U.S. Fitness Industry Revenue Dropped 58% in 2020

After posting record numbers in 2019, the U.S. health club industry was off to a promising start last year. No one would have imagined that by spring, virtually all gyms and studios would be closed.

The pandemic took a harsh toll on fitness club operators, employees, and consumers. And it may take years for the industry to recover from the damage.

Five indicators speak to the indelible mark COVID left on the industry last year:

1. Industry revenue plummeted by 58%
2. 17% of fitness facilities permanently closed in the U.S.
3. Eight major fitness companies filed for bankruptcy
4. More than 1 million industry employees lost their jobs
5. Americans lacked access to their go-to outlets for fitness and health

Industry Revenue Plummeted by 58% in 2020

IHRSA estimates the industry lost $20.4 billion in 2020, just one year removed from generating an all-time high of $35 billion in revenue. These losses represent a 58% revenue decline. In April and May alone, the industry lost $5.5 billion in revenue.

Health clubs, gyms, and studios in all states were closed for at least a total of one month last year. In many states like California, Oregon, and Washington, closures persisted for most of 12 months. Mandated restrictions in most states allowed limited operations ranging from outdoor or virtual-only services to a maximum of 50% capacity.

Continued closures and restrictions curtailed club operators’ efforts to run a sustainable business and forced many to close down for good. Others are teetering on the brink.

“One has to remember that health clubs are largely fixed costs businesses. A decline in revenue to such a large degree has devastating consequences, both short- and long-term,” said Brian Smith, managing director of consumer investment banking at Piper Sandler Companies, a leading investment bank and institutional securities firm. “We are going to see lasting effects as operators look to rebuild cash flow, recapitalize their base business, rehire staff, and so forth.”

17% of Fitness Clubs & Studios Permanently Closed in the U.S.

Data from major gym and studio payment processing companies serving the industry reveals 19% of boutique fitness studios have permanently closed as of December 31, 2020. Approximately 14% of gyms and traditional health clubs have ceased operations.

No club concept was immune to the impact of COVID-19: full-service health clubs, HV/LP gyms, fitness studios, and independent clubs were all afflicted by widespread closures and ensuing restrictions.

“Compliance with mandates caused many clubs, especially single-activity studios, to close because their economic model was no longer feasible,” said Rick Caro, a 48-year veteran of the industry and president of Management Vision, Inc., a leading consulting firm specializing in the club industry. “Their subsequent lack of liquidity created the immediate need to discontinue their operations. This has caused clubs to close, costing jobs and leaving members with no alternative for needed physical activity and social interaction.”

Eight Major Fitness Companies Filed for Bankruptcy

Leading companies across the health club, gym, and fitness studio segments filed for bankruptcy in 2020. Companies that filed for Chapter 11 restructuring include:

• Gold’s Gym,
• 24 Hour Fitness,
• Town Sports International (TSI),
• YouFit, and
• In-Shape Health Clubs.

24 Hour Fitness closed 144 locations while Gold’s Gyms shuttered 31 sites. TSI ceased operation on more than 100 establishments.

Studio brands Flywheel, Yoga Works, and Cyc Fitness filed for bankruptcy due to the pandemic’s financial distress. Flywheel and Yoga Works closed all of their 42 and 56 respective studios.

For many fitness club operators, bankruptcy seemed to be the only option.

“Health club operators were holding off lenders seeking debt payments, landlords seeking full rent payments, [and] members still on freeze, [all] with an increased cost of operations related to safety and cleaning,” said Pete Moore, founder of Integrity Square, an equity and financial advisory firm serving the Health, Active Lifestyle, and Outdoors (HALO) sector. “Larger club groups used Chapter 11 bankruptcy protection to reorganize, shed creditors, reject bad leases in order to reset and survive. Smaller footprint clubs and studios had to strongly consider filing for bankruptcy.”

More Than 1 Million Industry Employees Lost Their Jobs

Last year the fitness club industry’s workforce shrunk by 44% as 1.4 million staff members lost their jobs. The 3.2 million industry jobs were in limbo when roughly 95% of fitness centers were closed at the peak of shutdowns in the spring.

Job losses affected small business owner-operators, executives, instructors, administrative staff, and seasonal workers. With continued restrictions, some of these job and career opportunities may never return to the industry.

Americans Lacked Access to Their Go-to Outlets for Fitness & Health

When they needed it most, Americans were essentially barred access to their health and fitness clubs. All through last year, fitness club operators struggled with closures and restrictions, despite the well-documented research showing the vital role exercise plays in boosting health and wellness. Club operators experienced this limited access in the staggering decline in the number of on-site visits last year.

Placer Ai data shows that Q2 2020 health club visits fell by 80% for leading brands relative to Q2 2019. Declines in usage continued throughout the year. In Q3, visits shrank by 50%, and in Q4, visits decreased by 38%.

Last year was one the fitness industry would hope to forget. It may take years to recover from the economic damage from COVID-19. But health clubs, gyms, and studios are more critical now than ever. The direct negative consequences of an at-home lifestyle have created significant negative health factors and increased medical costs. The public needs the environment and support club operators provide in improving the health and wellness of their local communities.