The Life Time athletic club in Eagan hummed with activity on a recent Friday afternoon.
Low chuckles from a group of chiropractors in the cafe, members greeting staffers as they entered the building, and the peal of children’s laughter: It was all music to the ears of general manager Chet Haider, who remembered being the only one in the building for months at the start of the pandemic.
“The energy has been amazing from going from an empty club to feeling and seeing people,” Haider said.
Life Time Group Holdings, the Chanhassen firm that’s one of the nation’s largest fitness center operators by revenue, is rebuilding its muscle after being stunted by the pandemic.
Its center membership — which dropped from around 850,000 in 2019 to 500,000 at the end of 2020 — was around 650,000 as of the end of last year. Its monthly dues average is $135 per membership, up 30% from a year ago. Revenue this year could reach 2019’s level, executives say.
Life Time shored up its balance sheet by relisting on the stock market last fall, a move that raised $700 million. It is adding more cash by selling the real estate at some of its more than 150 clubs and leasing it back.
“This is a mammoth business that has been handcuffed for the last couple of years and handcuffs are off,” founder and chief executive Bahram Akradi, said in an interview earlier this month.
Still, it may take some time for the company’s bottom line to rebound. Life Time lost money in the last three months of 2021, the company disclosed earlier this month. And executives and analysts expect it to be in the red in the early part of this year.
Life Time’s foot traffic at the beginning of this year as calculated by data firm Placer.ai continues to lag its own numbers from early 2020 and 2019 before the pandemic. It also falls behind other major fitness chains’ foot-traffic numbers, according to analysis by BMO Capital Markets.
Whereas the industry average in foot traffic was down 11% beginning this year compared to the same time in 2020, Life Time was down 21%.
“They are not seeing the same speed of catch up like others, such as Planet Fitness,” said Simeon Siegel, a senior analyst at BMO Capital Markets. “[But] as the temperature lifts and pool decks open, the spring and summer recovery may prove more important to watch.”
Akradi started Life Time in 1992 and grew it from its big-box multipurpose gym roots with its first IPO in 2004. He then took it private in 2015 and in recent years diversified into co-working spaces, called Life Time Work, and apartments, called Life Time Living. At $1.9 billion in 2019 revenue, the company was the nation’s No. 2 fitness company by revenue after LA Fitness.
But then the COVID-19 outbreak spread across the world and Life Time clubs and other fitness centers were forced to temporarily close in March 2020 due to local health mandates.
“We could have taken that period and think, ‘Oh, my God. This is bad. This is bad,'” Akradi said. “Instead, we’ve taken that time as an opportunity to literally examine every little detail in our company, every detail of execution, customer experience.”
Like many clubs during the pandemic, Life Time enhanced its apps and other digital offerings. It created $15 monthly digital-only memberships that let people download and livestream workouts and classes on mobile gadgets.
“I have to provide you the opportunity to be healthy and happy anytime anywhere,” Akradi said. “I need to give you the opportunity to come to the club and take my spin class, but if you are stuck somewhere and you can’t come, you can open your app and take my class. It’s both.”
In January, Life Time launched a program called Arora aimed at people 55 and over with designed workouts and social events. Life Time also introduced more engaging programming modeled after its adult classes for older tweens.
Akradi also wants Life Time to become a premier destination for pickle ball, a low-impact sport the entire family can play. It recently converted one of its fitness centers in Bloomington to be entirely dedicated to pickle ball.
Life Time, which tries to foster a community atmosphere, is part of a cultural evolution in which fitness is embraced as a lifestyle, said John Baumgartner, an analyst for Mizuho Securities.
“The old model for the old-school gyms that were out there would be to sign a member up and hope they don’t show up,” Baumgartner said.
Other fitness chains, such as Orangetheory Fitness, are also working hard to engage people, he said.
Life Time opened six new centers in 2021, and executives plan 12 this year. Akradi’s vision is for Life Time facilities to more closely resemble country clubs — with spas, tennis courts and saunas — than gyms.
“You don’t have access to one location like when you join a country club,” he said. “You can can go to beach clubs across the country. You can go to play pickle ball across the country. You can play tennis across the country. You can do this everywhere and there’s no one else in our position.”
While the amenities are a selling point, it is the community aspect of the Eagan Life Time club that Kathy Gleason, 59, of Burnsville said is a major draw. She said she has met numerous friends at the fitness center where she plays pickle ball and participates in body flow classes and other workouts several times a week.
“We missed it,” Gleason said. “We missed not having our place to go and get healthy.”
The Eagan facility, which was renovated in 2018, has a monthly standard membership of $119 charge for a single adult. The club at the Southdale Center in Edina that opened in late 2019 has standard membership of $199 a month.
Life Time memberships start at $249 per month for adults at a club it opened in downtown Chicago earlier this year. Life Time plans to continue to layer price increases to existing members.
“We have tremendous pricing power from here forward based on the fact that once you go to the direction of customer coming into you because of the experience, the price just doesn’t matter,” Akradi told analysts during the company’s latest earnings call.
Life Time stands to benefit from some impacts of the pandemic, including the closure of other fitness centers, and the need for people to get back in shape if they weren’t as active over the last two years. It may also benefit from consumers who want a one-stop shop for services.
“Life Time is able to do what the independent [gyms] want to do,” said Anne Mezzenga, the co-founder of podcast Omni Talk Retail and owner of two boutique gyms in the Twin Cities called North Strong.
Life Time can provide child care, spas, cafe and other amenities in one place while smaller gyms don’t have the same resources, Mezzenga said.
But Life Time also has plenty of challenges ahead. More consumers have also embraced at-home exercising using digital tools and may not want to pay for gym memberships. And the fitness industry remains as competitive as it was before the pandemic, with plenty of cheaper alternatives than Life Time.
While COVID-19 infection rates are on the decline across the country, another variant could throw a hurdle in front of Life Time and other fitness companies.
“I think the biggest challenge is just the unknown with COVID,” Baumgartner said. “It’s been choppy quarter to quarter.”