At the 10th Annual Financial Panel at the IHRSA show in late March, analysts agreed that the health and fitness industry remains recession-resilient, and the finance community continues to be attracted to the industry.
"We like the industry because investors like the industry," said Brian Maier, managing director of Merrill Lynch, who is responsible for areas that include fitness and leisure. "They don't think of themselves as 'fitness investors,' they think of themselves as 'investors.'"
During this year's financial panel, held March 21-23, Maier and other panelists told the audience that, although they do like health clubs and the fitness retail business, the overall health and fitness industry is still very fragmented. Nevertheless, Maier added that the industry is predictable, which is a key factor.
The panelists generally agreed that the country's current trends would eventually make the industry desirable. Although these trends haven't influenced the industry significantly yet, most feel they will. They include: aging Baby Boomers, the first of whom turn 60 this year; increased interest in wellness and balanced health, rather than just working out; government support of the country's needs to get healthier; and rising healthcare costs, which could drive more toward fitness to keep costs down.
Analyst Scott Mushkin, vice president of Banc of America securities, who covers healthy lifestyles companies, pointed out the potential behind those trends. For example, he said 75 percent of the healthcare dollars spent go to preventable and chronic diseases that could be avoided if someone were healthier. In addition, Boomers "don't want to die or fade away." And the age of marriage is getting older, so young people have more disposal income.
Specifically to the club industry, Andrew Zarnett, managing director of Deutsche Banc Securities, pointed out there is "a lot of capital waiting to be invested." And Mark Harms, of the Global Leisure Group, said that his group believes Asia is a "huge market opportunityâ€¦with strong growth characteristics." When it comes to Europe, Harms said that consolidation among clubs on the continent is just beginning, while in the United States, the sale of Bally ("Clearly, Bally has a for-sale sign up.") marks a turning point.
For the analysts, deciding how to "comp" fitness is a no-brainer. The industry is not necessarily compared to other lifestyle industries; rather it is compared to retail, said Maier. Why? Because the industry has to do with convenience, customer service, cleanliness and innovation.