New York
CNN Business
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In the US, gym memberships typically cost around $50 per month. Boutique gyms and high-intensity classes double and triple that.
However, Planet Fitness offers a $10 per month membership for 30 years. The no-frills gym chain hasn't raised prices, making it one of the few things that still cost the same despite some of the highest inflation in decades.
Planet Fitness, which advertises a $10 fitness program that includes an annual fee and free training, has long sponsored New Year's Eve festivities in Times Square to get people to consider signing up for membership as their solution.
The almost sacrosanct price of $10 has become a key part of the company's brand positioning as an accessible, “judgment-free” club for casual fitness enthusiasts. Planet Fitness members typically go five or six times a month, and about 60 percent of them don't go for 30 days.
“It's a very powerful marketing tool,” said Simeon Siegel, who heads the firm at BMO Capital Markets. The $10 price tag, he says, is just right: cheap enough to lure people looking to get in shape to Planet Fitness, and just as importantly, not so expensive that they cancel if they don't go often.
Paying $10 a month, infrequent users are more likely to keep their memberships, saying they belong in the gym rather than quit, he said.
Planet Fitness uses a $10 membership fee (which can be cancelled at any time) to recruit people who are interested in exercising but have never attended a gym before, are intimidated by fitness fanatics at other gyms, or can't afford a more expensive club. The company believes that $10 is an entry point for the roughly 80 percent of Americans who don't belong to a gym.
This cheap gym membership model — known in the fitness industry as high volume, low price, or “HVLP” — is also tailored to appeal to high school students, college students, and those recovering from injuries or surgery with parents . Rick Caro, President of Management Vision and longtime fitness industry consultant.
“It's a ‘get you off the couch' price,” said Christopher Rondeau, chief executive of Planet Fitness (PLNT), which has grown to more than 2,300 gyms nationwide and is on reached a record 16.6 million members in the quarter. “You don't try it the first time and spend $50, $60, $70,” he said.
Planet Fitness doesn't plan to raise the $10 price anytime soon. Instead, it will drive prices down by letting people trade in for a $24.99-a-month “Black Card” membership, with more perks.
“The longer I can stay on $10, the more I can get people off the couch, try fitness, and continue to drive more value for the Black Card,” Rondeau said.
The higher-priced monthly plan offers access to all of Planet Fitness' gym and benefits like hydromassage beds, massage chairs, and tanning equipment, and Black Card members can bring one visitor.
More than 60% of members subscribe to this tier, and Planet Fitness added $2 a month earlier this year. Planet Fitness members pay about $17.60 a month on average, helping the company keep the lower plan at $10.
“It's not that different from other businesses that lure you with low prices and then upsell you with higher options,” said Joseph Altobello, an analyst at Raymond James.
To appeal to occasional gym-goers, Planet Fitness' clubs also have more cardio and light-strength equipment than many of their competitors, and fewer heavy free weights. Planet Fitness discourages so-called “clumsy” behaviors, such as weight loss and purring, and has a “clumsy alert” to prevent people from dropping them.
Planet Fitness has benefited from consolidation in the fitness industry during the pandemic, which has left the company with fewer budget gym competitors.
About 25% of US gyms and studios About 10,000 facilities have permanently closed during the pandemic, according to industry trade groups. Several major chains, including 24 Hour Fitness and Gold's Gym, filed for bankruptcy.
However, Planet Fitness hasn't permanently closed any gyms during the pandemic. This is largely due to its franchised gym model, some of which are owned by private equity groups.
The company is also taking advantage of Americans looking to get back in shape after the pandemic. Monthly visits to gyms in the U.S. are higher than in 2019, according to data from Placer.ai, which tracks retailer foot traffic.
Despite the rise of Peloton and many people getting used to working out at home during the pandemic lockdown, working out at home isn't a threat to Planet Fitness' $10 model.
“It's a different client,” Altobello said. “Not everyone has the money or space to create a home gym.”
