A gym needs a fair amount of space for its equipment, changing rooms and classrooms, but it also benefits from having conveniently located real estate. (Representational Image)
If you're thinking more these days about your fitness regimen -- or lack thereof -- then you're not alone. It's the time of year when many Americans realize they are a little pudgier than they ought to be and resolve to slim down. In other words, it's a money-making time for the gym industry.
Every year, Google searches for gyms spike every year in January, and membership purchases and foot traffic soar. According to Gold's Gym, its traffic jumps 40 percent between December and January. But just wait a few weeks -- it won't be long before all those good intentions die.
In fact, the gym industry depends on it. Perhaps the most vivid reminder came in a 2014 episode of the podcast Planet Money. Planet Money visited Planet Fitness, one of the biggest gym chains in America. The gym had capacity to hold only about 300 people, but had signed up 6,000 total members. Half of the Planet Fitness members don't ever go to their gyms, Planet Money says.
It might seem like kind of a weird business model -- a business that succeeds when their customers don't set foot in the door.
But it's also the way that health insurance works: depending on a large pool of healthy people to fund the higher health care costs of those who do get sick. Airlines these days count on some passengers not showing up when they overbook their flights. There's even an old saying that the founders of Colman's Mustard made their fortune based not on what people ate, but what they left on the side of their plates.
For gyms, the calculus between how many memberships are used and how many are wasted is particularly important, since gyms pay so much in rent. A gym needs a fair amount of space for its equipment, changing rooms and classrooms, but it also benefits from having conveniently located real estate. The bigger a gym is, the smaller its profits will be.
Hence a gym's mission to attract the perfect customer: People who intend to work out, but don't.
That could include many of us. But gyms have other techniques in hand to lure their perfect customers.
One is the annual contract. Most gyms offer lower prices if you sign up for longer-term contracts, banking that you probably won't get through the door. Planet Fitness and other chains, like LA Fitness and 24 Hour Fitness, offer frequent specials to entice people to pay now, and the occasional free pizza or bagels.
As Planet Money relates, these gyms are also designed to appeal to casual exercisers rather than fitness gurus. The chains incorporate lounges, smoothie shops, massage chairs and music, and hide all those intimidating weights and sweaty weight lifters away in the back.
If you're one of the few who really do go to these gyms, you end up getting a great deal. All the people who are at home sitting on the couch are essentially subsidizing your membership, allowing you to pay way less than what your gym services actually cost.
But again, most people who join gyms do not end up getting a good deal. One study of nearly 8,000 gym members published in 2006 found that gym members paid an average of more than $17 per visit, far more than they could have paid if they bought a 10-visit pass at $10 per visit.
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