Are Gyms Profitable?

Gym owners have had it tough.

First, there was the COVID-19 pandemic, which permanently closed around 500 UK gym and leisure facilities and cost the industry an estimated £3.1 billion. And then, once pandemic restrictions began lifting and the industry started showing signs of a quick and resolute recovery, a cost-of-living crisis emerged, threatening membership revenue and significantly raising energy and rent prices.

During the pandemic, there was also an increase in the number of people exercising at home. In early 2021, the FT reported on an IHRSA survey that said 68% of Americans who’d started exercising at home during COVID intended to continue.  

These and other challenges may impact a gym’s ability to generate profit, but profit isn’t the whole story. Two Brain Business writes that the type of metrics used to discern a business’s financial success should be considered. It uses the example of gross profit, pointing out that it’s possible for a gym to have $10 million profit but to go under if expenses are $11 million. Profit may only be part of the story in understanding how robust a gym’s finances really are. 

Despite recent challenges, many gyms are out there turning a healthy profit. In 2022, the global fitness industry was worth $96.7 billion and growing. In 2023, gyms and fitness centres in the UK are expected to be worth $1.9 billion, including around a 5.5% market size increase. COVID-19 may have had a significant impact on the health and fitness industry, but it’s bouncing back, and there’s certainly an appetite for health and fitness, but are gyms profitable? 

How much does the average gym in the UK make?  

It’s difficult to paint an accurate picture of the average UK gym, but we can get an idea using certain numbers and figures. According to startup.co.uk, the initial cost of opening a mid-size commercial gym is around £80,000 to £100,000. Start-up costs for any business can be high, but gym equipment is often a particularly large expense, especially for smaller independent gyms. And remember, this is often paid out before the first members have even paid their first month’s fee.

Most UK gyms have a turnover somewhere between 100,000 and £250,000 per year. But turnover doesn’t equal profit. Gyms must pay commercial leases, equipment purchasing and maintenance costs; and hire, staff, clean, market and ensure their business from this figure.

Between 60 and 80 percent of a gym’s revenue comes from its monthly membership fees.  

One study by the International Health, Racquet & Sportsclub Association (IHRSA), suggests that the average revenue per gym member is just under $700 per year. Multiply this figure by the amount of paying members a gym has, and you’ll get a better idea of its potential profit. Sharp sheets give an example, suggesting that a gym with 300 members paying $100 monthly would have a total revenue of $30,000. It adds that additional paid classes could bring this figure to around $50,000.

Run Repeat reports that the average UK gym has a revenue of $852, 357.06 (£708,700.75). 

It’s a similar story in the US too. The website How to Start an LLC writes that it’s typical for a new gym to generate between $1000 and $2000 a month in revenue within the first 6 months, suggesting that a successful gym could generate at least $20,000. According to the AFS 2016 Marketing Best Practices Research Report, a typical small fitness centre in the US makes around $63 per square foot or as much as $300,000 per year. Larger gyms can make up to 10 times as much. 

Gyms aren’t only making money from their active members. If you have a gym membership but never (or very rarely) use it, then you’ll know that the gym still collects that money each month. While technically “oversubscribed”, the gym can continue providing a good experience for its active members who obviously don’t need to compete for equipment or space with their inactive counterparts. It means gyms with a 300-person capacity could have 400 members on their books. 

Photo by LOGAN WEAVER | @LGNWVR on Unsplash

Examples of successful and profitable gyms 

Health Club Management reported in 2022 that the Gym Group increased its membership by 10% during the first 6 months of 2022. Its revenue also jumped to £84.2 million. In the US, Planet Fitness reported third-quarter revenue of $244.4 million, marking a 58.4% increase from the same period last year.  

How do gyms make money?  

A gym membership usually accounts for between 60 and 80 per cent of a gym’s income. Profitable gyms will have a healthy number of active and dormant members (members who pay but rarely or ever attend). In the UK, the average cost of a gym membership is £40 a month. In the US, it’s $58. Although you’ll also find options at the budget and luxury end of the market.  

Gyms can also make money selling personal training packages. Trainers can be employed either directly or indirectly by the gym, or gyms can hire out their floorspace for classes.  

Gyms can also sell merchandise like t-shirts or water bottles, or food and drink items. Some also rent out small areas of the building to concessions like sports therapists or nutritionists.  

Since COVID-19 and the rising popularity of online fitness classes, some gyms have started offering remote training and classes. This can be a group session or a one-to-one. The benefit of this is that trainers can attract clients beyond the local area of the gym. We touched on this in a previous post on indoor cycling apps.

What do gyms have to pay for? 

Gyms pay rent like any commercial business. The amount depends on the amount of floor space, the building’s facilities and physical location. Unlike other businesses, gyms can’t exploit every inch of floor space because the equipment must have sufficient room to be used efficiently and safely. Members won’t enjoy working out right on top of others, either. Gyms are also having to cope with rising energy bills. It’s why some are now looking to install electricity-generating indoor bikes that can capture and convert human power, helping to offset utility costs. Gyms must also pay, among other things, PTs, reception staff, and cleaners and for any maintenance, cleaning supplies and décor. Building and equipment maintenance must also be factored in, as well as insurance and sales and marketing costs.

What are some of the challenges that gyms face?  

Gyms share many similar challenges with other businesses, but there are several that are more specific to the fitness industry. The rising cost of energy bills is clearly going to be a challenge for gyms. According to Energy Live News, the combined cost of gas and electricity in 2022 was set to rise by more than 100% compared to 2019. Hussle also reported that 55% of gym-goers asked in a recent study admitted that they were worried gyms would close due to increased energy bills. The cost-of-living crisis also means people may be more likely to cancel or freeze memberships. Others may be less likely to join a gym in the first place if they’re finding it cost-prohibitive in the current economy. Mid-range gyms may be particularly vulnerable because they compete with budget gyms, which may now appear more tempting to those hoping to cut back on non-essential expenses. Luxury gyms may find it easier because their members are often less affected by difficulties within the economy and may, therefore, be more likely to retain their current membership.  

Budget gyms have the benefit of being more attractive to potential members, especially to anyone brand new to fitness, but their profit margins are usually very low, and this can impact the type of experience they’re able to offer.  

We also mentioned earlier that gyms must also compete with a rising interest in at-home exercise. Home exercise equipment has been popular for decades, but it’s never been more affordable or accessible and, in many cases, technologically and software enhanced. Examples of this would be the advanced metrics provided by the Watt bike or the live power meter on the RE:GEN’s Ohm battery. Exercising at home is often seen as more convenient and may be cheaper over the longer term than signing up for a gym membership.

What can gyms do to become more profitable? 

Gyms make most of their income from memberships, so it makes sense that attracting new members while retaining current ones is key to making a profit. It’s easy to place the emphasis on gaining new members, but gyms must also pay attention to their existing members by listening to feedback, rewarding loyalty, ensuring equipment is regularly maintained and upgraded, and creating innovative or interesting experiences or classes, etc.  

Personal training packages can help, and so can 6-, 8- or 12-week fitness challenges. Gyms can use health technology such as body fat analysis or offer higher-tier memberships that unlock extra benefits.  
 
When people are in a gym, they’re a captive audience, so anything you can market that supports their fitness journey, whether that’s physically, mentally, nutritionally, intellectually or through merchandise, may be worth exploring further.  

Own a gym, or thinking about opening one? Find out more about installing electricity-generating indoor bikes to capture human power and use it to help power your premises. 

Don't own a gym? You can join the pre-order for the RE:GEN home bike. 

Looking to re-energise empty office space? Find out more about the ECO:POD