Health clubs multiply, membership costs fall

Driving the surge is a bountiful real estate making it easier for gym developers to blanket the market, industry observers say. Many new gyms are in smaller facilities and offer fewer amenities but also cheaper, month-to-month pricing.

While a handful of “Cadillac” gyms — those with indoor running tracks, tennis courts, pools and the like — continue to push monthly fees of $100 or more, the ground has shifted toward inexpensive entry level memberships such as the $10 basic membership charged at Planet Fitness.

The average membership fee in metro Atlanta is about $20 to $35 a month.

Experts caution that the boom will be hard to sustain.

“There are a lot of fitness concepts popping up all at once,” said Leslie Kuban, a franchising expert at FranNet of Georgia. “I think there will be some consolidation because not everyone can survive.”

Operators admit low prices can be carrots dangled to get consumers in for tours. More often than not customers opt for more expensive membership fees that hike costs $5 or more in return for amenities such as unlimited use of tanning beds and massage chairs or access to all of a chain’s locations.

“In 2008 and 2009, we adjusted our prices to a value priced system at $15 a month,” said Steve Strickland, chief executive officer and co-founder of Atlanta-based Workout Anytime, which offers cardio and weight equipment, but leaves out amenities such as yoga and step classes. “We were at $29 at the time.”

Strickland said the adjustment was part response to the recession and part recognition of the industry’s direction.

In the past, banks dismissed health clubs’ interest in filling space at shopping centers near big box retailers, said Alder Partners franchisee Stanley DeMartinis Jr., whose firm plans to open at least 20 Planet Fitness locations in metro Atlanta by 2020.

Lenders that financed strip center developments didn’t think gyms could anchor projects and draw customers to all parcels in the way that big retailers could.

That changed as it became more difficult to fill empty Blockbuster, Walmart and Dollar General stores as retailers pulled back on opening brick-and-mortar locations , especially in markets like Atlanta, where there was a lot of inventory, he said.

“It’s a mature DMA,” DeMartinis said. “There’s not a lot of new construction going on.”

Other gym operators such as fast-growing Orangetheory Fitness fill smaller retail spaces of around 2,500- to 5,000-square feet with “boutique” health clubs that focus on circuit training workouts meant to produce quicker results for time-starved consumers.

Orangetheory fills a niche for consumers who want to focus on intense core strength and conditioning without the need to pay for equipment they will never use, said Orangetheory co-founder and chief executive officer Dave Long.

But Orangetheory is not cheap, he admits. At about $100 a month on average, the chain’s membership fees are an investment, he said.

“A lot of people need a program and a push that encourages them to come,” he said, adding that the company’s workouts are never the same, are done in small groups and are based on scientific results.

Tory Banks, 35, of Decatur, has tried different gyms but found Planet Fitness off Wesley Chapel Road in DeKalb County to be the best fit. He said basketball and racquetball courts are great, but Planet Fitness’ pared down facility and focus on small classes and cardio and workout equipment was more his speed.

Other gyms, he added, felt like a social scene. “Working out is not about trying to be fashionable,” he said.

Robin Jarmon, 26, said Planet Fitness’ price attracted her to the gym. Although she pays $20 a month — up from the $10 basic membership — it’s inexpensive enough that she didn’t feel the financial pain when she took a few months off from working out because of work demands.

“It’s a great place to work out and I’ve even come here overnight and felt safe,” she said.

In-home workouts — where trainers come to residences with equipment — is growing too. Josh York, founder of New York-based Gymguyz, recently signed a deal for the company’s first franchise in Atlanta. Gymguyz, whose sessions can cost between $49 and $68, appeals to customers who don’t have the time to go to a gym, may be intimidated or prefer one-on-one training.

That demographic has grown as Americans are finding it harder to balance work, family and social lives, he said.

“A lot of people don’t like to waste time,” he said. “And we have mothers who just can’t get out to go to the gym.”

How the chains fare depends on retaining customers. Gym memberships jump around 12 percent in January, according to The International Health, Racquet & Sportsclub Association, a health club industry group. The compares to an increase of about 6.9 percent in July, the slowest month of new member sign-ups.

Most gym operators go into marketing overdrive during the first few months of the year, offering discount prices such as $1 initiation fees or family specials. Twenty-four hour access to the gym via a swipe card also has grown in popularity and used as a tool to pack more value into memberships.

And gone are the days when consumers were locked into year-long memberships. Most now offer month-to-month contracts.

Kuban said health clubs want customers to stick around, but they are not upset when members — especially those who join as part of a New Year’s resolution — lose interest as the year goes along but keep paying monthly fees. That keeps the crowds manageable and reduces wear on workout machines, which typically have a life cycle of three to five years.

“They count on that and build that into their costs,” she said. “That’s called human behavior.”