Monday, January 5, 2009

Amid Financial Crunch, Health Clubs Get In Shape To Keep Members

“At the Bodies in Motion health club, Tee Mushonga wrapped up a successful sales pitch by handing a stack of paperwork to a new customer for the West Los Angeles facility. If Mushonga, the club's membership director, had looked through his office's glass window, he would have seen another customer at the front desk completing paperwork. This one wasn't signing up for a new membership. He was canceling it. ‘There's definitely been an increase of cancellations,’ said Mushonga, who estimated losing 155 members in December while bringing in 110 new ones. For the workout business, 2009 is shaping up as a year in which health clubs will get worked over by the economy as members try to balance physical and fiscal health. Though health club owners and industry officials expect a traditional surge in January as customers make New Year's resolutions to get in shape, they're aware of the financial crunch ahead. ‘I anticipate the consumer will come out of this retail tailspin that happened over the last eight weeks and have to decide: 'I only have so much money to spend. What will I spend it on?' said Carl Liebert, chief executive of 24 Hour Fitness, based in San Ramon, Calif. Fast turnover is typical in the business, with five out of 10 new members canceling in the first year, he said, but he's unsure of 2009's prospects. Last month, Bally Total Fitness filed for bankruptcy protection under Chapter 11 for the second time in less than two years. In 2008, Bally closed 19 gyms nationwide. The picture was better at 24 Hour Fitness, which added 19 clubs and brought in $1.4 billion in revenue -- a figure Liebert called a ‘single-digit increase.’ But with his company benefiting from its sponsorship of the U.S. Olympic team, Liebert had expected to add 40 to 50 clubs. The credit crunch and mortgage crisis in September delayed those initiatives. For now, 24 Hour Fitness operates 415 locations in 15 states. ‘Our year was like a basketball game where we were coasting with a 20-point lead but had to call a couple timeouts to win by two or three points,’ Liebert said. Still, the International Health, Racquet and Sportsclub Assn. contends that its industry is ‘recession proof’ despite layoffs, the credit crunch and the mortgage crisis. The trade group has determined that consumers have spent consistent amounts of money on the health club industry despite economic uncertainties since 1981, the first year it tracked industry statistics. Gym memberships peaked nationally in 2006 at more than 42 million and were down by less than 3% last year at 41.5 million, according to statistics provided by the health club group. In 2007, health clubs brought in $18.5 billion -- a $900,000 increase from 2006. Association Chief Executive Joe Moore said the final numbers in 2008 would ‘probably’ be the same. ‘From talking to a lot of people in the industry, the bargain clubs and the high-end clubs continue to do well,’ Moore said. ‘The clubs that are in that middle price range are having more trouble.’ Heading into 2009, health clubs are breaking a sweat to attract new members. Gold's Gym, for instance, started the new year with free services, including four days of on-site workout advice from experts.”,0,7059562.story

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