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What Is Boutique Fitness, and How Can Investors Profit?

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Millennials are abandoning their gym memberships for more expensive and trendy boutique fitness classes. Despite the more expensive fee, there are reasons why so many people are visiting specialized small gyms for cycling, boxing, boot camps, and much more.

By definition, a boutique fitness studio is a small gym, generally between 800 and 3500 square feet, that focuses on a more community-like group exercise in one or two specific fitness areas. Some popular studios include SoulCycle, Peloton, Orange Theory, Barry’s Bootcamp, CorePower Yoga, and Class Pass.

Limited Availability

Boutique fitness studios have very limited spots. The especially popular ones have long waiting lists, and advance reservations are typically required. With such limited availability, unlike regular fitness centers, there are strict rules for attendance. Many boutique fitness studios require cancellation or no-show fees. This motivates the registered to attend the classes.

Mind Refreshing

The days of mindless treadmill running are behind the millennial generation.  Now, whether it is cycling or an intense boot camp, millennials can choose where to go and what to do.

Boutiques also appeal to young fitness addicts who are willing to pay more for a more committed method of exercise.

Effectiveness: Cost, Commitment, and Community

As expensive the classes for boutique fitness studios can be, they do provide higher value for each classes. Since the classes are smaller, the training can be more tailored to your expectations and personal goals.

About 67% of traditional gym memberships are never used, according to a study done by UC Berkeley. With such focused concentration, coupled with one’s own choosing of the activity, participants may feel more committed to the exercise.

Also, since there are specific sessions at specific time, you are more entitled to go, instead of at regular gyms, where you can choose to go any time you want, which often leads to not going at all.

The sense of community is also a big part of this trend. Because the facility itself is small and the sessions have specific times, the staff and the clients all get to know each other after a couple sessions. Basically, they all become workout buddies.

The camaraderie within the gym circle makes the experience more special and enjoyable. Such multitude of reasons that contribute to a fun way to keep yourself healthy seem to be a good enough reason for the boom in this trend.

Where Is The Money?

Because this trend is relatively new, there aren’t many companies that have gone public—yet. SoulCycle, a popular stationary spinning fitness studio, initially filed for an IPO in 2015 in hopes of raising at least $100 million to pay off debts and open more studios. However, after stalling it for a while, it formally requested to withdraw its IPO registration this May “due to market conditions.”

However, another big-business brand in this industry is Peloton, a unique fitness company fueled by innovation and technology. In addition to its digital streaming studio in midtown Manhattan, it also has an option in which the Peloton bike can be bought at an upfront cost of $2000, which has a screen for live-streamed classes. It has been especially popular with busy people who can’t afford the time to physically go to a class and people who live far away from a studio.

Peloton’s latest financing was around $550 million and may be its last round before going public. The CEO and co-founder John Foley said 2019 “makes a lot of sense” for an initial public offering. The last round of financing raises Peloton to a reported valuation of $4.15 billion, according to CNBC.

Peloton might be the beginning for such trendy boutique fitness studios to go public, but the trend is just growing. Investors should watch out for these innovative exercising gyms, especially as they disrupt traditional membership-based gyms like Planet Fitness (PLNT - Free Report) .

Elsewhere, investors can look to apparel makers like Nike (NKE - Free Report) , Adidas (ADDYY - Free Report) , and Lululemon (LULU - Free Report) —all of which could potentially market to boutique fitness goers.

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