For 33-year-old health club operator and LA Fitness parent Fitness International LLC, workout trends come and go, but that doesn’t mean it ignores the latest boutique fitness studios popping up around its 709 locations.
One trend the Irvine-based company feels has staying power are sensory-deprivation tanks—booths that shut out light and sound, allowing people to float in warm saltwater to help with muscle recovery and relaxation.
LA Fitness struck a sublicensing deal last month with Coronado-based floatation therapy franchise True Rest and will open its first float spa in the chain’s Fountain Valley location this fall. It plans to add at least three more spas in other Southern California clubs.
LA Fitness Senior Vice President and Chief Real Estate Officer William “Bill” Horner said the company’s constantly searching for new things to offer members and that its latest tack is more in-gym studio concepts.
“With the advent of the amount of studios out there, we’re upping our studio game,” he said. “We’ve always had really solid programming—50 classes a week included in your membership—but we’re designing the club for the ability to have some more separate studios.”
It’s not the first niche wellness concept the health club giant has incorporated, but it seems to have picked up the pace over the past year, starting with the launch of the machine-based “Pilates by LAF” workout and “Stretch by LAF,” a concept introduced in the fall that was created by Miami-based studio chain Stretch Zone. It even partnered with USA Triathlon last month to offer a series of indoor triathlon training events at LA Fitness locations in Arizona.
But the moves can also be seen as an attempt to keep up with the growing popularity of boutique fitness studios, whose members’ average age is 30, according to a study last year by the International Health, Racquet and Sportsclub Association.
Irvine-based boutique fitness brand operator Xponential Fitness LLC’s year-over-year revenue is projected to climb 105% to $308.6 million this year. It also acquired three fitness concepts, growing its portfolio to six brands, including Club Pilates, CycleBar and StretchLab.
The study found that traditional clubs like LA Fitness have started developing personalized studio experiences and improving their training and mind-body offerings.
“You don’t do it fully until you test it out,” Horner said. “But I think it adds value to the membership that we try these things [and] we get feedback from our members, because we don’t want to use any space for something that’s not going to get good participation.”
Old is New
LA Fitness has held a tight grip on the title of largest nonfranchised U.S. fitness chain. It’s been the top-ranked health club in the country based on gross revenue for the past five years by industry trade publication Club Industry, which released its closely watched annual health club list last month.
The company hit an estimated $2.1 billion in revenue last year, according to trade publications, up 5.7% over 2016.
Horner, who joined the company in 1999 when it had 38 clubs, declined to comment on revenue but said business continues to grow.
His positive outlook reflects reports that the industry will expand this year. Gym, fitness and health clubs’ U.S. revenue is projected to grow at a 2.8% annualized rate to $33.7 billion over the next five years, including a 1.1% bump this year, according to a report last month by research firm IBISWorld. Profits are projected to stay at 11.5% of industry revenue, thanks to steady demand for niche and chain gym memberships.
LA Fitness plans to meet the demand by opening 25 to 30 locations this year. It grew employment 25% from last year to nearly 30,000, about 1,000 of whom work in Orange County.
LA Fitness ranks 13th on the Business Journal’s annual list of OC’s largest private companies.
The Business Journal’s OC 500 list of influential people includes Chinyol Yi and Louis Welch, who co-founded the company in 1984 in West Covina. They still have an ownership stake, though it’s now also owned by investment firms Seidler Equity Partners in Marina del Ray and CIVC Partners and Madison Dearborn Partners in Chicago.
Seidler has been an investor since 1998, and CIVC joined in 2001. Madison Dearborn was the latest firm to invest, acquiring a 20% stake in 2007 for $600 million.
Horner said its secret to success is convenience and value. It chooses sites on “the normal path of travel for as many people as possible,” and monthly memberships are about $30, the middle of the industry range.
He likened the business to Target, known for attracting a wide range of customers and often partnering with high-end designers, such as Jason Wu and Victoria Beckham, on exclusive collections to garner shopper interest.
“People that have money shop at Target, and people that are aspirational shop at Target,” he said. “We’re always looking at something to try and test things our members will find of value.”
Feeling Salty
True Rest Director of Sales and Construction Mandy Rowe said the Fountain Valley spa will look similar to its branded locations, where guests have their own private suites with rainfall shower, float pod and access to LA Fitness’ locker room.
True Rest operates 23 U.S. locations and plans to open 40 more by the end of next year. It’s also installed float spas at Mercedes-Benz Stadium for the Atlanta Falcons and at the Chicago Cubs’ training facility.
LA Fitness members will have to pay more for the feature, a practice also in place with Pilates by LAF and Stretch by LAF.
“Anyone can walk in the door,” Rowe said. “So it’s good marketing for LA Fitness to reach new people who aren’t members, and it’s good for us because we get to market to LA Fitness members.”
Rowe said pricing will be similar to its branded spas. A 60-minute float session costs $79, and monthly memberships range from $59 to $180. It’s planning to introduce a 30-minute float session for time-constrained guests.
Horner said LA Fitness added the float spa by converting a former 800-square-foot racquetball court at the 44,000-square-foot Fountain Valley location, where a $5 million-plus remodel was completed in 2015.
He said the popularity of boutique fitness concepts hasn’t gone unnoticed by the chain but emphasized its facilities offer value and convenience above all else.
“If you miss your class at a studio facility, you don’t work out,” he said. “Life happens. Traffic happens. If you miss your class [here], you can still get a workout in our gym. We’re in the convenience business more than anything else.”
