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Thursday
Jan152015

Industry Outlook

 

As we wrap up 2014 and look forward to a brand-new year, many businesspeople tend to experience a flurry of mixed emotions, ranging from celebratory—“Another successful year!”—to pensive—“How can we make our business even better next year?”—to a touch of anxiety— “What unknown challenges will we face in the year ahead?”

 To gain a clearer understanding of what 2015 may hold for the international health club community, CBI checked in with six industry leaders from around the globe. Our esteemed panel includes Rasmus Ingerslev, a pioneer in the field of virtual fitness and the CEO of Fresh Fitness, a Danish chain of 22 clubs; Susan Jansson, the founder and CEO of HealthSPORT, a group of 13 full-service clubs in California; Gustavo Borges, a former Olympic swimmer and IHRSA board member, who now presides over five Academia Gustavo Borges swim clubs in Brazil; Jeff Skeen, the president and CEO of Fitness Connection, a collection of 17 clubs in Texas, Nevada, and North Carolina; Doug Cowan, the founder and CEO of the Health Systems Group, in Ontario, Canada; and IHRSA’s own expert, John Holsinger, Director, Asia-Pacific.

These are not dedicated researchers or industry or financial analysts: These are industry practitioners, men and women who, each day, labor in its trenches, toil in its fields. As a result, their reflections on the industry’s past, present, and future are especially revealing and meaningful.

Rasmus Ingerslev
CEO
Fresh Fitness, DK
Copenhagen, Denmark


freshfitness.dk

 

As an innovator in virtual group exercise— as the founder of Wexer Virtual—what do you see happening with respect to this category of classes?

I think we’ll be able to look back at 2014 as the year when virtual classes were embraced, worldwide, by key club operators. I estimate that 10 million virtual classes were conducted last year, and that the number will more than double, to at least 25 million, during the coming year. This information comes from an in-depth market survey conducted among more than 6,000 end-users in multiple markets. Virtual classes are going to become the next treadmill or set of dumbbells—a must-have for clubs of every sort.

What other types of trends do you see taking off during the new year?

I believe high-intensity class formats and functional training will continue to grow in popularity. As a result of this trend, we’re gradually turning our clubs into multifunctional “fitness playgrounds” with equipment and activities that appeal to a wide range of users. I believe this is great for motivation and, therefore, retention. It’s important, however, that we continue to provide plenty of engaging, entry-level activities to guarantee the industry’s steady growth.

From an overall perspective, I have no doubt that we’ll continue to see an increase in the number of niche/ boutique clubs offering highly specialized services—i.e., studios for yoga, cycling, and various hybrid concepts. In a survey conducted recently among the CEOs of leading European health club groups, 100% said that they expect to see more growth in this segment.

What sort of growth do you expect to see in the Danish club market in 2015?

The Danish market is maturing. It currently stands at about 15% penetration, and is still growing. I suspect, however, that, during the coming year, we’re going to see more of a shift between different segments than net growth in the total numbers of members. For Fresh Fit- ness, we’re projecting 40%–50% growth, which would represent 30,000–37,500 members. We’re currently the third largest operator in Denmark in terms of number of members, and our goal is to be the second largest, with a 20% market share.

Susan Jannson
Founder, CEO
HealthSPORT
Arcata, California USA

healthsport.com

 

Your company is known for its emphasis on “fitness for all.” Given that, how do you think clubs could do a better job of connecting to a wide variety of cohorts in 2015 and beyond?

Our intention is to “Get the World Fit,” but, realistically, we’re able to reach only those people who view themselves as potentially “Fit People,” and decide to invest some time, energy, and money in their health and fitness. The challenge in penetrating more of the under-served market seems to be price, and successful integration into the club environment. If clubs can offer an attractive value proposition, while embracing each and every member, this challenge can be met.

One tactic we employ is to get new members pursuing a specific desired outcome, such as weight loss. To that end, we offer an inexpensive 6-to-8-week program to introduce them to the club, giving them the chance to learn what it feels like to aspire to be a “Fit Person.” We also work to make our club offerings more personal. For example, we’re adding fitness therapists—physical therapists who specialize in sports injuries, personal training, and performance training. They manage our personal training department, provide continuing education, and work with impaired members.

What sorts of programs do you expect to increase in popularity in 2015?

Programs that create a sense of community, facilitate sharing, and encourage members to achieve results, while also having fun, will be popular. This year, we’re introducing a program that makes use of FitShares software. It not only measures members’ results, but, more importantly, it tracks their successes, allowing them to share their accomplishments with their friends on Facebook, or to post a selfie depicting the fun they’re having at the club.

What sort of growth do you see taking place at Health-SPORT in 2015?

I anticipate growth in the number of members at our newer clubs, revenues from programming and partnering with other fitness providers at all clubs, and a boost from technology tracking, with increases in our online sales of training and programming at our bigger clubs. In the case of our older facilities, I’m investing in improvements, building new locker rooms, moving one club to a larger building, remodeling the interior of another, and taking on a neighboring space in a third to maintain market share and keep the brand current.

Gustavo Borges
Owner
Academia Gustavo Borges
Sao Paulo, Brazil

metodologiagb.com

 

Given your achievements as an Olympic swimmer, how do you view the role of swimming within the global health club industry?

Swimming plays an incredibly important role in our industry. Unlike most club options, swimming is appropriate and rewarding for members of virtually any age. We offer instruction to children as young as six months old. The multiyear process of learning to swim also can help clubs build a strong relationship with their members, both children and adults. And as swimmers get older, training in the water offers a no-impact workout that, while much easier on the body than other activities, still provides the health benefits of serious physical activity.

What sort of new opportunities and growth prospects do you see on the horizon for the Brazilian market in 2015?

Unfortunately, 2014 was a tough year for the club industry here in Brazil. Even with expansion on the part of the two biggest players—Bodytech and Bio Ritmo—the market suffered from the effects of low growth in the Brazilian economy. So, I think that, with respect to expectations and investments, 2015 is going to be a conservative year—a year to focus on the fundamentals, and see what’s going to happen. I don’t want to sound pessimistic, but it could be another tough year for all of us. On the positive side, this gives our industry the opportunity to focus on those clients who are already in our clubs, set them up with the right programs, and take even better care of them.

What are some of the most significant challenges currently facing the industry in your market?

Taxes, workers’ law, unions, and regulations ... We’re also going through a period of increased professionalism in our market, which, while it’s wonderful, introduces a challenge with respect to fair competition. With all of the difficulties that any market imposes, the challenge always is to keep one’s eyes on the client.

Planning is our focus for 2015. Among the things that we’re doing is looking for more effective ways to handle the aquatics department. We need to know what works best in terms of club size, equipment, heating, depth of pools, humidity, etc. After we get all of those answers, we’ll start to grow again.

Jeff Skeen
President & CEO
Fitness Connection
McLean, Virginia USA

fitnessconnectionusa.com

 

From a global standpoint, what significant changes and/or challenges do you foresee the industry encountering in 2015?

Both industry-wide and worldwide, I think one of the most significant and ongoing challenges will be to find creative ways to involve more members in fee- and non-fee-based services.

Given the recession, attrition, and the increase in healthcare costs, fee-based programs are a way for club operators to drive revenue, combat attrition, and enhance their members’ health. The “creative” part has to do with finding what works for members, and finding space for the increased member participation.

On the global front, becoming part of the solution to the healthcare crisis is going to be a challenge for most operators. Unfortunately, many of them have been running their businesses in a way that only accommodates the healthy, while doctors practice “sick care,” rather than healthcare.

Given your areas of special expertise—club acquisition and franchising—what do you see happening in the New Year?

We’ve seen increased activity in mergers and acquisitions, franchising, and new club construction. The area that’s picked up the most from prior years is the latter;
it seems that landlords have recovered from the recession, and now are more willing to provide club operators with tenant improvement dollars to assist them in opening new locations.

This month marks the second anniversary of your acquisition of Pure Fitness for Women, a women-only operation. What’s your take now on this particular business model?

We’re pleased with the performance of this club. I think there continues to be an incredible opportunity in the women-only market. One of the things we’ve discovered, by virtue of owning a women-only facility, is that many women either just like to work out with one another or are motivated by religious convictions. When you consider the landscape of potential women-only clubs, you don’t find many large or national operators. Women-only facilities are clearly here to stay, and, given the lack of national players, there are plenty of opportunities available for more of them in the coming years. Because we’ve been satisfied with Pure Fitness, we’ve focused, for the past couple of years, on high-volume/high-value operations, and we’ll continue to do so in 2015. We’re looking at seven new locations and one potential acquisition this year.

Doug Cowan
Founder, CEO
Health Systems Group (HSG)
Ontario, Canada

healthsystemsgroup.com

 In the early 1980s, HSG began to develop its own brand of health promotion products in the areas of nutrition and weight management, stress abatement, office ergonomics, and back care. How can the club industry do a better job of providing total wellness/practical solutions?

I’d suggest that it utilize an integrated approach, combining programs, services, and the use of facilities and equipment to provide an enhanced and innovative user experience. In some cases, this might also involve developing strategic partnerships with other organizations, which can fill a niche or void within a given club, essentially creating a network.

In addition, clubs need to hire staff who are passionate about fitness, and who can cultivate strong relationships with participants. We should encourage members and staff to participate in activities that “bond” them together via common interests. Member-to-member and member-to-staff relationships play key roles in a rewarding member experience.

It’s also important to maintain an interactive relation- ship with members. We do so, in part, by supporting local charitable organizations and events, and by hosting fun social events—e.g., Cycle for the Cure, Swim-a-thon, Super Bowl Party, Fifty Shades of Fitness, etc.

Elaborate on that a bit, if you would.

We need to be experts in delivering fun and interactive functional workouts, in both large-and small-group settings, which focus on building a body capable of performing real-life activities in real-life situations— rather than relying on equipment that promotes lifting a certain weight in an idealized posture that’s dictated by a selectorized machine. We best serve the total health needs of our clients if we integrate elements of nutrition and weight control, along with stress- abatement techniques, into our core programs.

What sorts of technological advancements do you expect will play a role in the industry in the coming year?

Given the proliferation of technological applications that equipment manufacturers are installing on their equipment, we’re able to offer members hikes, bike trips, cycling races, mountaineering expeditions—all from the safety of their club. In 2015, technology will provide users with a greater capacity to track and monitor their progress. We need to be prepared and understand how we can best apply these rapidly evolving technologies. The database systems we employ with our own projects allow us to provide more sophisticated forms of tracking, fostering improved member adherence and retention.

John Holsinger
IHRSA, Director
Asia-Pacific

ihrsa.org

 

Last year, you spoke about the likelihood of a continued increase in small-footprint express facilities and small-group personal training centers in the Asia-Pacific market. How accurate were you?

The franchise-style, small-footprint models, such as Jetts Fitness and Anytime Fitness, continue to expand throughout Asia, with new master franchisees emerging in previously untouched markets, including China, Hong Kong, and Singapore. Small-group personal training centers are big in Australia and New Zealand right now, but interest is spreading to more mature markets, such as Hong Kong and Singapore. China is witnessing a proliferation of personal training, yoga, and smaller foot-print studios, especially in the larger cities. Meanwhile, the regional chains, with their good understanding of regional cultural differences, are flourishing, and most of the national chains remain stable.

What trends are lurking on the horizon for this region for 2015?

All of the trends currently active in the U.S. and European markets—e.g., specialization, personal training, and social media member contact—gradually will be implemented in Asian countries, as visionary and resourceful owners identify new spaces in which to play. Larger chains are working hard at increasing the member connection with member rewards programs (Celebrity Fitness with its Starfit Rewards, and Fitness First with its First Club Loyalty Program); social media and online program bookings; and real-time, program space availability for small-group personal training and yoga. Yoga and Pilates chains based in the U.S. are exploring opportunities in the Asian boutique-friendly countries of Singapore, Thailand, and Dubai.

What changes and/or challenges does the Asia-Pacific industry face going forward?

The region will continue to see the undifferentiated, mid-sized clubs struggling to better define themselves to their target membership and to open channels into the yoga/Pilates/barre boutique spaces, either within or associated with their clubs. These business models will develop in response to greater demands, an intensified focus, and a call for increased choices on the part of more savvy customers, who, increasingly, expect to get exactly what they want from their exercise programs. At the same time, the industry will continue to employ the same demographic reasoning it’s utilized in the past, e.g., a location close to home or work, faster or time- sensitive workouts, professional information from the club on health/wellness/lifestyle issues, true value for money considerations, etc. A few Japanese chains are considering expanding into other Asian countries, which, if successful, would introduce very different club cultures to the target markets. 

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