The Company

✦ Ready to go back to the gym?

✦ Ready to go back to the gym?
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By
Michelle Cheng
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Not too long ago, the idea of hopping from one fitness class to another—from barre to pilates to cycling—had widespread appeal. Gym-goers were tired of the high fees charged by boutique fitness studios and gym memberships that made it nearly impossible to quit.

In 2013, a 27-year-old former-dancer-turned-consultant decided to capitalize on those motivated, versatile, and non-committal exercisers. Payal Kadakia founded ClassPass, an app whose users pay a monthly subscription fee that lets them attend classes at a wide variety of local gyms and studios. The idea ultimately took off in 30 countries and with 30,000 studios and 5,000 beauty partners.

Then the pandemic hit. In March 2020, when gyms around the world closed virtually overnight, ClassPass paused subscriptions, and average weekly revenue dropped 95%. Mingling with varying permutations of sweaty strangers in enclosed spaces had become a liability.

Today, ClassPass is one of many companies trying to figure out the future of fitness, a resilient industry that was still rocked by Covid’s impacts on where people work out. That future is already looking more flexible, from home workouts to shifting schedules—at one point last year, noon became ClassPass’s most popular workout time—to fitness equipment companies like Peloton and Mirror entering the mainstream. Even traditional gyms are settling into a hybrid approach that mixes in-person workouts with virtual classes.

Where does that leave ClassPass? CEO Fritz Lanman, who still speaks reverently about exercising IRL, says that since June 2021, 90% of the company’s customers are back to active subscriptions—i.e. they get charged for them. “We believe the key to living a really fulfilled, inspired life is having these real world experiences with people you care about,” Lanman says.

But the company is also hedging its bets, expanding into wellness and beauty—picture ClassPass for the spa—while also digging into corporate wellness programs with partners like Amazon, Google, and United Airlines. Lanman is also plotting expansion to non-coastal cities, particularly following an explosion in movement to the suburbs. Currently, half of Americans are near at least five ClassPass-affiliated studios.

By the digits

$1 billion: ClassPass’s valuation, according to PitchBook, a market research firm

95%: Year-over-year decline in average weekly revenue in March 2020

25%: US gyms that closed permanently during the pandemic, as of July 1

$29.2 billion: The US fitness industry’s lost revenue between March 2020 and June 2021

$820: Price tag for 25 classes at New York City’s Barry’s, a cult-like HIIT workout studio

$199: Price tag for 100 credits to book up to 35 classes on ClassPass 

ClassPass as poster child

The future of fitness isn’t the only trend relevant to ClassPass. The eight-year-old startup taps into a number of budding convictions about the new digital economy.

  • Digital subscriptions. You might say gym memberships are the original subscriptions, but companies like Netflix and Substack are also increasing our comfort with recurring payments. The subscription economy is expected to grow to $1.5 trillion by 2025, UBS estimates, from around $650 billion today.
  • Platform middlemen. ClassPass’s appeal is the convenience of not being attached to one studio, but the low prices can have a negative impact on the studios themselves. Clashes between ClassPass and small business owners have already resulted in the end of its unlimited model, and the launch of peak pricing. For many merchants, the biggest appeal is marketing, but as these companies, which depend on networks, continue to grow, it becomes difficult for merchants to push back.
  • Merger mania. ClassPass has reportedly had merger talks with Mindbody, which makes appointment-booking software used by gyms and salons, and can help cut costs and scale the subscription-based fitness business.
  • Grandiose ambitions. Lanman says ClassPass is more than just a product, and he’s not alone in that dream; Peloton’s CEO describes his fitness outfit as “a media company that changes lives, inspires greatness, and unites people.” Uber, Airbnb, DoorDash—are you even an app if you aren’t also a world-changing community-building experience?

Brief history

2011: Looking for a break from corporate life, Payal Kadakia is browsing for a new dance class and wonders if she can make the process easier. She creates a 30-day discovery pass for trying different boutique gyms, but the studios aren’t happy, as people keep gaming the system.

2013: ClassPass launches with a $99 monthly subscription to any fitness class. The model ultimately goes through a few iterations on pricing and the number of classes allowed.

March 2017: Kadakia steps down as CEO, transitioning to executive chairperson, and Fritz Lanman, a ClassPass investor and then executive chairman, steps into the role of CEO.

February 2018: ClassPass expands into beauty and wellness treatments in select cities, including massages and manicures.

March 2018:  After ending its unlimited plan in 2016, ClassPass iterated through two years of different packaging and pricing plans. ClassPass subscribers can now purchase a monthly allotment of credits to use towards any “experience” on the platform.

April 2018: ClassPass moves its headquarters from New York City to Missoula, Montana, in part due to wage inflation.

July 2019: ClassPass expands to corporate partnerships, signing on partners like Google and Morgan Stanley.

December 2019: ClassPass launches in Brazil; South America becomes its fifth continent. 

January 2020: ClassPass reaches $1 billion in valuation.

Competitive analysis

We asked Lanman who he sees as ClassPass’s primary competition:

  • SoulCycle: People love the mantra-driven, cult-like cycling business, which is owned by Equinox and valued at more than $900 million, in part for its strong community.
  • Peloton: As more people turn to working from home, cycling on a $2,000 bike at home sounds more appealing than ever.
  • Netflix: ClassPass sees “Netflix and chill” as a threat to working out (which, same).
  • Airbnb: With the short-term rental company building up its experiences business, Airbnb could come into competition with ClassPass.

5 unique ClassPass classes

Here are some of the quirkier options available in some ClassPass areas:

💃  House of Pole (Copenhagen): The studio offers pole dancing, pole fitness, dance, aerial hoop, aerial silk, and flexibility sessions for all experience levels.

🏄‍♀️  SurfSET (New York): A studio where you can do yoga or weights on a custom-made surfboard design to mimic the instability of being on water.

🌊  Aqua Studio (New York): A cycling class taught in four feet of water, where classes pair high-intensity cardio with salt water.

🤸‍♂️  JaneDO (New Jersey): Studios that offer full body workouts on trampolines.

🎈  Skyline Aqua (Singapore): In this studio, you can do an intense workout on a floating exercise mat.

Keep learning

Thanks for reading! Don’t hesitate to reach out with comments, questions, or companies you want to know more about.

Best wishes for a healthy end to your week,

Michelle Cheng, reporter (ClassPass and Barry’s enthusiast)