New Formats — Including High-End Boutique Concepts, Connected Fitness Ecosystems and Wearables — Will Win as Health Becomes Consumer Priority Post-Pandemic, L.E.K. Consulting Report Says

BOSTON (May 19, 2021) — With many consumer industries preparing for an imminent rebound in demand from pandemic lows as vaccinations proceed, the traditional fitness industry, especially gyms and group fitness, will watch from the sidelines for the next two to three years, according to a new report from L.E.K. Consulting, a global management consulting firm.

While consumers are developing a heightened focus on health and fitness, the beneficiaries will be specialized sets of offerings and evolving innovations, such as integrated ecosystems of hardware, software and content; “wearable”-enabled coaching services; differentiated studio experiences; and perhaps, high-value, low-price (HLVP) gym brands, the report says. Traditional neighborhood gym brands will lag.

Because of COVID-19, fitness industry revenue dropped by more than 50% in 2020; the strong growth in digital fitness (e.g., apps for at-home or outdoor exercise) wasn’t enough to offset the dramatic decline in traditional membership fees. Major chains, including Gold’s Gym and 24-Hour Fitness, declared bankruptcy, and overall, 17% of fitness locations in the U.S. closed.

“Consumer trepidation around using in-person fitness facilities will likely push a full recovery out to 2023 or 2024. And even once  gym use reaches pre-COVID-19 levels, it will be based on a different mix of in-person and digital, at-home activity,” said Alex Evans, Managing Director at L.E.K. and coauthor of “The Future of Fitness: Looking Past COVID-19.”

Lingering consumer concerns are expected to draw out the recovery of traditional fitness gyms. A recent survey found that 43% of fitness club members say they will not go within the next three months and 10% report they won’t go within the next year.

Fitness players that will continue to struggle

The report authors believe the following will play out for many legacy stakeholders:

  • Many traditional gyms — especially small, independent locations — will likely continue to struggle with membership numbers. 
  • Spinning studios may find it hard to reach pre-COVID-19 levels of participation — mainly because of tremendous competition that has emerged from virtual providers. Peloton alone added approximately 1 million subscribers in 2020.
  • “Equipment-light” concepts, such as yoga and barre studios, likewise will struggle in the face of comparable digital experiences at home.

Where the investment opportunity in fitness lies

However, concepts and offerings with greater points of distinction will fare much better during the rebound, according to the report. For instance:

  • Multi-modal, equipment-intensive and community-oriented boutique concepts — like Orangetheory, CrossFit and 9Round — are better positioned for greater-than-market growth than other studio offerings (like spin and yoga).
  • Digital fitness will continue to grow faster than the overall fitness market, but more slowly than during its COVID-19-fueled peak. Most of the growth will be driven by integrated ecosystems of hardware, software and content, such as Peloton, Hydrow and Mirror. These companies are uniquely positioned to deliver a seamless, turnkey experience to a scaled audience and to fuel higher engagement with gamification elements and progress tracking over time. 
  • Digital wearable ecosystems have the opportunity to enhance the fitness-focused propositions of existing services, such as Noom and Strava, and to spawn new fitness and rewards and incentives programs.

“We’re seeing that well-capitalized concepts that have a relatively small space footprint, like Barry’s Bootcamp, are nicely positioned to capitalize on post-COVID-19 commercial real estate dynamics — namely, favorable rent terms and location availability. In fact, some of these kinds of players, including Xponential Fitness, increased rather than decreased their number of locations in 2020,” said report coauthor Jon Weber, Managing Director at L.E.K.

The gym chains positioned for a strong rebound

While it is expected to take traditional gyms several years to return to pre-COVID-19 levels of membership, the report projects that HVLP gym brands like Crunch Fitness and YouFit Health Clubs could be among the first, owing to their attractive pricing and strong appeal to value-oriented consumers. The potential for ancillary revenue for these brands is there: HVLP members are not very likely to adopt a separate digital fitness solution, so HVLP brands have an opening to upsell their own digital fitness services.

Like differentiated boutique fitness experiences brands, HVLP gyms may be able to take advantage of a favorable post-COVID-19 commercial real estate market to keep costs in line.

“The COVID-19 pandemic hit the fitness industry hard, largely due to its reliance on in-person facilities. But it also has accelerated the inroads that were already being made by digital fitness concepts — in particular those, like Peloton, that leverage integrated ecosystems of hardware, software and content to enable tracking of performance. It also has highlighted the attractiveness of various differentiated boutique concepts,” said report coauthor Geoff McQueen, Managing Director at L.E.K. “So, while it may take until 2023 or 2024, the fitness industry will not only recover from COVID but will also offer numerous attractive investment opportunities along the way.”

About L.E.K. Consulting
L.E.K. Consulting is a global management consulting firm that uses deep industry expertise and rigorous analysis to help business leaders achieve practical results with real impact. We are uncompromising in our approach to helping clients consistently make better decisions, deliver improved business performance and create greater shareholder returns. The firm advises and supports global companies that are leaders in their industries — including the largest private- and public-sector organizations, private equity firms, and emerging entrepreneurial businesses. Founded in 1983, L.E.K. employs more than 1,600 professionals across the Americas, Asia-Pacific and Europe. For more information, go to