Opening a new business is always a gamble, even in the best of times.
But imagine swinging your doors open to the public at the height of an economic recession.
At a time when many construction projects are being torpedoed by what is being described as the worst financial storm in decades, Life Time Fitness is opening not one, but two, mammoth health and fitness clubs in North Jersey — one in Florham Park, and another scheduled to open in late January in Berkeley Heights.
These are not just ordinary health clubs, mind you. These are health clubs on steroids.
The Florham Park facility is 110,000 square feet. By way of perspective, the average Home Depot store is about 130,000 square feet.
Located on a 33-acre plot off Fernwood Road in Florham Park, Life Time sports 400 pieces of cardio and weight resistance equipment, indoor rock-climbing walls, a Pilates and yoga studio, basketball, racquetball and squash courts, an indoor/outdoor aquatics center with a water park, a children’s interactive play area and whirlpools. There is even a cafe that serves smoothies and sandwiches, and a spa/salon where you can get facials, massages, and hair and nail services.
Jason Thunstrom, a Life Time spokesman, describe the fitness club, which is open 24 hours a day, seven days a week, as “a day spa,” which tries to meet the health and fitness needs of families.
The company spent about $35 million building the Florham Park facility, and Thunstrom said that, so far, it has been well received by the public.
“We had a great grand opening,” he said. “Membership sign-ups are tracking where we expected. We’re very excited about the New Jersey marketplace and the greater New York marketplace in general and see tremendous opportunities here.”
But can the Minnesota-based company, which operates 81 clubs in 18 states, stay the course in these tough times?
Shares of Life Time have fallen precipitously in recent months. And with the U.S. economy in a recession, the company told shareholders recently that it is ratcheting back spending and cutting some new projects.
Michael Robinson, chief financial officer at Life Time Fitness, said the company is prudently managing its growth in the near term to weather the financial storm but is confident about its prospects going forward.
“Up until September, we were extremely successful in raising capital, but it has gotten tougher,” Robinson said. “That is when we stepped back and said prudence calls for us to slow down and live within our means.”
Robinson said Life Time, which went public in 2004, planned to open 11 centers in both 2009 and 2010, but scaled that number down to six, for a total of 12 clubs in two years.
The health club industry as a whole is suffering from the economic recession.
U.S. consumer demand dropped last year, to 41.5 million members for 2007 from 42.7 million in 2006, according to the International Health, Racquet & Sportsclub Association, as hard-pressed consumers cut club memberships and other discretionary spending.
Earlier this month, Bally Total Fitness of Greater New York and its affiliates, including Bally Total Fitness Holding Corp., filed Chapter 11 bankruptcy, citing the burden of its long-term debts and constrained credit markets for its downfall.
But the health club industry said revenues continued to grow, to $18.5 billion from $17.6 billion, “which suggests that clubs are collecting more revenue per member than ever before,” the group reported in June.
For its part, Life Time Fitness recently reported that total revenue for the third quarter 2008 grew 17.3 percent to $198.8 million from $169.5 million during the same period last year, driven primarily by growth in membership dues and in-center revenue. Meanwhile, net income in the third quarter grew 17.6 percent to $21.6 million from $18.4 million last year.
“Without question, we are seeing pressure in terms of membership attrition,” Thunstrom said.
However, the company has also been signing up members at a faster pace than in previous quarters, and current members are actually using the gym more often, he added.
Monthly fees at Life Time range from $89.95 for an individual member to $169.90 for a couple to $239.80 for an entire family.
Thunstrom said that despite the large number of job losses nationwide, people so far seem to be trying to hang on to their fitness memberships.
“It’s stress reliever,” he said. “We’re hearing that as people are affected by a challenged economy their health club membership is not the first thing to go.”
Unlike some other clubs, the company doesn’t require new members to sign long-term contracts that lock them in for 12, or 24, months. “If after the first 30 days you say, this is not for me, it’s a 100 percent money back guarantee,” Thunstrom said. “Then from that point on, it’s a 30-day cancel policy.”
This strategy helps keep the company on its toes, he said.
“Every time you visit, I better earn your business because you can leave at any time,” Thunstrom said.
The company has also added a few money-saving perks to give current members added value during these tough times.
Recently, Life Time launched mylt.com, a virtual club that allows members to take advantage of discounts at companies that have partnered with the health club. Members can save cash on everything from cell phone bills to groceries to entertainment to automotive services to dining out.
‘The timing couldn’t be better, especially now in this tough economy” Thunstrom said. “If a member can get a discount on their phone bill and a discount when they buy home products at, say, Lowe’s, and when they go to a movie, in a while you add that up and on a monthly basis it can have a significant net effect on their savings.”
Health, NJ Spas
“Thank the Lord. I can’t wait to run out there and tell the girls,” said Linda Orsuto, owner of 800 West Salon and Spa in Cherry Hill. “They’re going to be so happy.”
