SIC 7991
PHYSICAL FITNESS FACILITIES



Establishments in this industry are primarily engaged in operating reducing and other health clubs, spas, and similar facilities featuring exercise and other active physical fitness conditioning, whether or not on a membership basis. Also included in this industry are establishments providing aerobic dance and exercise classes. Sports and recreation clubs are classified in SIC 7997: Membership Sports and Recreation Clubs if operated on a membership basis, and in SIC 7992: Public Golf Courses or SIC 7999: Amusement and Recreation Services, Not Elsewhere Classified if open to the general public. Health resorts and spas providing lodging are classified in SIC 7011: Hotels and Motels and SIC 7041: Organizational Hotels and Lodging Houses, on Membership Basis. Establishments that promote physical fitness through diet control are classified in SIC 7299: Miscellaneous Personal Services, Not Elsewhere Classified.

NAICS Code(s)

713940 (Fitness and Recreational Sports Centers)

Industry Snapshot

According to the International Health, Racquet & Sportsclub Association, the number of health clubs in the United States grew by 5.1 percent during 2001 to 17,807 facilities at the beginning of 2002, up from 16,938 in January 2001. Despite the slow economy that characterized the first years of the 2000s, health club expansion continued at a quick pace. In 2001 fitness and health centers in the United States generated combined revenues of more than $12.2 billion.

Health clubs emphasize three aspects of physical fitness: cardiovascular conditioning, strength, and flexibility. Some even add nonprofessional mental health services like stress reduction and counseling programs. Full-service health clubs featured aerobic conditioning equipment, resistance equipment, dance and exercise classes, swimming pools and spa areas, and sometimes even tanning and massage. As the U.S. population ages, the over 50 population is becoming increasing important to the health club industry, and some clubs are responding by adding health maintenance and monitoring programs to their offerings, including checks for bone density, blood sugar, and blood pressure.

In 2002 membership and enrollment (or initiation) fees from the industry's 33.8 million members constituted the vast majority of club revenues. Although these fees have long been the mainstay of industry income, other revenue sources like children's programs, personal training, exercise classes, physical therapy, and aquatic programs started contributing a growing proportion of health club revenues.

Organization and Structure

The fitness center industry is self-regulated through several professional organizations that were formed in the mid-1970s. The two most influential of these are the Association of Physical Fitness Centers (APFC) and the International Racquet Sports Association (IRSA). The APFC was founded in 1975 to provide the burgeoning industry with information, education, and public relations advice. This organization is concerned with the public's perception of the fitness industry, and it has led the way in self-regulation. The APFC's Code of Ethical Practices was one of the first and until the early 1990s the only attempt to establish and enforce industry guidelines. Member facilities had to agree to honor the Code, but the APFC had no legal authority over its members. IRSA, which later changed its name to the International Health, Racquet & Sportsclub (IHRSA), was formed when the National Tennis Association and the National Court Club Association consolidated in 1981. As its name indicates, the majority of IHRSA's membership (about two-thirds) consists of multipurpose clubs that combine fitness and racquet facilities. IHRSA's most valuable contributions to the fitness industry include its statistical surveys and its professional journal, Fitness Management. Fitness centers are geographically concentrated in high population areas. Consequently, California leads the nation, followed by New York, Texas, and Florida. The vast majority of these businesses were privately held, with notable exceptions being industry leaders Bally Total Fitness Corp., Sports Club Company Inc., and Health Fitness Physical Therapy Inc.

Background and Development

Health Spas. Known early in their history as health spas, fitness centers sprung up in the early 1960s, by which time increasing automation had negated the need for most people to perform daily physical labor. At the time, some experts predicted that physical health in the United States in general would deteriorate, but some Americans made a concerted effort to encourage physical fitness. This "fringe movement" of enthusiasts and entrepreneurs started a trend that led to a fitness boom.

Spas were the first establishments of the fitness center industry. They emphasized relaxation with a European flavor, featuring whirlpools, steam rooms, and massage services. The following were the most prominent of these spas: Europa, European, Scandinavian, Grecian, and Olympic. These early facilities also had some fitness equipment, including manual joggers, stationary bicycles, standard resistance machines for men, and passive resistance equipment for women. Most spas focused on a single sex and had only one locker room. Some clubs tried to maximize their facilities by alternating women and men on particular days of the week. In 1972, however, the New York Health and Racquet Club ushered in co-ed fitness when it built its first facility that had both a men's and a women's locker room. The vast majority of fitness clubs constructed since that time also have locker rooms for both men and women.

Self-regulation. An appreciation of professionalism was also spawned in the early 1970s. In the decade prior to that time, health spas were largely isolated from one another and were characterized by "inexperienced, inefficient and insincere" management, according to The Complete Health Club Handbook. Rising concerns about providing consistent quality led to the creation of affiliate organizations such as the APFC and, later, the IHRSA.

But these early attempts at professionalization were not sufficient to stem the rising tide of consumer complaints that precipitated public Federal Trade Commission (FTC) hearings in the late 1970s. The government's investigation identified several industry-wide problems, including false, deceptive, and misleading advertising and sales presentations; high-pressure sales tactics; bait advertising; deceptive pricing; misrepresentation of membership benefits and staff qualifications; and unfair cancellation and refund policies. Despite the large number of complaints, Dr. Jimmy Johnson, then executive director of the APFC, convinced the FTC that the industry was "well on its way to being self-policing." John-son's protestations and his association's laudable efforts at self-regulation prevented the FTC from bringing the industry under government regulation. Although the problems cited in the 1970s continued to crop up over the next two decades, the fitness center industry managed to avoid government control throughout the 1980s and early 1990s by steadily increasing self-regulation.

Nevertheless, abuses continued. In 1994 Bally's Health & Tennis (later Bally Total Fitness Corp.) was fined $120,000 and ordered by the FTC to refund thousands in membership fees in connection with charges of improper billing and collections practices.

Certification of individual employees began in the mid-1980s, but stringent evaluation and certification of facilities were not undertaken until 1989, when the American College of Sports Medicine (ACSM) began a feasibility study of the proposition. After determining that facility certification was necessary "to elevate the credibility of the health and fitness industry to the purchasing public, as well as to ensure the safety of the public when exercising at a facility," the ACSM laid out three phases for the project. They first developed standards and guidelines for facilities, then published a 16-page booklet targeted to the public titled, The ACSM Guide to Selecting a Health and Fitness Facility. Released in 1992, the publication helped educate potential fitness facility members in their efforts to determine which facilities offered safe, high-quality services. The ACSM started its third phase, actual certification, in mid-1993.

The Fitness Boom. An enormous number of adult exercisers generated a sport and fitness boom in the 1970s and 1980s, which caused rapid growth in the fitness center industry. In 1961 less than one-fourth of Americans, when asked, said that they did something aside from work to promote their own physical fitness. But throughout the 1970s and 1980s, more than 45 percent responded affirmatively to that question.

It was during this period that many of the best-known fitness center chains (including Bally's, Holiday Universal, Inc.; President's Health & Racquet Clubs, Inc.; Vic Tanny International, Inc.; and Scandinavian Health Spa) experienced dramatic growth. The aerobics and running craze of the late 1970s and early 1980s launched a general fitness boom, and by the early 1990s more than two-thirds of Americans claimed to participate in some form of exercise. Health clubs were even celebrated as smart singles spots in the 1980s, but this social orientation faded in the 1990s.

Legal Aspects. The fitness center industry has not been able to escape the tidal wave of litigation that has over-whelmed the United States. Fitness center managers have needed to employ waivers and releases, risk management services, and liability insurance to protect themselves from financial disaster at the hands of an unhappy member and his or her lawyer. The most exacting claims seemed to occur in three categories: slip-and-fall or wet area accidents, injury to participants engaged in athletic activity, and claims involving health center employees.

David L. Herbert asserted in Fitness Management magazine that "one who merely rents space for a particular activity owes no duty to those utilizing the space to supervise its use." But as fitness centers in the 1990s offered more services like health and fitness appraisals, weight training, smoking cessation programs, and stress management, they incurred more liability. Herbert emphasized that "once a facility does more than merely rent space, it is likely that it will be required to exercise due care to protect users from unreasonable risk of harm or to insure compliance with safety-related game rules." Fitness centers and their employees who did not properly screen or test participants before exercise, improperly prescribed activities, and improperly or negligently supervised activities opened themselves to lawsuits, according to Herbert.

The Americans with Disabilities Act (Public Law 101-336), which went into effect in January 1992, added another legal challenge to fitness center management. The law, which prohibited discrimination by places of public accommodation against those with disabilities, compelled architectural and program changes, such as the addition of ramps and changing screening systems, for example. Again, Herbert warned that "Health and fitness facilities that presently utilize screening systems to admit or exclude individuals to particular exercise or recreation programs may have to modify their policies to accommodate the provisions of the law." On the other hand, prospective members whose medical histories forbade particular activities would not be able to gain access to those programs, regardless of the law's stipulations.

Top Challenges. In 1993 IHRSA members claimed that the following issues were the five most pressing external challenges to the industry: local economy, price sensitivity of the market, competition from clubs, taxes, and unfair competition from non-profit establishments like YMCAs. The same survey respondents specified member retention, personnel management, advertising and marketing, cost control, and sales management as their top five internal priorities. Although home exercise was farther down the list of external threats, some industry analysts have noted that "the boom in home fitness is cutting into the health club business." The National Sporting Goods Association reported that sales of home fitness equipment in the United States more than tripled over the course of the 1980s, from $54.17 million in 1980 to $1.79 billion in 1990. Home exercisers cited convenience and privacy as advantages, but most consumers conceded that they could not recreate the variety of activities possible in a multipurpose fitness center.

America's recessionary economy of the late 1980s and early 1990s challenged fitness centers. Conventional wisdom predicted that consumers who had less discretionary income would eliminate health club memberships from their personal budgets. But performance of the fitness industry in past economic downturns showed that people often focused more on their health during stressful economic periods. Membership in virtually every age group rose continuously throughout the 1990s. Memberships for those over the age of 55 and those under the age of 18 were particularly active areas of growth during this time. Women constituted another major area of growth for the industry. By 1997 women made up 57 percent of health club patrons, almost triple the number in 1981.

During the economic downturn, fitness centers that were already weak or questionable were "shaken out." One analyst said, "Recessions are grand opportunities for the strong," because the healthy businesses would be able to capture their failing competitors' members. Industry statistics supported that commentator's view: the total number of commercial clubs decreased for the first time in the history of the industry, from about 13,500 in 1990 to 12,000 in 1991 and remained at that level through 1995. By 1997, though, the number had climbed again, to more than 13,000.

The fitness center industry continued to grow throughout the decade. The number of adult users of clubs increased from 18 million in 1995 to 22.5 million by 1998. Despite dire predictions, there was no "credit crunch," and, in fact, low interest rates helped boost the average pretax net income of fitness centers by 41.2 percent. This increase was due in large part to debt restructuring. Great potential for increased membership remained—only 8.5 percent of the population belonged to health clubs in 1998.

Current Conditions

Despite a sluggish economy, health clubs faired well in the early 2000s. According to Bank Loan Report, 17 of the country's largest health clubs increased revenues by almost 15 percent during the first quarter of 2002. The day spa industry in the United States generated approximately $7.3 billion in 2001. Over 12 percent of Americans, 80 percent of whom were women, attended a day spa between 1999 and 2001.

The vitality of the health club industry can be at least partially attributed to the changing demographics of the U.S. population and the industry's response. Traditionally, health club membership was dominated by the 18- to 34-year-old age group; however, in 2002, the 35- to 50-year-old group became the largest age segment of health club membership with 37 percent, whereas the 18- to 34-year olds held a 34-percent share. The largest percentage jump came in the category of oldest members, those over 55 years old, which grew from just 9 percent of all health club members in 1987 to 23 percent in 2001. Health clubs also began catering to the youngest crowd, those who were 6 to 18 years old, a category that also saw significant growth.

Although most clubs continue to offer traditional workout equipment and programs that focus on aerobic and strength training, clubs are responding to their changing clientele base by offering more activities for children and teenagers as well as catering to the older crowd by focusing on wellness, not just exercise. For example, during the early 2000s, yoga became the latest health club fad. Emphasizing stretching and mental relaxation, yoga classes became very popular. Health clubs also tapped into programs and services that appeal to women. As a result of these changes, the health club industry is working to provide a well-balanced program with something for everyone.

Industry Leaders

With more than four million members and 360 clubs in 27 States and Canada, Chicago-based Bally Total Fitness Holding Corp. (BFIT) was by far the nation's largest fitness chain. In fact, BFIT was more than three times larger than the next nine competitors combined. BFIT was the fitness-center division of parent company Bally Manufacturing Corporation. In 2002, Bally Total Fitness had revenues of $968.1 million. The fitness centers were spun off from their parent company in 1996 and had a public stock offering in 1997. Two other fitness center chains followed Bally into the public realm in the 1990s: Los Angeles-based Sports Club Company Inc. ($122.5 million in 2002 sales) and Minnesota's Health Fitness Corporation ($27.9 million). Both of these companies have been successful, but on a much smaller scale than Bally.

Workforce

Composition. The fitness center industry employs more than 600,000 full-and part-time workers, and part-time employees outnumbered full-timers by a ratio of five-toone in the late 1990s. The workforce was predominantly composed of fitness and dance instructors, who are paid hourly, by the session, or per student. According to the U.S. Department of Labor, Bureau of Labor Statistics, in 2001 the industry employed 4,520 athletic trainers. More than 80 percent of aerobics instructors have some college education, and most clubs require certification of instructors. Front desk employees made up the second largest segment of industry workers. These unskilled, entry-level workers were paid an hourly wage. Owners constituted the third largest group of fitness center workers. Fitness centers also employed maintenance engineers, tennis instructors, racquetball/squash instructors, sales and marketing personnel, and administrators. An increasing number of clubs hired independent contractors as sports trainers, physicians, and physical therapists. Approximately 85 percent of the industry's clubs provided some level of employee health benefits for full- and/or part-time workers. An across-the-industry hiring and pay freeze in the 1990s helped hold down operating expenses.

Certification. Throughout most of the history of the fitness center industry, employees were not required to have any formal training. The only exceptions were lifeguards, who were required by law to be certified. Several public and private universities had health, physical education, and recreation programs, but most employees of physical fitness centers were not required to have such training. That changed in the early 1980s, when knowledgeable consumers began to demand more than just enthusiasm from fitness instructors.

Certification tests and programs proliferated in the 1980s from such professional organizations as the American College of Sports Medicine (ACSM), the American Council on Exercise (ACE), the Association for Fitness in Business (AFB), the National Strength and Conditioning Association (NSCA), and IDEA-The Association For Fitness Professionals (formerly the International Dance-Exercise Association). IDEA's certification examination for aerobic dance instructors, first administered in 1986, is a good example of such tests. It consisted of 175 multiple choice questions on exercise physiology, anatomy, kinesiology, programming skills, leadership techniques, nutrition, weight loss and control, emergency training, health screening, and legal issues. Those seeking certification were required to be at least 18 years old and have current CPR certification. Notwithstanding the prevalence of certification, there were no national or state accrediting standards in the late 1990s.

America and the World

The American fitness center industry is generally regarded as being a decade ahead of its European counterpart. Reasons cited for the disparity focus on costs and professionalization. For example, high-energy costs make standard swimming pools very expensive for European businesses to operate. Consequently, they have tried to compensate with expanded whirlpool and sauna areas. Moreover, high real estate costs have forced most fitness center owners to lease their facilities. As far as professionalism is concerned, the European industry appeared to be in a "pre-association" state in the 1990s: club owners did not share information and, consequently, many of their management practices, promotional ideas, and marketing tactics were accomplished by trial and error. The "pay-as-you-play system" that characterized America's fitness industry in its early years was the norm in European clubs of the 1990s.

Research and Technology

Research and technology have played an important, but sometimes dubious, role in the fitness center industry. Fleeting trends have sometimes brought sweeping transformations in equipment and training methods at fitness centers. In the late 1980s and early 1990s, everything from stationary bicycles to resistance equipment became computerized. Much of the technologically advanced equipment simulated other sports, like downhill and cross-country skiing, rowing, and even rock climbing. And while some practitioners, like Augie Nieto (president of Life Fitness, Inc.), predicted increasing computerization, other observers, like Douglas Garfield (of Bodyguard, Inc.), foresaw "less high-tech and more high-touch" activities in health clubs of the future.

Demographics Influence Trends. As a mass of "baby boomers" entered middle age, the health and fitness center industry rushed to meet their needs. The industry had to make a critical transition from an almost exclusive focus on the young adult market, toward the "40-somethings" and their families. Some club owners asserted that "family-oriented health programs are the fastestgrowing segment of the health club industry." Programming gained popularity as a source of member recruitment and retention and increased revenue. Convenienceoriented services included food service, salons, childcare, laundry facilities, car washes, ATMs, and sporting goods shops. Bally even began offering a line of vitamins and nutritional supplements.

Enrollment fees, long considered a powerful inducement to member retention, were proven to have no power to ensure member longevity. More and more clubs have dropped enrollment fees, partly in response to consumer demands. This trend was predicted to continue. Although some industry observers decried the return to old-fashioned "pay-as-you-play," fitness services, other entrepreneurs viewed them as "a valuable option for wooing customers into joining."

Other trends included the growth of more all-female health clubs, the development of "ultraluxe fitness centers," and a continuing focus on attracting more baby boomers. As of 1997, only 5 percent of health clubs were single-sex, and the industry felt it could capitalize on women who did not want to "mingle" while they were working out. "Ultraluxe" clubs feature services as varied as plush surroundings, gourmet meals, business centers, and dry cleaning. They have sprung up in major cities such as Chicago and New York and cater to an extremely wealthy clientele. As baby boomers approach retirement, they will have more free time, and the industry hopes to capitalize on this extra time by drawing them in as new customers.

Further Reading

Appin, Rick. "Health Clubs Get in Shape." Bank Loan Report, 1 July 2002.

Barovick, Harriet. "The Kids Are All Pumped: As Health Clubs Work to Woo Them, Children of All Ages Are Becoming Dedicated Gym Rats." Time, 3 March 2003, A1.

Berg, Michael. "By the Numbers." Muscle & Fitness, September 2002, 38.

Boyer, Ellen. "Gyms See Sedentary Kids as Increasingly Growing Market." New Orleans CityBusiness, 30 December 2002.

Fetto, John. "No Pain, No Gain." American Demographics, 1 April 2002.

Herek, Matthew. "Boom Time: The Health and Fitness Segment is Blasting Off as Baby Boomers Seek to Get Fit." Sporting Goods Business, July 2002, 48-52.

——. "Health Club Leaders Speak Out." Sporting Goods Business, January 2003, 50-51.

Hoover's Company Profiles. Hoover's, Inc., 2003. Available from http://www.hoovers.com .

"Massage Comes Out Top for Both Sexes in the U.S." Cosmetics International, 25 March 2002, 2.

"More Workouts Fewer Sick Days." Work & Family Newsbrief, April 2003, 6-7.

"Pre-boom a Boom to Gyms." American Demographics, January 1999.

Stoneman, Bill. "Weighty Trends for Fitness Marketers." American Demographics, April 1999.

The U.S. Health Club Industry. International Health, Racquet & Sportsclub Association, 2003. Available from http://www.ihrsa.org .

"Women's Health Clubs Are Taking Off." Marketing to Women: Addressing Women and Women's Sensibilities, March 2003, 8.



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