How the fitness industry loses out on potential revenue in a dynamic, globalized world
Our co-founder Kenn wrote about the explosive growth of platforms and the sharing economy, especially as relates to the fitness industry. How can gyms overcome churn, gain revenue, and attract a new demographic? Find out by reading Kenn’s article below!
Platforms and the sharing economy
Platforms and the sharing economy facilitate the easy exchange of goods and services worldwide, offering a level of convenience that consumers have come to demand. The platform business model has quickly become the norm, not the exception. Take a look at this data from the Global Platform Survey, which illustrates 1) the enormous value of platform business (more than $4.3 trillion); 2) the fact that an increasing number of platform companies have entered the market in recent years; and 3) the household-name-status of many companies which consumers don’t even usually realize are in fact platform businesses, from Apple and Google to Microsoft and Amazon.
Essentially, platforms function as a bridge between producers and consumers of goods and services, connecting the two and making it easy for customers to buy or use whatever it is that producers have to offer. Major benefits of the platform business model are:
- Creation of additional value for both consumers and producers
- Increased efficiency and rapid scalability
- Easy for producers to tap into a global market
- Opportunities for exponential growth
But, when we look into this further, we see that not all platforms are created equal.
In order to truly carry the benefit mentioned in bullet point #1 above, the platform has to serve the needs of both consumers and producers equally. Let’s look at two well-known platforms as examples:
When Hotels.com started out, back in the early days of the Internet in 1991, its value proposition was strong and clear – to provide added convenience and savings to travelers and to make it easy for hotels to receive and process bookings. With their early entry into the market, however, Hotels.com was able to exploit its strong industry position to take large commissions from producers, eating into their revenue.
Hotels became dependent on Hotels.com as the platform took over all aspects of the booking process, from marketing to booking. Today almost half of all hotel bookings are made via an OTA (online travel agency) like Hotels.com, Expedia, or Booking.com, which makes it virtually impossible for hotels to opt out of using OTAs. As a result, however, these platforms have all the leverage in their relationship with producers.
Founded in 2008, Airbnb has gone from a couple thousand bookings pear year to 150 million nights booked in 2017, and is on track to keep growing – a prime example of how the platform business model allows for exponential growth. Airbnb serves a key consumer need in a way that is affordable and convenient, combined with less-aggressive service fees that make it highly appealing to both consumers and producers (in this case, Airbnb hosts). The end result is a platform which creates dual-sided value.
Platforms and the sharing economy are expected to continue to grow in the coming years, with the value of the shared economy sector projected to reach $335bn by 2025, compared with $15bn in 2013.
Where the fitness industry comes in
It’s safe to say that the fitness industry is still looking for its unicorn. Many companies have attempted to be the Airbnb of fitness but have fallen short, largely by failing to create dual-sided value for both gyms and fitness users.
The fact that more and more people are traveling more and more frequently means that consumers’ demand for convenience is at an all-time high. Platforms like Airbnb, Uber, TripAdvisor, Hotels.com, etc. were all created with the aim of meeting travelers’ growing demands for convenience.
The inconveniences of working out while traveling are well-known – from substandard hotel gyms to never-ending registration and payment for a day pass, it’s little wonder that many travelers opt to skip the gym while on the road. This can create a vicious cycle: when gym-goers allow their active lifestyle to lapse, even if just for a short period of time, they’re increasingly likely to not renew their gym membership when they get back home, as in just a week you can lose both your fitness level and your gym-going habit. IHRSA estimates gym membership churn at 30%, and over a quarter of lapsed gym members say that they didn’t renew their membership because of inactivity and being unable to keep up with the gym-going habit.
The outcome is that rather than benefitting, gyms now are actually losing money when people travel.
By the numbers
Let’s break down the numbers:
- Approximately 1.2 billion people make trips of at least one night away from home every year. The average trip length is 7.3 nights. This results in a global travel market with a net value of around $7600bn every year.
- The value of the global fitness industry is ca. $83bn, with 162,000,000+ people who are members of gyms. There are about 200,000+ gyms around the world.
Without even needing to do any math here, we can see that the travel industry represents huge potential for gyms. Likewise, we can infer that there are a huge number of people who are potential gym users when they travel.
But if we do do some quick math:
- Let’s estimate conservatively that 50% of gym users travel, and that 50% of these want to work out when they do. That gives us a user base of 40 million people.
- If we (again, conservatively) estimate that each of these 40 million people travels 3 times a year and wants to work out while doing so, and that each person is willing and able to buy $8 for each day pass, we’re looking at a total potential revenue of $1bn every year.
It’s worth noting here that these estimates will only continue to grow year over year as more and more people travel and businesses globalize further.
After breaking this down, it’s mind-boggling to realize that none of the fitness industry’s major players have succeeded in, or even really tried, developing a platform that allows gyms and travelers to easily connect.
TrainAway’s mission is to meet exactly this challenge – to build a platform which creates just as much value for consumers (travelers) as for producers (gyms). The TrainAway app allows the easy exchange of goods (in this case, a day pass) between gym and user, seamlessly removing all barriers. The user experience is simple and straightforward for the customer and the process of on-boarding and being a TrainAway destination is foolproof and requires virtually no time for the gyms – as it should be. Moreover, TrainAway provides additional revenue for gyms in the form of day passes sold, and by focusing only on day passes and the traveler/short-term visitor market, TrainAway doesn’t interfere with gyms’ existing membership models.
As TrainAway grows, our goal is simple: to make every destination on Earth one where finding and getting short-term access to a high-quality gym is easy. This may not be an easy goal that we’ve set for ourselves, but we strongly believe that it’s an important and worthwhile one.
We’ve laid the foundation for achieving this goal, but at the end of the day, it’s only possible if and when gyms buy into the model.
We’ll close this article with two questions:
- Why, with all the evidence we’ve laid out above, should gyms not join the TrainAway platform?
- And more importantly, can they afford not to?