Gym Industry Hits a Wall: January Growth Stalls Amid Challenges

📝 SUMMARY: January, traditionally the most lucrative month for gyms due to New Year's resolutions, witnessed an unanticipated stagnation in growth within the U.S. fitness industry. According to mobile phone location data analyzed by Placer.ai for 10 major gym chains, including Equinox Holdings Inc., Planet Fitness Inc. ($PLNT), and Xponential Fitness Inc. ($XPOF), foot traffic in January 2023 showed no increase from the previous year. This flat growth is a significant departure from the over 40% rise in visits seen in the same month for the past two years, hinting at potential hurdles for the industry's recovery post-pandemic.

Planet Fitness, often regarded as a benchmark for the sector, typically gains around 400,000 new members in January, a substantial portion of its annual 1.7 million sign-ups. However, this January's performance may foreshadow a challenging year if the trend of stagnant traffic continues. Analysts from TD Cowen and Stifel attribute the slowdown to a combination of severe winter conditions across much of the U.S. and escalating competition among gyms. Additionally, attempts by some chains to increase membership fees may have backfired, as illustrated by Planet Fitness's decision to revert to its $10-per-month promotion after a failed price hike attempt.

This situation suggests that the fitness industry might face limitations in raising prices in the future, with investment increasingly directed towards more affordable gym options. The industry's pivot towards low-cost offerings, exemplified by Planet Fitness's reliance on promotional pricing to attract members, reflects a broader trend towards value-oriented fitness solutions. Analysts caution that the industry's growth may be increasingly dependent on maintaining competitive pricing strategies, underscoring the challenges of balancing affordability with profitability in a changing market landscape.

🔍 SOURCE: https://www.bloomberg.com/news/articles/2024-02-11/gyms-face-tough-year-as-key-january-growth-screeches-to-a-halt