COVID-19 IMPACT ON THE FITNESS INDUSTRY
By: Ting Zhang
Tags: Fitness Industry, Fitness, Covid 19, Economics, Current Events

Summary This Medium.com posted blog explores the COVID-19 impact on the fitness industry, consumer behavior shifts, emerging technologies, and other solutions to address the associated economic impact. The study focuses on the COVID-19 impact on the traditional brick-and-mortar fitness such as gym clubs, smaller/private training facilities and boutique fitness studios. It also discusses the emerging technologies and solutions used in the fitness market that benefit from the trend of at-home workouts and their economic impact.

Introduction If there’s one thing that the pandemic has made clear, it’s that a healthy lifestyle certainly does pay off. According to the World Health Organization (WHO), healthy individuals are better at overcoming the virus than unhealthy ones (the ones with underlying health issues). The pandemic has raised awareness of the health benefits of working out: poor cardiovascular health is one of the major risk factors for severe illness or death as a result of COVID-19 [1]. It has also caused a sea change in the way we view fitness. More and more people think about health more holistically: besides physical well-being, one’s emotional, mental, and spiritual fitness has become a bigger priority.

This might be ironic as to how many gyms had shut down permanently due to lockdown measures. The fitness clubs were not viewed as vital community resources for physical and mental well-being, but rather as “non-essential”, and were lumped together with bars, restaurants and other leisure operations among the industries hardest hit by the public-health crisis.

Current State Assessment Heading into the pandemic, the U.S. had roughly 40,000 health clubs generating $35 billion in annual revenue, according to the International Health, Racquet & Sportsclub Association (IHRSA). At the end of 2020, the industry has lost $20.4 billion in revenue, while about 6,400 clubs — 18% of the total — closed permanently, as shown in the figure below [2]. At the peak of gym closures last March, class bookings everywhere fell as much as 85%. By September, when more than 87% of fitness clubs across the U.S. had reopened, 60% of members still didn’t return to gyms while 20% had stopped exercising altogether, according to ClubIntel [3].

2020 was a nightmare for traditional gyms and physical fitness. Lots of smaller gyms and private training facilities shut down permanently. Fortunately, big gym chains such as GoodLife Fitness, YMCA and Planet Fitness are too big to fall due to their economic scale. Facing with the significant financial hardship, Goodlife Fitness- Canada’s biggest gym chain was granted a new loan by the Canada Enterprise Emergency Funding Corp. (CEEFC) in February 2021. This provided Goodlife Fitness — which employs more than 10,200 people across the country — with access to $310 million to protect Canadian jobs [4]. While big health clubs haven’t increased membership prices, the cost per in-person class at boutique fitness studios rose 20% on average, according to McCarter, chief executive officer of the fitness booking platform MindBody.

Photo by Risen Wang on Unsplash

Solutions and Economic Impact For people who have continued exercise routine, they are now adapting to at-home workouts and are taking up outdoor activities such as biking, running, etc. People have also become more conscious and serious about mental health and are now engaging in physical activities that include mindful activities such as meditation. In fact, participation in fitness activities such as yoga and pilate has risen since the pandemic.

Home workouts were really taking off after COVID-19, accompanied with the use of smart phones and tech solutions, from companies that provide a software platform that enables apps, streaming, video workouts to hardware companies that facilitate live group workouts. On the other hand, to stay connected with their clients, gym owners and personal trainers have moved to online platforms for digital remote coaching to hybrid or multi-club digital memberships. The options available to consumers are unlimited. Online shift is contributing to what experts said would be a permanent change to how the $35 billion industry works.

Peloton, one of the more notable names in the industry, is an emerging high-end hardware technology company that manufactures, distributes, and delivers fitness devices directly to the customers. As the category leader and beneficiary during the pandemic, Peloton experienced a 66% surge in sales to $524.6 million during the fiscal third quarter in 2020 as more consumers became willing to spend thousands of dollars for hardware that connects them to live classes and other riders[5]. The company sells a spinning bike starting at C$2,495 and a treadmill for C$3,295. In addition, Peloton members pay C$49 per month to have access to the company’s live streaming classes, which boast cult-like followings across social media platforms [6]. In April 2020, Peloton’s stock popped after reporting that it held its largest class ever, with more than 23,000 people streaming it from home [7].

Another good example of the hardware technology is Mirror by Lululemon, which offers a wall-mounted screen for fitness workouts and personalized training sessions. In June 2020 the athletic apparel company Lululemon was announced that the company was buying the in-home fitness company Mirror for an estimated $500 million [8]. It also streams live and on-demand fitness classes directly onto its reflective surface using an app. Mirror’s focus on bodyweight exercises seemed perfect for those uninterested in stationary bikes or treadmills. With a chic aesthetic, it does well to capture that spirit of boutique fitness, too. The Mirror costs US$1,495. The company generated $170 million in revenue in 2020, including the period prior to the acquisition. Lululemon forecasted that the platform could generate $700 million in revenue and reach 600,000 subscribers by 2023 [9].

It’s not just hardware companies that are thriving right now. Since the start of the pandemic, 80% of fitness consumers live-streamed workouts compared with 7% in 2019, according to a MindBody survey. In December, Apple rolled out a virtual fitness subscription service called Fitness+ built for the Apple Watch and compatible with iPhones, iPads, and the Apple TV for US$9.99 a month or US$79.99 per year. TrueCoach, a mobile fitness app that allows trainers to train clients online, experienced a 200 percent year-over-year increase in user growth in Q2 [10]. Numerous other similar apps appear to be seeing similar traction. Recent data from market research firm Reports and Data estimates that the global fitness app market will grow to $14.64 billion in 2027 due to the pandemic and quarantine impacts [11]. Digital and connected fitness will continue to grow in popularity. The widespread availability of fitness tech is also a win for health-conscious consumers. Like other technologies and consumer products, prices for today’s high-end items will eventually come down and become more affordable to consumers.

Photo by Luis Vidal on Unsplash

What does the future of fitness look like? Data from the IHRSA confirms that 94% of gym-goers plan to return to their normal routines once gyms reopen [12], although many indicated they will retain a virtual component. The gyms and clubs would have to focus on some areas while gradually reopening all of its clubs under the provincial government’s direction: ensuring physical distancing, reducing capacity levels in gyms, and enhancing its cleaning and sanitization practices. The bigger beneficiaries will be boutique workout studios like DanceBody, SoulCycle and the like, as each machine at these single-modality gyms acts as its own ‘pod’ to avoid cross-contamination with the right capacity, cleaning, and ventilation. People will want to go where they can not only get a great workout but also socialize.

The long term future might be a blend of digital and physical. There is no denying that people will go back to the physical gym. But, to thrive in the future, it also need to continue providing members with online options alongside the brick-and-mortar offering. It’s delivering more than fitness and workouts, focusing on incorporating all things wellness with highly personalized experiences to position the business ahead of the competition.

At-home will become a part of the fitness ecosystem, and it’s going to continue having an outsized platform. COVID-19 has accelerated adoption of a hybrid model of online/in-person workouts that more gyms are likely to retain even after the pandemic is over. Although some of the stores might be shrinking, consumer demand is booming as people aim for a balance between mental and physical health.

Photo by Jordan Whitfield on Unsplash

Reference:

[1] ‘COVID-19 and cardiovascular Disease’, Circulation https://www.ahajournals.org/doi/pdf/10.1161/CIRCULATIONAHA.120.046941

[2] ‘IHRSA 2019 Annual Report’, IHRSA, https://www.ihrsa.org/publications/ihrsa-foundation-2019-annual-report/

[3] ‘The Member Journey in the Era of COVID-19 A Study of the Member Experience Prior to, During, and Post COVID-19 Club and Gym Closures’, ClubIntel https://www.club-intel.com/wp-content/uploads/Final-The-Member-Journey-in-the-Era-of-Covid-19.pdf

[4] ‘LEEFF loan to GoodLife Fitness protects Canadian jobs’ https://www.newswire.ca/news-releases/leeff-loan-to-goodlife-fitness-protects-canadian-jobs-826521050.html

[5] ‘Peloton sales surge 66%, as more people buy bikes during coronavirus pandemic; shares jump’, CNBC, https://www.cnbc.com/2020/05/06/peloton-pton-reports-fiscal-q3-2020-earnings.html

[6] Peloton website https://www.onepeloton.ca/

[7] ‘Peloton stock pops after reporting largest class ever as coronavirus restrictions keep gyms closed’, CNBC, https://www.cnbc.com/2020/04/24/coronavirus-peloton-stock-pops-after-reporting-largest-class-ever.html

[8] ‘Lululemon acquires Mirror fitness startup for $500 million’, Running Magazine,

https://runningmagazine.ca/the-scene/lululemon-acquires-mirror-fitness-startup-for-500-million/

[9]’Lululemon sees big potential in Mirror, but investments drive guidance lower’, Marketwatch, https://www.marketwatch.com/story/lululemon-sees-big-potential-in-mirror-but-investments-drive-guidance-lower-11617212877

[10] ‘Why The Surge In Consumer Demand For High-Tech Home Gyms May Just Be Getting Started’, Forbes, https://www.forbes.com/sites/markhall/2020/07/16/high-tech-home-gyms/?sh=70fd582c7c5d

[11]‘Fitness App Market To Reach USD 14.64 Billion By 2027’, Reports and Data, https://www.globenewswire.com/news-release/2020/05/14/2033925/0/en/Fitness-App-Market-To-Reach-USD-14-64-Billion-By-2027-Reports-and-Data.html

[12] ‘The COVID Era Fitness Consumer’, IHRSA, https://www.ihrsa.org/publications/the-covid-era-fitness-consumer/