According to Dun and Bradstreet Company, approximately 1,200 fitness clubs are currently active in Israel. The number of fitness club visitors, both members and non-members, is estimated to be approximately 300,000 people.
- Many small businesses are active in this highly competitive industry.
- An up-to-date fitness center must take into consideration a high investment in high-quality equipment, design, and marketing. This creates difficulties for small fitness centers and therefore, many chains have surfaced in the industry over the last few years.
- Competition, the increase in the number of fitness centers, and additional parameters such as courses or peripheral services offered by the fitness center affect the decision of which center to join.
- The industry is at an upsurge. Yearly increase rate is estimated to be 7-8%.
- The market of fitness center equipment, including private centers is estimated at approximately 70 million NIS per year.
Customers: Defining the Target Market and its Size, Market segmenting
The target market for fitness centers includes the general fitness-aware and recreation-aware population.
One of the industry’s main characteristics is a member dropout high percentage, estimated to include 50-60% of all members.
- Direct competition stems principally from other fitness centers located in the immediate geographical vicinity, in addition to local cultural centers, country clubs, and workplace fitness rooms.
- Indirect competition stems from other sports activities offering an alternative to fitness clubs such as independent sports or various hobby sports and courses.
Main marketing resources for the industry include advertisement, display of salient billboards, seasonal promotions, and cooperation with workers’ unions and workplaces in order to sell bulk memberships at discount prices.
Factors Affecting Success:
Location constitutes one of the most influential parameters of the fitness club’s success. Additional parameters are reputation, equipment level, spaciousness, professionalism of staff, price level, and variety of courses offered.
High initial investment, membership recruitment process, and high operation costs.
In order to operate a fitness center, a certified instructor must be present during all activity hours. Additional instructors are required according to the extent of the operation. At larger, more luxurious fitness clubs, additional human resources may include clerks, marketing personnel, maintenance staff, and cleaning staff. Fitness centers offering other types of courses or treatments will base these services on sub-contractors.
A considerable amount of equipment is required in order to operate a fitness center, including aerobic machines, power machines, and accessories. In addition, dressing room and washroom equipment is required, furniture, reception desk, and office supplies.
According to inter-industry evaluation, equipment cost for a fitness club is approximately half a million NIS. This cost does not include renovation, design, furniture, and dressing/washrooms.
Industry revenue and profitability
Fitness center revenue stems from membership sales and additional services, mainly courses and treatments. Additional revenue sources are a cafeteria, equipment sales, or leasing spaces to other parties.
Most of the fitness center’s revenue stems from the sale of periodic memberships.
Listed below are average revenues from membership sales for the year 2003, according to the type of fitness center:
- Large, prestigious centers with state of the art equipment and a large number of posts, including studios: 4,275-3,170 thousand NIS per year (approximately 1,100 average memberships sold)
- Modernly designed centers containing good level equipment and studio rooms: 1,325-1,620 thousand NIS per year (approximately 590 average memberships sold).
- Fitness centers without a studio: approximately 1,055 thousand NIS per year (up to 470 average memberships)
Risk level is relatively high, and it stems from a high investment threshold, especially in centers intended for the wealthier population. An additional parameter affecting risk level is the relatively high level of regular expenses in comparison to the speed of new memberships sold, which may be low at first.
Licenses and Certifications:
- A business license and licensing from the Ministry of Education Sports Inspector
- A certified fitness center instructor must be present during all operating hours.
- Each member must provide a doctor’s authorization testifying to health competency.
Business insurance, third party insurance emphasizing injury liability, professional liability insurance employer’s liability insurance, and loss of income insurance. In addition to the above, an insurance agent should be consulted in regards to the need for additional insurance.