Company Buying Gold’s Gym Out Of Bankruptcy Has Business Model To Reshape Entire U.S. Gym Industry

A stack of weights and a line of polished, high-quality treadmills used to make the gym experiential retail category an attractive asset class for landlords who wanted to pull in routine traffic from fitness enthusiasts every day.

But four months after the coronavirus outbreak, one of the nation's largest gym brands, Gold's Gym, is about to be acquired out of bankruptcy by German company RSG Group GmbH. RSG is an omnichannel brand, known for its digital workout offerings as much as its footprint of gyms across Europe.

And that may be a worrisome indication to landlords of the direction fitness real estate is taking.

Gold's Gym, like many U.S. health clubs, struggled with anemic revenue and zero traffic as the coronavirus struck the nation. As fitness centers are high-touch, high-traffic businesses, many city's pandemic restrictions kept them closed for months.

RSG Group, which operates both online fitness channels and brick-and-mortar gyms across the world, levied the winning bid on July 13 to purchase DFW-based Gold's Gym and its assets out of bankruptcy for $100M. The deal is subject to customary approvals before closing. 

The buyer told Bisnow Gold's Gym will emerge from bankruptcy with 61 company-owned gyms and 600 franchise-owned gyms. The buyer has no plans to close the fitness centers or the Dallas headquarters.

"We don’t plan to close gyms," RSG Group founder and CEO Rainer Schaller said in a statement to Bisnow. "We won’t be changing the footprint. We want to keep the DNA of the brand, while bringing it into the future. I believe there’s still a lot of potential and even with the digitalization, there will always be a need for gyms. They may look different or have a different offerings, but going to the gym is part of people’s daily routines and they aren’t willing to give that up."

That does not necessarily mean landlords are free from worry, DBRS Morningstar head of research for North American CMBS Steven Jellinek, an analyst following the experiential retail space, told Bisnow.

RSG Group possesses both the technology and the business model to reshape the entire U.S. gym industry, he said. The impact of digitization on the exercise experience by a major brand like Gold's Gym — and the market cannibalization of gym-goers during the shutdown through RSG's digital offerings — could be bad news for other gyms and their landlords who are hoping gyms return with the same space demands after the coronavirus pandemic subsides.

"If I were a landlord [with gym tenants], this would make me take a step back and think, 'What is the future of in-person gyms and does the gym in my strip center or mall have a future?" Jellinek said.

Jellinek said RSG Group has a strong digital fitness option under its umbrella, something not necessarily available to other gym chains. With many of its competitors shut down, rising cases stalling reopening plans and no vaccine in sight for the near future, it also has the time to capitalize on that brand to build up digital memberships for Gold's Gym, luring away typical gym-goers and building up customer loyalty during troubled times for the gym industry.

"It’s probably going to be a while before people go back to the gyms en masse," Jellinek said.

And then when the market reopens fully, Gold's Gym can benefit from already having a hold on patrons who tied themselves to digital workouts introduced by other RSG Group brands like online group fitness class provider Cyberobics and fitness planner app LOOX. 

Any gym without a competing technology or on-demand service is going to be behind the eight ball, Jellinek said. 

"It looks like they are being creative," Jellinek said of RSG Group. "It looks like they might be taking advantage of the jump in technology, which workouts are taking on with Peloton and everything else. The interplay between a club and on-demand fitness is increasing."

Jellinek said other gyms hoping to come back to brick-and-mortar could lose members to facilities that have an omnichannel approach to exercise.