The wind is at our backs, and a gale is lashing in our faces. The times have never been more challenging, or demanding, or full of risk, or rich with opportunity.
The purchase of 24 Hour Fitness by Forstmann Little for $1.6 billion; the initial public offering (IPO) of Town Sports International; the anticipated sales of Crunch, Spectrum, Wellbridge, and The Sports Club Company; the "race to the bottom" in terms of membership pricing (e.g., Fitness 19, Planet Fitness, and Anytime Fitness); Gold's Gym International's (GGI's) attempt to create the first controlled franchise model; Curves' 8,000-plus U.S. franchises; the rapid expansion of LA Fitness (U.S.); Fitness First's 425 facilities; LA Fitness' (U.K.) hunt for acquisitions.
Wall Street applauds Life Time Fitness (NYSE: LTM); LTM surpasses $1.1 billion in market capitalization, sells at 33 times earnings; David Patchell-Evans exceeds 100-club mark in Canada; Quiznos enters industry with its own fitness franchise model, 123 Fit; Dan Morrissey's XSport Group challenges the major players in Chicago.
Body Training Systems and Les Mills International divorce; board of Bally Total Fitness (NYSE: BFT) backs CEO Paul Toback; major shareholder, Emanuel Pearlman, attacks Bally's recovery plan; U.S. commercial club count tops 28,000; number of U.S. clubs climbs 6% in first six months of 2005; the proliferation of miniclub franchise opportunities; U.S. club membership tops 41.3 million (15.6% of population over the age of six years are now members).
Colleges and universities everywhere create world-class fitness facilities; the risk of commoditization increases; the search for differentiation intensifies; President Bush, 59, bench-presses 185 pounds; the 18-34-year-old and 55-plus markets continue to expand; HMOs subsidize memberships in New Jersey, Massachusetts, and Minnesota; recognition of the benefits of exercise broadens and deepens, and, as it does, the industry's value proposition grows stronger by the year, month, and minute; the obesity epidemic explodes with dramatic implications for the industry.
Competition is fierce (many clubs now share their primary trading area with 20-25 others); downward price and upward cost pressures are intense; big boxes wreak havoc in many markets; YMCA family clubs spring up everywhere; mature adults, in ever-increasing numbers, understand the necessity of regular exercise; more and more doctors are prescribing fitness for their patients; health insurers are beginning to offer incentives.
New business models have emerged; LTM and LA Fitness (U.S.) approach "category-killer" status; the family club opportunity is huge; nondues revenue opportunities continue to expand; upscale clubs (e.g., Sawmill, East Bank,Western Athletic) are prospering; a buyers' market emerges in fitness equipment; the women-only opportunity expands; yoga, Pilates, and personal-training opportunities increase; the industry racks up retention gains.
Major clusters are developing within GGI (the Galiani, Pulliam, Felsted, and Neste groups); local and regional brands are growing stronger; national brands are beginning to emerge; the industry is experiencing a critical shortage of talented, battle-tested managers; tacticians such as Polic, Chaet, Conrad, Plummer, Wischmann, and Woodard-Chavez have never been more important; feasibility and valuation experts such as Caro are in greater demand than ever before; CapEx questions abound.
Opportunity is everything. Talent is everything. Implementation and execution are everything.
In short: competition is everything.
John McCarthy is the executive director of IHRSA and can be reached at jmc@ihrsa.org.
