An Analysis of the U.S. Health Club Industry in 2004 and the Role of Bally Total Fitness

Executive Summary Introduction
The rise of the U.S. health club industry can be traced back to the 1980s and 1990s when the majority of health clubs emerged. By 2004, this $14 billion industry claimed 41 million members. Although the health club industry operated in a perfectly competitive market, several prominent key players gained large market share, including Bally Total Fitness and 24 hour Fitness. This perfect competition encouraged entry of smaller emerging firms into the industry. In 2004, the health club industry consisted of 26,000 clubs in the U.S. Of this growing market, the fifty largest firms were responsible for 33% of industry revenue and 38% of the clubs was not-for-profit. The for-profit industry was divided into the following formats: owner-operated clubs, franchised clubs, design and management companies and health spas. Bally Total Fitness, the largest publicly traded health club operator in the United States in 2004, claimed over 3.6 million members worldwide. This multi-million dollar company had earned a reputation as being the “largest and only nationwide commercial operator of fitness centers” in the United States, a substantial leap from the single modest club that first opened in 1962. Several advantages contributed to Bally’s success over the other health clubs in the industry. CEO Lee Hillman rationalized Bally’s brand portfolio by selling off outlets. By the late 1990’s, the company purchased multiple gym chains around the country in order to improve performance and profitability of the business. Within 8 years of existence, Bally Total Fitness had outlets in 29 states, diversifying it as the broadest geographic distribution of any owner-operated health club chain in