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The Earth has once again completed its nearly 584-million-mile round trip, meaning the modern rituals of the New Year have begun. Whereas in times gone by we may have ushered the new year by sacrificing a boar or a particularly unfortunate king, the modern New Year’s ritual is relatively spartan: cut back on indulgences like food, booze, and chocolate, and throw ourselves into the most common New Year’s resolution — get some exercise!

January is typically a bumper month for gyms, and although as many as 91% of people give up on their New Year’s resolutions it’s still a nice boost for the fitness industry, which is just starting to find its sneakered feet again after a bruising couple of years.

So that’s what we’ll be taking a look at today — how the fitness industry has limped through the pandemic, what state it’s in now, and where it’s headed.

So put on your sweatbands, crank up the unbearable techno music, and let’s get physical.

Gym? What’s a Gym?
The onset of the pandemic meant demand for fitness paraphernalia like activewear and at-home equipment soared, but gyms of course had to close their doors. Lockdowns punched a $30 billion hole in the US gym industry between March 2020 and June 2021. As of March 2022 around 22% of sports clubs had permanently shut.

As the world reopened, customers who’d stocked up on weights and treadmills at home emerged blinking into the sun and the big question became: will people return to the gym, or had the pandemic opened their eyes to at-home exercise? After all, Peloton was pedaling its way to riches, ending 2020 with a roughly $45 billion market cap.

Preferred Consumer Workout Location

Source: Nautilus.

The answer was that demand for gym memberships trickled back – today Peloton is worth less than $3 billion – although the market was subtly altered. In March 2022, Wall Street started plugging money into mainstream gym chains, the more affordable end of which saw attendance return to pre-pandemic levels, according to PureGym’s chief executive Humphrey Cobbold. Luxury urban gyms faced a steeper uphill climb with the exception of boutique clubs that specialized in a particular type of exercise. In short, the big cheap chains won big and the remainder of industry had to push deeper into niches to capture market share.

Hot commodities (complete with hot yoga): Gyms in the US and the UK got a bit of a real-estate boost last year as they became attractive targets for landlords. Mall and shopping center landlords in particular vied for gyms to take up their empty space, as gym-goers often hang out to socialize or even shop after working out.

Landlords’ desire for gyms and health clubs has majorly inverted their relationship with fitness companies. Parham Javaheri, chief property development officer at health club Life Time, told The New York Times: “Years ago, 90 percent of club pipeline was us calling landlords and developers… Now at least 50 percent of work is from inbound interest.”

So it’s fair to say gyms and health clubs have finally got a second wind from Covid — unfortunately it’s just as we’re headed for a different, non-epidemiological kind of crisis.

Cardio Versus Macro
With the head of the IMF forecasting a third of the world’s economies will end up in a recession this year, a lot of consumers will start to hear the tremulous voice of Chandler Bing moaning “I wanna quit the gym” echoing in their heads. This is already plain to see in the UK, which the Bank of England announced in September had fallen into a recession. A YouGov poll published in December found 10% of respondents either planned to cancel their gym membership or had already done so in response to the cost of living crisis.

The rising cost of energy in the UK and Europe has piled onto gyms’ and health clubs’ operating costs — especially those with swimming pools. UK leisure center chain Better Leisure cut down its opening hours in November saying its energy bills had tripled since 2019.

While gyms find themselves in an increasingly hostile macroeconomic landscape, they also have to contend with the at-home fitness competitors that, while nowhere near their pandemic highs, are still a major factor in the marketplace.

Hybrid Exercise
Between March and October 2020, sales of fitness equipment doubled, with treadmill revenue sprinting 135% and stationary bike sales tripling according to market research company NPD Group. Many of those weights, yoga mats, and machines are still lurking around consumers’ homes, giving them an economic incentive to shun the gym and return to domestic exercise.

On top of the competition from home equipment makers, gyms also face rivalries from fitness companies with a digital component streaming workout routines into people’s homes, many of which were popularized during lockdowns. However the success of early-pandemic darlings is far from guaranteed.

The Peloton Effect: The poster-child for lockdown fitness was undoubtedly Peloton. Its sales of bikes and treadmills flew off the shelves in 2020, ballooning its share price by 400% — repairing the damage done by its unwittingly creepy 2019 Christmas commercial.

Source: YouTube.

As the world started to reopen however, the buzzy startup rapidly lost momentum, and in December 2021 a dire omen came in the form of an episode of the Sex And The City sequel series, with a main character meeting their untimely end on a Peloton bike. In mid-2022 the company started seriously cutting costs, going through four rounds of layoffs that halved its workforce. It could struggle to recover in a recession given its expensive bikes’ big selling point is you get to spend more money on a monthly basis subscribing to the company’s digital classes.

The Future is Digital
Where Peloton stumbles is in manufacturing and selling expensive hardware, but its classes did tap into a trend for digital fitness. Mainstream gyms were quick to pivot to this during the early pandemic, providing apps with workout sessions either pre-loaded or streamable.

The digitization of fitness is unsurprisingly a siren song to the Big Tech companies with Apple, Amazon, and Google all staking their claim on the wearables-slash-healthtech hill (which just so happens to be packed full of juicy health data). One of the Big Four tech behemoths wants to go even further than a watch that tells you when you’ve been an adequately successful human being: Meta attempted to buy up a virtual reality fitness company called Within but got roundhouse-kicked in July by the FTC, which is seeking to block the acquisition.

It’s a bit of a shame, we all wanted to see Mark Zuckerberg lead a Zumba class in the metaverse.

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