It’s sad, but it’s also indicative of the era that we live in, where well-funded “bigs” of every type, size and price points infiltrate markets with mass-marketed ultra-modern clubs that drive independent players out. And business logic says we’ll see more of this as we move into 2016.
Unfortunately, this industry is, in part, going the route that retail went 15 years ago. More franchises and chains are shutting down the little stores, not just in large population areas but now in smaller cities (population 25,000 or so). Rural or “ex-urban” health clubs may be immune for a while longer, but I’m not even sure of that.
In my northern New Mexico hometown (with a population of about 6,500 and a total available draw population of maybe 15,000), there are two bona fide multi-services health clubs, a medium-low price 24-hour serve-yourself gym, a small national-brand women-only mini-club, and a high-quality personal training studio. Rumor has it that only one of these businesses is making a profit, while the others may be paying their owner-operators a meager wage.
Two of the three health clubs are hanging on by the skin of their teeth, with terribly outdated equipment. These clubs are in need of drastic facelifts that likely won’t happen. One of the clubs has been trying to sell for several years and actually had a prospective buyer for a while this summer. But negotiations dragged on and on, and ultimately the buyer could not get financing because the business simply does not generate cash flow sufficient to pay monthly debt. The women-only business stays around because of an in-law-no-rent situation that keeps it open with reportedly random operating hours.
Predictably within two years, only the profitable club and the personal training studio will have survived. The local fitness market will have sorted itself out, and there will be enough of a supply of potential members and clients to support the remaining businesses.
Apply the above story to the thousands of villages, towns and cities across the nation, and you begin to see an emerging trend: insufficient customer interest within over-built markets of facilities. When the law of supply and demand becomes inverted, something’s got to give.
Michael Scott Scudder, CEO of MSSNetwork, Fitness Business Council, and Wellness Business Council, is a fitness industry veteran and frequent speaker at industry conferences. He can be contacted at email@example.com or 575-613-1004.