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TRC Blog

February 02 , 2007

Health clubs gird for battle

February 2, 2007 by Sandra Zaragoza - Dallas Business Journal

For health-club members, the new year's first couple of months typically bring longer waits for treadmills and elliptical machines.

These days, though, folks really interested in battling the bulge in North Texas have at least one thing on their side: a lot more health clubs -- from hard-core gyms and niche players to upscale facilities.

For those in need of extra pampering, ultra high-end brands Equinox and The Sports Club LA soon will be the newest health-club brands to flex their muscles in the market.

Equinox, a luxury operator out of New York City, is said to be close to signing two leases in Dallas-Fort Worth. Meantime, Sports Club LA already is building a flagship, 70,000-square-foot facility in the Park Lane development on North Central Expressway that's expected to open next year.

When it comes to people going to gyms, Dallas ranks 15th in the nation with 18.5 health-club members for every 100 people, according to a ranking by the International Health, Racquet and Sportsclub Association.

A booming population and ample land are a few reasons that Texas has seen such "prolific health-club growth," said Rosemary Lavery, spokeswoman for Boston-based IHRSA, a leading health-club industry association.

The number of health clubs in the Lone Star State has spiked 118% in the last decade. There were more than 1,985 health clubs in Texas in 2006, up from 1,860 in 2005, according to IHRSA.

Nationally, there has been an elevated fitness consciousness with people looking to improve their self-image while lowering their chances for obesity-related diseases, Lavery added. That's helped push annual sales in the U.S. health-club industry to $15.9 billion, according to IHRSA.

Locally, Gold's Gym, LA Fitness and Lifetime Fitness are part of the newer crop vying for the estimated 85% of the North Texas population who aren't already card-carrying gym members. These chains have been aggressive about growing in D-FW's urban and suburban markets.

After being named one of America's fattest cities by Men's Fitness magazine, Dallas has been working to shed the bad rep. The magazine's editor, in town recently for the grand opening of Gold's Gym in Uptown, said Dallas has made strides in improving its collective fitness level.

Dallas ranked fourth on the magazine's list of the top 25 fattest cities in 2005, an even worse showing than the year before. However, when the magazine releases its new rankings next week, Dallas should have a healthier position on the list, insiders say.
'A true threat'

Developers and shopping center owners are also wooing fitness centers to their developments like never before.

"What landlords want is to capture trips," said Mickey Ashmore, president of Dallas-based United Commercial Realty. "People are going to work out at all hours of the day. (Landlords) want to increase shopping trips to a development and expand the number of shopping hours."

Industry watchers like to compare the health-club scene in North Texas to the stratified restaurant industry here -- a landscape that has plenty of low-end and moderately priced outlets and, now, a few more upscale contenders.

Locally, no one knows the upscale market better than independent operator Larry North, who's built a loyal following with his brand of hip, upscale health clubs in affluent markets.

North, who has five Larry North Fitness locations in Dallas and one club in Houston, plans to grow by two clubs per year in D-FW and other Texas markets over the next five years.

"I like (Equinox), but I view it as a true threat," North said. "I think they are good, but in some respects I'm better."

While Equinox, which couldn't be reached, and The Sports Club/LA coast on the ultra-high-end in terms of fees, insiders believe they'll have no trouble attracting a well-heeled following.

In its other markets, Equinox members typically pay $150 per month in membership fees, in contrast to the typical club average of about $49 to $75 per month. On top of membership fees, Equinox members pay an average of $2,000 per year for additional fitness expenses like personal trainers, sources say.

In exchange for premium monthly fees, members get facilities that more closely mirror a luxury resort or edgy urban lounge, as well as a greater number of fitness classes. Equinox members, for example, can choose from the latest trendy classes like ballroom dancing or target and bag circuit kickboxing. They also have access to organized fitness trips, like a trip to Machu Picchu in Peru for about $4,000, not including air fare.

The Sports Club/LA, which operates 10 clubs in major metropolitan markets, bills itself as an "urban country club." The chain charges $425 to $1,300 to join, plus monthly fees ranging between $130 and $175.

"We think of ourselves as a lifestyle destination. You can really go and spend all day there," said Jeff Ono, director of marketing for Sports Club/LA.

Ono says Dallas made sense for the brand because of the city's growing affluence and appetite for sophisticated options. The chain will more than likely open more clubs in the Metroplex, though there are no immediate plans, Ono said.

At Sports Club/LA clubs, climbing walls, upscale restaurants and in-house physical therapy departments are par for the course.

Like Equinox, Sports Club/LA offers innovative fitness classes. One, called "Candlelight Stretch," is set to live music from a string quartet.
Ramping up

"Dallas is a large dynamic market. It makes a lot of sense that major players want to be here," said David Schnabel, CEO of Gold's Gym International Inc.

The opportunity to reach the booming North Texas market is one reason Gold's moved its company headquarters from its birthplace in Venice Beach, Calif., to Irving about two years ago.

Since moving here, the chain has ramped up its corporate growth in North Texas, which will be its key corporate market. Along with its new Uptown location, the company plans to launch two more locations in Dallas and one in Plano over the next few months.

Schnabel believes more competition isn't necessarily a bad thing.

"Dallas is increasingly becoming a fitness-oriented city. Only 14% to 15% of the population belongs to a gym; there is plenty of room to grow," he said. "I think there will be increased participation at gyms throughout the Metroplex with our brand and others."

Gold's has introduced a new fitness amenity called Cardio Cinema, which combats workout boredom by showing feature films on a movie screen. The chain also is gearing up to launch a new branding campaign that will try to revamp its image from a "musclehead" gym to a family-friendly health club.

Right now, club giants 24 Hour Fitness, with 34 local locations and 169,745 members, and Bally Total Fitness, with 16 area clubs and 120,000 members, have the highest number of members in the area.

As the biggest muscle makers in North Texas, they also have the most market share to lose.

Steve Lieberman, CEO of The Retail Connection, believes the market's newer chains have an advantage over the more established players.

"Those guys have market share, but they also have older units. And it is very expensive and challenging to renovate a center," Lieberman said. "There is a huge advantage to offering new product, and a new experience."

At least one local health-club operator isn't taking the entrance of more high-end rivals lightly. North says he's gearing up for the new competition with plans to remodel his 17-year-old facility at Highland Park Village.

And he's bracing for a tough time. "I'm planning to put on my gladiator suit, sharpen my sword and fight to the death," North said.
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