When The Going Gets Tough, the Tough Get Going For Upscale Gyms

Imagine cocktails, fine dining, shopping, massage therapy and beautifying luxuries all found in a work out gym. Sounds like a five star resort for some, but for others, it’s a part of every day life. Considered an “upscale gym,” Chicago’s East Bank Club offered a trendy array of exercise facilities, hair and nail salons, a full-service bar and restaurant, and child- care services for its members in 2005. Members at the East Bank Club were also entertained by the occasional appearance of celebrities such as Michael Jordan, Oprah, and Heather Graham. Those who are not members called the East Bank Club a “Snobby haven for beautiful people.” East Bank’s management did not mind that title at all.

Despite economic uncertainty, many upscale gyms were not worried about membership or profits declining. East Bank’s Managing General Partner, Daniel Levin, looked at the economic uncertainty like it was: “almost as recession-proof as cigarettes used to be.” To further illustrate how unconcerned most luxury gyms were about the uncertain economy, East Bank’s member, Jeanine Meola said that if money became tight for her, her car would be the first to go followed by her membership at East Bank.

Nearly all luxury gyms market to families with such amenities as child-care services, playrooms, swimming pools, and dance classes. With these convenient amenities, many families have kept their memberships even when “times are tight”. Throughout the 2000’s and continuing today, less luxurious and less expensive gyms primarily made their profits from new membership. During recession times, their profits tended to experience a sharp decline. However, upscale gyms pulled their revenues from sources other than new memberships, such as food, clothing, salons and personal trainers. In fact, of East Bank’s revenues, only 53% accounted for dues, while the remaining 47% of revenues came directly from other sources.

Many upscale members of luxury gyms viewed their membership as a direct representation of their character, status, and personality. To withdraw one’s membership would display to the public that either problems may exist financially or working out and staying healthy is no longer a number one priority. Many people were members simply for status reasons and socializing, while others were mainly concerned with staying healthy. Perhaps there are additional reasons why people join upscale gyms. The management of East Bank Club was wondering what it should do to attract new members and increase the revenues.

2. Formulate one research question and two hypotheses.