Stretching the market | Mainers heading back to the gym this fall have more choices than ever, meaning fitness clubs need a strategy to keep their membership lists full

For the clients at Joe de Silva's small fitness studio off Route One in Falmouth, popping on an iPod and riding the Stairmaster for 30 minutes is not quite enough. You won't find a circuit of weight machines there or rows of treadmills with their own televisions. Losing weight and toning the abs are not even the studio's main goals.

Instead, clients arrive at a space populated with medicine balls, elastic resistance bands, free weights and cardio equipment, and prepare for an intensive hour-long session with de Silva or one of his two personal trainers. The idea is not just to burn a few calories, but to develop optimum workout techniques for each client and teach people how to stay fit on their own.

The studio, Natural Fitness, is a new venture for de Silva, a 27-year-old personal trainer and 10-year fitness industry veteran. He started out in Massachusetts cleaning locker rooms and weight machines at a Gold's Gym and eventually worked as a personal trainer at several gyms before leaving Bay Club in Portland to become a freelance personal trainer. His problem with traditional gyms was that "it's all about the memberships," he says. "Not about personal training."

Left to their own devices, members of a traditional gym often work out for a month or two, de Silva says, then get bored when their bodies plateau. By contrast, personal trainers can make sure clients are training effectively and consistently improving. His idea, he says, is to take "the life source of a gym" ˆ— namely personal trainers ˆ— and build a small business around them. "Because that's what I feel really drives the business," de Silva says. "If you don't have good trainers you're not going to have a good gym."

De Silva is one of thousands of entrepreneurs hoping to tap into this country's growing fitness bubble. While it may be surprising in a state where 59% of adults are overweight or obese, according to a new report by the Trust for America's Health, more and more health clubs are opening across the state. In 2005, there were 188 health clubs in Maine, compared to only 109 in 2000, according to the Boston-based International Health, Racquet and Sportsclub Association. The same trend is seen across the country, with entrepreneurs seeking a piece of the $15.9 billion industry. As of January, there were 29,069 health clubs in the country, according to IHRSA, up from only 15,372 clubs in January of 2000.

While those clubs have enjoyed a growing customer base ˆ— the number of fitness club members in this country increased from 32.8 million in 2000 to 41.3 million in 2005, according to the IHRSA ˆ— competition remains fierce in an industry that relies on the retention of clients. So to stand out among thousands of options, fitness clubs are developing business models that either target a niche or offer a hook that provides a stable customers base. Some, like de Silva, have abandoned the typical weight machines and treadmills for a more personalized approach to fitness; others rely on the age-old tactic of rock-bottom prices for no-frills but accessible centers. There are "express" gyms to lure the time-constrained, and clubs designed especially for women. "The industry has evolved into a much more sophisticated operation," says Robert Fisk Jr., who has owned the Portland Athletic Club in Falmouth since 1986. "You need to find something that sets you apart, particularly because there's more competition."

One thing is clear: The fitness industry has changed drastically over the years. The days of Pumping Iron, the 1977 film that starred Mr. Olympia, Arnold Schwarzenegger, are over. Today's fitness club owners are trying to shed the image of muscle-bound weightlifters tossing around dumbbells. Instead, fitness is in, and it's the baby boomers that are driving that interest. In 2004, there were 10.2 million people over age 55 with health club memberships ˆ— an increase of 562% over 1987. As the cost of health care increases, older individuals are realizing that staying fit is a way to prevent future health problems, says de Silva. "Most injuries can be prevented," he says.

But to longtime members of the fitness industry like Fisk, a growing customer-base with increasingly specific demands also has created a host of new challenges for entrepreneurs. "The fitness industry is more challenging because it's ever changing," Fisk says. "You can't just put in a fitness room and an aerobics room and make it in the industry anymore."

The expensive tools of the trade
Although the number of customers joining fitness clubs or hiring personal trainers has grown, no market can support an unlimited number of fitness clubs. Sherry Haller, owner of Union Street Athletics in Bangor, thinks the Queen City must be getting close to the saturation point. When she opened her fitness center in 1996, her competition was an existing Gold's Gym, the Bangor Athletic Club and the local YMCA and YWCA. Since then, however, several other fitness facilities have begun competing for clients. Bangor is now home to at least two Curves ˆ— the ubiquitous chain of gyms for women ˆ— Nitro Fitness, which is for men, and, most recently, Planet Fitness, the Boston-based chain that has seven locations in Maine and 115 throughout the country.

Still, despite the increased competition, Haller says her business has experienced one of its best summers yet. At the moment she has roughly 900 members, who pay a $35 monthly membership fee, compared to the last few summers when she's had 800 to 850 members. She expects membership to increase to 1,200 or 1,400 come this winter.

Running a gym, however, is still a cash-intensive project. She pays a $900 extended warranty on each of her 10 treadmills, for example. In addition, she spends $25,000 to $50,000 a year on new equipment. "I don't think it's as easy as a lot of people would think," Haller says. "It's a multi-million-dollar venture, even for a relatively small gym like ours."

However, the arrival on June 30 of Planet Fitness in Bangor, which offers a monthly membership fee of $15, presents Haller's clients with a tempting offer. "It's a little tough because they come in and give the place away," Haller says. "In order to maintain our facility and our services I just can't compete with that pricing."

So far, the low monthly rate seems to have attracted quite a crowd: Bangor's Planet Fitness already has close to 2,500 members, says co-owner Kris Glidden. The low rate and larger size ˆ— compared to Haller's 10 treadmills, the new Planet Fitness has 23 ˆ— is integral to the company's business model, and a classic strategy of high volume making up for low prices. "Everybody is trying to find a niche to fit into, and maybe that's where we differ," Glidden says. "Instead of looking for a small designated market, we're looking at the broad spectrum of the market ˆ— instead of catering to 20%, we're catering to 80%."

By contrast, Haller competes by incorporating the latest fitness trends into her facility. For instance, she offers classes such as Pilates and cardio kickboxing. Soon, she'll offer spinning classes, which are group classes in which an instructor leads riders on stationary bikes through a simulated ride. Renovating the room and buying the 25 spinning bicycles will cost $50,000, she says, but adds that it's a necessary investment. "I think it all boils down to what members are looking for," she says.

In the end, taking care of the customer is vital for a club's success. "It is a competitive market," says Rosemary Lavery, a spokesperson for IHRSA. "But we find that health clubs that focus on their target membership and listen to their members and reinvest in their facilities and programs have the highest retention rates."

The Portland market also is close to ˆ— if not already at ˆ— the saturation point. This year, at least four new fitness centers have opened in the Portland area, including de Silva's Natural Fitness in Falmouth, Personal Training Institute in Falmouth, Mezzanine Fitness & Wellness Center in Portland's Time & Temperature Building and a 20,000-square-foot Planet Fitness. That brings the Portland area's total to at least 12.

Fisk, who bought the largest indoor tennis facility in the state, Tennis of Maine, in 1986 and changed its name to Portland Athletic Club in 1994, has grown and contracted his operation over the years to deal with the area's changing market. During the 1990s, Fisk aimed to make his club as comprehensive as possible by offering racquetball and volleyball courts, a children's center, a full-service beauty salon and a restaurant, among other things. But over the years, as competition increased, that comprehensiveness became more of a burden because of the overhead it required. At one point the club had 110 employees. So in 2003, Fisk made an about face and sold his 82,000-square-foot building, eliminating the restaurant, children's center and beauty salon to focus again on PAC's core services ˆ— tennis and fitness.

PAC now occupies 41,000 sq. ft. and employs about 25. "Our niche is the experience and the professionalism and being in a non-intimidating environment," Fisk says, noting that five of his trainers have been with the club for more than 10 years. "Let that be our niche and let other clubs fight it out over the niches they're trying to fill."

One of Fisk's early competitors in the Portland market was Bay Club, which opened in 1989 and is housed in one of the city's largest office buildings, One City Center. That location, says owner Tracy Moore, gives Bay Club a competitive edge: convenience. Bay Club attracts a corporate clientele from the surrounding offices that are willing to pay between $50 and $60 a month to take advantage of the club's accessibility during the work week.

Moore ˆ— who was general manager at the club until she and her assistant manager, Steven Stinson, bought it a month and a half ago ˆ— says the club is profitable and secure in its upscale niche. But she admits the arrival of competition like Planet Fitness forced her to lower some of her membership rates.

So far, the Portland market's raft of health clubs is staying afloat, but Fisk says he's not sure it will last. "The industry looks good, but I do think the Portland market is a bit oversaturated with health clubs," Fisk says. "If you looked at all their books, I'd say the industry is not as profitable as it has been in the past because it's more competitive."
For his part, Fisk maintains that the PAC has been profitable since day one.

Women, children and seniors
Given the costs required to own a large fitness center, several entrepreneurs in the industry have instead adopted a business model with a tight focus on a specific niche or demographic ˆ— often one untapped by the large fitness centers. "Basically, a big trend in the industry is the fact that niche marketing is so prevalent; whether its express gyms, children gyms or senior targeted gyms that have a rehabilitative aspect to them," says Lavery with IHRSA.

The most notable example of niche marketing is the Waco, Texas-based chain Curves, the women-only "express" gym founded in 1992 that runs members through a 30-minute workout. Since the chain took the industry by storm, others have emerged that use the same model, but for men. Paul Bernier has opened Nitro Fitness locations in Lewiston, Waterville and Bangor since buying the state's franchise rights from the Kansas City-based chain for an undisclosed amount in February 2005. He also plans to open a fourth location in Portland this winter. (See "The new men's clubs" on page 17) for more on Curves and Nitro). A similar chain, Cuts Fitness for Men, also just opened its first Maine location in Scarborough.

Business owners also are trying to cash in on increasing public awareness of childhood obesity by opening fitness centers targeted for children. Karen Kohlmeyer just returned from a three-week training session to prepare her to open a My Gym franchise in Brewer (one already exists in Falmouth). My Gym targets infants through nine-year-olds, though Kohlmeyer, a pediatric physical therapist, will only work with children up to six because of her small space and targeted demographic. Instead of rowing machines and dumbbells, you'll see trampolines and balance beams at a My Gym location. An eight-week session costs $120.

De Silva at Natural Fitness is also pursuing a niche ˆ— personal training ˆ— but with a business model that doesn't rely on memberships to cover costs. In fact, after de Silva or one of his trainers gives clients the standard $30 assessment and designs a program specifically for them, clients are encouraged to work out on their own, rather than keep coming to the facility and paying the $60-per-hour fee. That could mean making a small investment ˆ— $200 to $300 ˆ— to create a simple home gym consisting of a stability ball, some adjustable dumbbells and an elastic resistance band, or buying a membership at another fitness center to use the equipment. The approach, de Silva says, helps overcome the notion that hiring a personal trainer is prohibitively expensive.

His clients range from a young Olympic ski jumper trying to return from a foot injury to a 50-year-old man with bad knees who just wants to be able to ski again. "Everyone's got their niche. We've got ours: We look for deconditioned clients," de Silva says.

If his approach catches on, de Silva says he has big plans for Natural Fitness. While his current space is only 740 sq. ft., he hopes to move into a larger facility and eventually open a larger gym ˆ— though not an ordinary gym. He pictures a place where many disciplines work together, including personal trainers, massage therapists and doctors, to create a "wellness center."

And he says the model can work, because despite the steep competition, the fitness industry is wide open to innovative approaches. "You can get away with a lot in this industry," he says. "I think no one has stepped up to the competition."