Friday, December 25, 2009

Resolution: Get a Deal on a Gym Membership

New York Times article "Resolution: Get a Deal on a Gym Membership" (December 25th, 2009) requires incorrect assumptions on the U.S. fitness industry.  The article seems to assume that gym membership is procyclical (it increases when the economy is strong and decreases when the economy is weak). Corrections suggests that the opposite is quite possible.

But this year the frenzy has been ratcheted up a notch as clubs try to make up for the recession, which caused many corporate sponsorships to evaporate and many individual members to drop out or cut way back on costly extras like personal training and massage.

First, Corrections notes that according to the International Health, Racquet and Sportsclub Association (IHRSA) in 2006, there were 42.7 million health club members. In 2007, there were 41.5 million members. In 2008, there were 45.5 million health club members.

This makes sense. When individuals consume most goods, there are two inputs--commodities that they buy (t.v. sets, or gym memberships) and time they use to consume the good (tv-watching time, or time at the gym). While gym memberships cost money, we expect the larger portion of their cost comes in the form of time.

In a recession, when unemployment is high and wages are low, we expect that people will move away from money-intensive goods, such as expensive meals, and toward time-intensive goods, such as gym time, and its complement, gym memberships.

We may, however, expect revenues to go down, as shopping around for a gym, and going to a gym farther away becomes more feasible and thus gym memberships become more competitive. The general trends for gym membership are displayed in tabular form below.

Corrections will be sure to post the 2010 IHRSA results from next month.

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