2014 Outlook for the Pilates and yoga studios industry

According to a paper by IBIS World in April of 2012, the Pilates and Yoga Studios Industry was the fourth-fastest-growing industry, next to For Profit Universities and 3D Printers. 2013 continued that growth as yoga grew for its eighth straight year to become a $6.9 billion industry.

2014 will continue strong growth as studios continue to expand into new regions of the country. Furthermore, men and baby boomers will continue to drive growth as they aspire to become yogis.

In the next five years, as unemployment goes down and discretionary spending goes up, studios will see an average of 3.8% revenue growth to a total market value of $8.1 billion by 2018.

The Road to 2013: Recession Resistance
According to a study titled Yoga in America by Yoga Journal and Sports Marketing Surveys USA, from 2008 to 2012, yoga participation went from 15.8 million to 20.4 million — a 29 percent increase. With more participants came more studios (21,616 in 2008 to 26,610 in 2012, a 23% increase), more clothing sales ($1,04 billion in 2008 to $2.23 billion in 2012) and more overall spending on Yoga products ($5.7 billion to $10.32 billion). Yoga and Pilates Studios was one of the few industries to grow both revenue and profits during the economic downturn.

“When consumers experience lower disposable income and high unemployment — they turn to activities like yoga and Pilates and the meditation associated with it. It grew during recession largely because of inexpensive group classes,” said Caitlin Newsom, industry analyst at IBIS World and author of a report titled Pilates and Yoga Studios in the U.S. Because of the downturn, many studios moved away from the traditional “donation only” models to standardized payments.

Price Standardization and Reaching New Audiences Leads to Even Higher Margins and Revenues
By the end of the year, studio profit margins will increase to 12.7 percent and revenues to $6.9 billion. This growth is in large part fueled by three factors: Standardized pricing, geographic expansion of studios and rising demand from different gender/age demographics.

Moving away from donation models helped studios stabilize cash flow while also increasing margins. These new pricing models (based on class bundles or length of time — weekly, monthly, annually) invited more yogis to participate as lower priced group sessions gained popularity over expensive private lessons. And just like many other trends that start in the East and West Coasts, as revenue models matured, studios moved inland.

“Primarily studios have been in the West Coast and East Coast metro areas, but now, it’s moving to the Great Lakes, Midwest, South and expanding to new markets,” said Newsom. Still, studios will have to strategically locate themselves; only 13 percent of yogis are willing to drive more than 25 minutes to class. On the other hand, nearly half of yogis practice within the home. Apparel, equipment and yoga instructional companies will likely benefit most from the inland expansion.

The average yogi spent $526 on equipment, clothing, and instruction in 2012. While the majority of it was spent on instruction (DVDs, classes, retreats, etc.), $111 was spent on apparel and footwear. Many clothing brands have entered this space, largely marketing yoga apparel toward women. Some brands like Prana, Gramicci, and Gaiam have wisely targeted a growing demographic: men.

“The perception of yoga is changing in the West — it used to be perceived as an activity for women, but now doctors are prescribing it to male athletes for injuries,” said Richard Karpel, CEO of Yoga Alliance, a trade association for yoga practitioners and studios. Today, men make up less than 20 percent of yogis; however, the Yoga in America study showed that 47 percent of aspirational yogis (people who would love to try yoga, but don’t know where to start) are men. While it is unlikely that men will dominate the activity, they will continue to make up larger numbers of the overall yogi population.

Another interesting driver of growth will come from Baby Boomers. The Yoga in America study showed that the two fastest growing age segments of New Yogis will come from the 55-64 year olds and 45-54 year olds. Given yoga’s low-impact and therapeutic nature, boomers will enjoy yoga just as much as the next fastest growing segments — 18-24 year olds and 25-34 year olds.

The Next Five Years
As discretionary spending increases, margins and revenue will continue to grow. Revenues for studios are projected to grow 3.1 percent a year for the next five years to become an $8.1 billion industry by 2018. Margins will stretch to 13.2 percent over the next half decade as yoga reaches new areas of the country, men and baby boomers.

But perhaps, sustained long-term growth, just like any industry, depends on adoption of future generations.
“I raised my two kids in this country and they were introduced to yoga in school, “ said Rajashree Choudhury , founder of the International Yoga Sports Federation — a group that (among other things) aims to qualify Yoga Asana as a sport into the Olympics. “I have no doubt that yoga will become a mainstream sport in the next 10 years. The way it is progressing, I think it may happen sooner.”

(Caption: A Google Trends graph showing the rising number of searches for the term “yoga.” It should be no surprise that January is the most popular month for the term as people are researching New Year’s resolutions).