Health Clubs Industry
Perceptual Map
The Health Clubs Industry is highly segmented and was estimated
to be roughly $27.2 billion in size for 2016.[1] The barriers to entry are minimal and growth
has been attained primarily through consolidation and franchising.[2]
[3] While there are some key players in this
industry, it mainly comprises of local and boutique fitness centers.
The following perceptual map focuses on six of the largest
multi-purpose gyms which include the following: LA Fitness ($1.98 Billion);
Life Time Fitness ($1.48 Billion); 24 Hour Fitness ($ 1.42 Billion) Equinox
Holdings ($1 Billion); Planet Fitness ($378 Million).[4] The profile range of these companies range
from low-cost (Planet Fitness) to midmarket (LA Fitness, 24 Hour Fitness) to
luxury (Equinox, Life Time Fitness).
Health Clubs that are considered low-cost do not offer much beyond strength
training and cardio equipment, while the luxury health clubs offer spas, cafes
and juice bars, amongst other amenities.
In order to compare pricing, I looked at the first-year
annual average of fees for the basic single membership package offered by the
following health clubs.[5] In regards to quality, I took the average of five
factors on a 1-5 scale from a recent survey conducted by J.D. Power.[6] I then multiplied those numbers by two,
because I like ten-point scales better. Their market share is based on their revenue portion
of the $27.6 billion industry total.
Analysis
The perceptual
map indicates that there is a correlation between membership fees relative to
the quality of amenities offered. The
outlier appears to be Planet Fitness though, as they have been able to match
quality with low price. This would probably
explain why the company has expanded exponentially relative to the rest of the
industry. Of it’s 1300 franchise gyms,
more than half have opened in the past four years.[7]
The map also seems to indicate that
there are three primary areas of growth.
First, with the recent exponential growth of Planet Fitness, the
franchise model, low-cost model seems to be a major industry disrupter. Second,
LA fitness and 24 Hour Fitness appear to be growing through consolidation as
both are backed by private equity. [8]
[9] While
LA Fitness offers the lowest quality of amenities, they are still the largest player
due to consolidation. This also likely
explains why the quality of their equipment and facility is low due to the fact
that much of their equipment would be older or depreciated in value. Third, luxury clubs are growing as well as
they appeal to the consumer segment seeking exclusivity and the best
quality.
[1] https://www.statista.com/statistics/236120/us-fitness-center-revenue/
[3] https://www.entrepreneur.com/article/299678
[4] http://www.clubindustry.com/awards-rankings/club-industrys-top-100-health-clubs-2017
[5] https://www.gymmembershipfees.com/
[6] http://www.jdpower.com/ratings/study/Fitness-Centers-Study/2293ENG
[8] http://www.sepfunds.com/Partner-Companies/la-fitness.html
[9] https://www.bizjournals.com/sanfrancisco/news/2014/05/30/24-hour-fitness-sold-to-private-equity-pension.html
