Healthy Profits : Gym Chains Don’t Sweat Recession as Working Out Becomes a Way of Life
Money is tight, so Marisa Redanty is often forced to make a small but tough choice: Do I have lunch with a friend or go to the gym? More often than not, working out wins out.
Once viewed as the kind of luxury that’s the first to go in difficult times, working out has become such a firmly entrenched way of life for many Americans--particularly in Southern California--that not even the recession has been able to squash it.
A West Hollywood actress, Redanty, for example, has cut her gym time down, but not out. While the recession has forced her to occasionally turn three-times-a-week visits into once-every-other-week jaunts to Voight Fitness & Dance Center in West Hollywood, she still keeps going.
Despite the recession and major changes in key industries such as real estate and aerospace, most health clubs and fitness centers in Southern California say business is good, a condition that is often determined by the strength and stability of a club’s membership roster. Club membership has held steady in recent years.
The mid-1980s were a boom time for health club building; in the 1990s, that boom has quieted. Some clubs are expanding. But fewer new ones are going up. Marketing continues to be aggressive, and deals abound.
Growth has “clearly slowed down. That is the one clear impact of the recession,” says Lee Hillman, executive vice president and chief financial officer of Chicago-based Bally Manufacturing Corp.
With 329 clubs nationwide, Bally is the nation’s largest health club operator. Hillman says the company has acquired Nautilus Fitness Centers in Southern California, a weaker 19-outlet chain.
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For Redanty, who estimates she spends about $60 to $100 per month on fitness classes, making sacrifices to work out is worth it. Hers is an attitude that has helped the health club industry weather the economic storm.
Working out “is not even a choice for most people anymore,” says Kevin Goodwin, district manager of Diamond Bar-based LA Fitness. “Ten years ago, it was a fad. Now, it’s a way of life.”
Like many health clubs, Bally runs ads offering deals to woo new members. One recent ad touted fees of $12.47 per month--”the price of a trip to McDonald’s,” as Hillman puts it--as the average monthly cost for one of its membership plans.
Industry watchers say such deals usually indicate aggressive marketing to keep people, and dollars, coming through the doors in hard times. The health club industry of the ‘90s is not the same industry it was in the late ‘70s and early ‘80s, when it took a pounding from economic troubles.
“The industry has matured, tightened control of their clubs and are running better businesses,” says Michelle Bates Deakin, managing editor of Club Industry, a health club business management magazine in Framingham, Mass.
Clubs in Southern California and the Pacific region have done especially well, according to statistics from the International Racquet Sports Assn., a Boston-based health club group.
“They not only had a good year (in 1991), they did better than they did the year before,” says Steve Goodfriend, a research manager at IRSA, of clubs in the West. Profit margins for western clubs rose from 5% in 1990 to 9% in 1991; the only region in the country with better results was the Rockies, according to the association.
Just under 1,400 health clubs operate in California. There are about 12,000 clubs in the United States. The industry pulls in about $6 billion nationwide each year.
About 16.6 million Americans were active in some kind of health club last year, said New York-based American Sports Data Inc. The number has remained essentially flat, going from 16.7 million in 1989 to 16.4 million in 1990.
“I think the people who participate in sports do it irrespective of the economy,” says John Callaghan, an associate professor of exercise science and sports psychology at USC. “Out here, we have a real addiction to health and fitness and physical beauty. It’s not just the physical dimension, it sharpens you up mentally too.”
Sports and exercise can also provide an avenue away from worries and the more controlling aspects of life, Callaghan says.
Take Conrad Padilla. His auto repair business in Highland Park flourished, he says. Then the recession hit. Employees were let go. For him, working out is his way “of dealing with all the changes.”
One change for Padilla is that pulling the extra $140 together for a six-month membership at the Body Shop Health Club in Eagle Rock is more difficult sometimes.
“I keep it as a part of my life because it’s good for relieving the stress of this rotten economy,” says Padilla, who lives in Eagle Rock.
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The region’s economic troubles have not hit too hard at the downtown LA Athletic Club, which has seen a moderate decline in business over the last two years, says Steve Hathaway, chief operating officer and general manager.
In part, Hathaway attributes the decline to the fact that some clients work at downtown companies squeezed by the recession.
“But we’re optimistic about the future, and we’re beginning to see things improve in the central business district,” Hathaway says.
