7 Signs of Continued Hardship, But a Bright Future for Gyms

More than one year after widespread shutdowns, U.S. fitness club operators still grapple with pandemic-related damage.

Although the first quarter of 2021 started strong, no January rush could undo the insurmountable decline the fitness industry endured last year. By year-end, the industry saw 17% of gyms and studios close for good and revenue drop by 58%.

Business owners, managers, and industry employees continue to push through COVID-19’s impact on the fitness industry as the fight for relief endures. The industry’s battle highlights the vital role health clubs, gyms, and studios play in the economy.

Here are seven signs that despite continued struggles, the long-term future is looking bright for gyms.

1. 2021 Started Promising With a January Uptick in Visits
2. Gym & Studio Usage Still Down in Early Q1 by 60% in Some Regions
3. Recovery is Uneven, But Trending Up Heading into Mid-Year
4. Smaller Fitness Businesses Continue to Carry Additional Risk
5. Fitness Industry Damage Impacts Local Economies
6. Gyms & Studio Recovery May Lift Local Economies & Communities
7. The Pursuit of Fitness Industry Relief Persists

2021 Started Promising With a January Uptick in Visits

As we typically expect in the fitness industry, New Year’s Resolutioners and long-time exercise enthusiasts renewed their fitness goals at health clubs.

According to data from several leading club management companies, gym and studio attendance increased by double-digit percentages in January 2021 relative to December 2020. Placer Ai analysis separately shows that visits at six leading fitness brands also saw growth in January.

“Many clubs, which are in a fragile financial situation, may have been counting on such a major increase in new joiners and subsequent spurt in overall revenue,” said Rick Caro, a 48-year veteran of the industry and president of Management Vision, Inc., a leading consulting firm specializing in the club industry. “Failing that, several may have to cease operations."

Gym & Studio Usage Still Down in Early Q1 by 60% in Some Regions

Relative to pre-pandemic levels, usage is still down across the fitness club industry. Businesses in states with prolonged closures and harsh restrictions—such as California, Washington, and New York—saw decreased usage topping 60% in January.

National data from club management software firms shows that commercial studios and gyms saw decreased visits ranging from 30-45% in January and February 2021, relative to the same period in 2020. Nonprofit facilities such as YMCAs and community centers experienced a 60% decline in visits.

"The first quarter has always been a significantly stronger period than any other for this industry,” said Caro. “It often sets the tone for the rest of the year. However, this year it may not have the lift as would be customary.”

Recovery is Uneven, But Trending Up Heading into Mid-Year

While visits were down at clubs nationwide in early Q1 relative to pre-pandemic levels, some segments closed out the quarter on a positive note. Placer Ai foot traffic data shows top fitness brands close the gap in year-over-year visits. While Q4 2020 saw a visit decline of 20% relative to Q4 2019, Q1 2021 visits were down by only 14%, comparable to Q1 2019.

Data from Daxko, a club management firm that serves multiple segments, highlights a similar uptrend:

• Check-ins at boutique studios in March this year reached 87% of March 2019.
• At health clubs, check-ins were 68% of pre-pandemic levels, while new joins outpaced March 2019 data.
• For all facilities in the firm’s portfolio, active members reached 66% of 2019 levels, and revenue hit nearly 80% of pre-pandemic March 2020 levels.

The recovery process has varied for health clubs nationwide. Without relief and easing of restrictions, recovery will be a long-term process for many gyms, health clubs, and studios.

“In conversations with a number of different multi-unit [and] multi-state operators of fitness facilities and studios who have reopened, they have reported wide variations within their portfolio of locations of the percent of pre-COVID recurring dues-paying members who have returned ranging from less than 50% to as high as 75%,” said Art Curtis, an industry veteran and president of Curtis Club Advisors.

“This variability appears to break out based on a combination of the different factors including restrictions imposed by state and local government including the timing of reopening, capacity restrictions, and masking requirements,” added Curtis. “As the percent of the population that is fully vaccinated continues to increase and state and local governments continue to reduce restrictions, it is expected that the unevenness of the recovery that we have seen to date will smooth out.”

Smaller Fitness Businesses Continue to Carry Additional Risk

At least 80% of health club companies are small businesses. As such, they lack the access to capital that larger networks may leverage to weather downturns.

A JP Morgan study of nearly 600,000 small businesses found that the typical small business has 27 days’ worth of expenses in reserve, meaning their lack of liquidity places smaller enterprises at an elevated risk of closure. Small fitness businesses include mom-and-pop storefronts, other independent operations, and many franchisees of larger brands.

During closures and restrictions, gyms and studios offered digital content—including live-streamed and on-demand workouts—to keep members engaged and active. Now, this omnichannel approach is the new normal for the industry.

A ClubIntel study shows that 27% of U.S. gym members indicated having access to digital content from their fitness club in April last year. That percentage grew to nearly 60% by November 2020. The rate has likely grown since then, according to anecdotal feedback from clubs.

However, digital fitness alone is not enough to curtail the loss of business for gyms and studios, along with the communities they serve.

Fitness Industry Damage Impacts Local Economies

Large footprint clubs often serve as anchors to shopping centers and malls in the U.S. According to the Wall Street Journal, “gyms were a bright spot for retail owners until COVID-19.” The bankruptcies of large chains have affected shopping mall owners and landlords as well as other retail tenants that bank on neighboring gym member traffic.

Some fitness facilities successfully negotiated their rent with landlords, which allowed for some extra breathing room. Yet, lease negotiations could not stand up to bankruptcies, closures, and restrictions that led to a decline in the institutional fitness industry workforce. More than one million industry jobs were lost in 2020, representing 44% of all employees.

Nationwide, health clubs have never endured financial damage comparable to the loss inflicted by the COVID-19 pandemic. IHRSA’s Health Club Business Handbook shows that over the 2007-2009 recession, the number of fitness clubs fell by roughly 1%. The recession compressed revenue growth at most mature clubs from the 5-to-8% range to a 2-to-5% range. All numbers pale in comparison to the decline in business due to the pandemic.

Gyms & Studio Recovery May Lift Local Economies & Communities

As community pillars and vital real estate tenants, fitness clubs play a vital role in the economy. Many clubs provide fitness programs for youth, families, and consumers of all ages and fitness levels. They also create jobs that often turn into career opportunities within the organization and industry at large.

Over the past several years, landlords have turned to gyms and studios to anchor shopping centers as many department store brands have floundered with the rise of Amazon and online shopping. Pre-pandemic, 44% of Philips Edison & Company’s 340+ shopping centers housed health clubs, according to the Wall Street Journal. A 2015 Kimco case study found that one year after the arrival of LA Fitness gyms at two shopping centers, six other tenants increased sales by 30% or more.

Health clubs, gyms, and studios play a vital role in revitalizing the economy and communities they serve, making relief and recovery all the more critical for the industry.

The Pursuit of Fitness Industry Relief Persists

Adding to the plight of health clubs and studios is Congress’s exclusion of industry-specific relief in the most recent $1.9 trillion coronavirus bill approved by the Senate. Despite COVID-related restrictions and economic damage rivaling that of restaurants, hospitality, and live events, gyms and studios have not received specific funding.

The economic impact of the COVID-19 pandemic has left an indelible mark on the brick and mortar fitness industry. Large and small businesses, employees, local economies, and consumers have all been affected by the struggles club operators are still experiencing. Without relief, thousands of businesses committed to improving the health and wellness of millions may close permanently.

“Fitness is a billion-dollar industry, yet we never had a solid political presence on local and federal levels,” said Diva Richards, CEO of Hard Work No Excuses, a small fitness business located in Marlton, NJ. “The pandemic forced us to first unite as an industry and secondly to make our voices be heard.”

IHRSA is continuing relief efforts critical to the industry and communities they serve. So far, with 28,000 actions taken, the bipartisan GYMS Act has surpassed 100 co-sponsors in the House of Representatives. On Thursday, May 13, the bill was introduced in the Senate. GYMS Act champion, Rep. Mike Quigley (D-IL), is hopeful that the legislation will gain more traction.

“This is not the end of the road,” said Quigley in a recent industry event hosted by IHRSA: United We Rise - Stronger than Ever. “There are already talks of other stimulus packages, and we mustn’t let up the pressure now. The federal government needs to provide assistance to your businesses which are hurting through no fault of your own.”

In the aftermath of industry damage due to COVID, gym and studio operators press on, improving the lives of millions of Americans through physical activity. The industry is resilient, but business owners, operators, and employees need help. IHRSA’s mission to protect the industry and grow beyond its pre-pandemic peak continues in the fight for relief.