Weathering an Economic Slowdown in the Fitness Industry
What facilities and staff can do to succeed in today’s cloudy economic climate.

Nobody likes to talk about an economic slowdown.
People at all levels of the health and fitness business worry enough about their companies in good times; hardly anyone wants to think about potential bad times. It is scary to think of consumers pulling back on spending, especially discretionary spending on items like club memberships. However, an economic slowdown such as we are in at present in the United States is not something you can wish away or pretend doesn’t exist. You need to be prepared– whether you’re a personal trainer or club owner, group fitness instructor or program manager–to deal with what happens to a fitness business and its staff if the economy worsens and we enter a recession. By my estimate, more than half of the personnel in today’s fitness club industry have no real concept of what is meant by a “recession.” Like the hotshot stockbrokers of the 1990s who effortlessly picked winning Initial Public Offerings, many fitness facility owners, managers and employees have enjoyed only the good times in this business. They are fortunate to have participated in the greatest boom in the history of health and fitness, a time in which the number of clubs increased by nearly 60 percent and membership numbers increased by nearly half, according to the International Health, Racquet & Sportsclub Association (IHRSA 2000). B y Mic hael Sc ott Sc udder

July-August 2001 IDEA HEALTH & FITNESS SOURCE

In light of the milestones achieved during so many years of sunny news, is it really necessary to look at the dark side? After all, isn’t this cloudy period also going to pass? My answer to both questions is “yes.” Yes, it is appropriate to prepare for an economic slowdown in our industry, because as the adage says: “What goes up must come down.”And yes, this downturn, too, shall pass. But how long will it take, and in the process how will you, your staff and your members be affected? I want to state right here and now that I am not trying to be a forecaster of gloom and doom. However, as a veteran of this business, I’ve learned one very important lesson time and time again: Plan for the best, but be a realist. So, while I hope this current economic slowdown is short-lived, the purpose of this article is to provide an overview of what leads up to a recession, what generally happens to our industry in a recession and how professionals in the industry can recognize “red flags” in a business and its clientele. I will also share some practical strategies that fitness professionals at all levels can use to “recession-proof ” their interests.

Rec ession: A Prac tic al Explanat io n
In practical terms, a “recession” occurs any time the economy slips from where it was for two consecutive quarters. Here are some indicators that have traditionally signaled the start of a recession: Credit Tightens Up. Bank loans become harder to secure. Getting investors for new projects becomes especially difficult. This can all happen even while posted interest rates are falling and/or tax relief is on the way! Witness the tight credit during fall 2000 and the first quarter of 2001, even though the Feds repeatedly lowered interest rates and a new President lobbied for a tax-relief act. The Stock Market Falls. During past recessions, the market has generally taken a long-term downward trend, and attempts at recovery in most sectors have failed. The U.S. equities markets actually topped out more than a year ago, in March 2000, and there have been no significant sustained upward rallies since. (Most analysts say we are currently in a “bear market.”)
A Change Occurs in Administration at the National Government Level.

This usually involves a new president and a shift in party powers in the House of Representatives and/or the Senate. President Bush took office in January of this year, amidst tremendous upheaval in both the House and the Senate. Manufacturing Consistently Hits New Lows. This trend may be accompanied by high inventories. Manufacturing output in

Red Flags That Signal an Economic Downturn