provide more upside. Class Pass’s ability to raise $54 million in venture capital is just another case in point and these stories won’t stop there because the potential is just too great. In evaluating recent financial transactions, announcements, the flow of capital only reinforce the S curve growth scenario I shared three years ago.

This is hardly a dire scenario for health clubs overall but it does require that they change their ways. As with retail, which saw digital online shopping become a huge threat that impacted many competitors, the most successful retail brands are now those creating unique consumer experiences through the deployment of both digital and physical store integration. Check out stock returns for Macy’s and Nordstrom’s over the past several years as compared to Amazon. In the end as new entrants into the health and fitness space grow the marketplace, rising tides lift all boats after all, successful bricks and mortar fitness models will reinvent their offerings around members in new ways in a world where customer experience is truly marketing. Its why, among other things, the appropriate deployment of technologies is so critical to the future of the health club industry and to operators as this new world unfolds.

I shared some of these concepts during my recent presentation at IHRSA 2015 this year. You can read the content and watch the videos relating to Navigating The Revolution, New Technologies Creating Opportunities here http://www.slideshare.net/Bryankorourke/navigating-the-revolution-key-trends-and-how-clubs-can-use-technology-ihrsa-2015 .

So what do you think ? Is the traditional health club business model mature ? Will successful operators reinvent their models to include the seamless integration of both digital and physical world experiences around the customer ? Feel free to write and let me know at bryankorourke@gmail.com, or tweet me @bryankorourke.com .

Bryan O’Rourke serves as President of the Fitness Industry Technology Council, is CEO of Integerus Advisors and CSO of Fitmarc and the Flywheel Group. These organizations collectively serve over 800 fitness facilities in the US, dozens of global organizations and over 5,000 instructor professionals. Bryan’s an entrepreneur, consultant, executive, investor and former club owner who has worked in the health club and fitness industry for 18 years. IHRSA named him one of 13 to watch in 2013. He has presented at industry and corporate conferences on four continents and is widely published and quoted in periodicals like Inc. Magazine, the Wall Street Journal and the New York Times. To learn more visit bryankorourke.com and follow him on twitter