The Industry
Industry Overview
Americans' continuing struggle with obesity, coupled with health clubs' nimble responses to new opportunities, has fueled the rapid growth of the fitness industry. The domestic fitness industry, which boasted 25 million members in early 1999, set a goal of 50 million members in the U.S. by 2010 and 100 million members globally. The strength of the domestic fitness market is apparent from the numbers: Half of the opportunity resides in what is probably the most health-conscious country in the world, the United States.
As recently as the early 1990's, health clubs were typically co-ed gyms that promoted muscle-building exercising on stacked-weight equipment to an under-50's clientele. Today's fitness centers are likely to cater a special demographic (teens, women-only, families, seniors) and to offer a comprehensive approach to wellness: fitness, nutrition, weight-loss, stress-reduction and nutritional supplements.
Two of the biggest changes in recent years have been the enormous popularity of 30-minute "express" workouts and the widespread use of hydraulic exercise equipment, favored by women. The International Health, Racquet and Sports club Association (IHRSA) estimates that about a third of the nearly 30,000 health clubs in the U.S. are "express" fitness centers
Health Club Memberships
In 2005, there were more than 41.3 million health club members in the U.S. This compares to 17.3 million members in 1987 and represents a compound annual growth rate of just under 5%.
The average number of days that a health club member attended a club was 92 days in 2005.. This compares with 72 days in 1987.
The data indicate that health club members are becoming more involved with their fitness centers. Since 1987, the number of core health club members - those who attended a health club 100+ days per year - grew 231% to 17.6 million, a record high. This compares to the growth of general club memberships, which grew 138% between 1987 and 2005.
Considering that Americans are more time-starved than ever, the upward trend in club attendance provokes thought. Management believes that the increase in club attendance may be due to the exploding popularity of 30-minute interval circuit training and to a wider array of wellness services offered by health clubs, keeping members from going elsewhere for these services.
Health Club Members
The majority (57%) of health club members are women, which is reflected to the proliferation of female-only fitness centers. It is estimated that exclusive women-only gyms make up a third of the fitness franchises in the U.S.
Although the 18-34 age bracket accounts for the largest portion of club memberships, the fastest-growing segment over the past 15 years is seniors. The number of club members aged 55 and older were 8 million in 2005, an increase of 314% over 1990. This compares to the number of club members under the age of 18 years (5.1 million, an increase of 178% over 1990) and in the 13-34 bracket (14.6 million, an increase of nearly 39%).
In general, health club members are affluent. The mean household income of a club member in 2005 was $82,900; members with household incomes of over $100,000 accounted for 33% of all club memberships. On average, people who join health clubs appear to have the spending power to augment their exercise routine with other products and services offered by their fitness center.
Diversified Health & Fitness is exploiting a large and growing worldwide market opportunity in fitness. The Company should continue to benefit from the following favorable trends currently impacting the U.S. health club industry: (i) empirically measured longer work weeks among Americans, sustaining interest in "express" workout centers; (ii) rising health care costs; (iii) aging baby boomer generation; (iv) continued trend toward obesity among the U.S. population; and (v) increased awareness from consumers toward the need and benefits of a healthier and more active lifestyle (vi) an increasing desire of club members for a shorter commute to their fitness facility.
