Equinox Group's Harvey Spevak on the future of the fitness industry

Equinox Group Executive Chairman & Managing Partner Harvey Spevak joined Yahoo Finance's Jen Rogers, Myles Udland, Dan Roberts, and Melody Hahm to discuss his outlook for the fitness industry and how the company has adjusted its business amid the coronavirus pandemic.

Video Transcript

MYLES UDLAND: We are joined now by Harvey Spevak. He is the Executive Chairman of the Equinox Group. Harvey, thanks for joining us today.

I would just start with, are any Equinox-- we'll start with the gyms, and we'll get into some of the other brands-- are any locations open right now? And as you guys think about reopening locations, what's your plan, as you have it right now? And we assume that things will change as we get closer to that date, but where do things stand with trying to get your gyms reopened?

HARVEY SPEVAK: So thanks for having me today. I think it's important to step back and first understand what we've done, and then I can address that more specifically. So our priorities early on when we closed back in mid-March was to protect our people.

And I'm very proud that the majority of our employees, particularly our personal trainer-- fitness instructors are still being paid by the company. I think that's very unique to not just the fitness industry, but just, you know, those categories that are the hardest hit, where you have zero revenue, whether that be hospitality, F&B, retail, what have you. I think we stand out in terms of how we protected our people.

And then, of course, we went to preserving our cash. And we've spent a big chunk of the last 30, 45 days focusing on how to stay engaged with our members and our community. And we've done that through our digital offerings, whether it be through our virtual personal training or Variis, which is the first of its kind multi-branded, multi-modality digital platform that we're really excited about.

Moving forward, now, obviously, we're spending a tremendous amount of time on reopening. We have nothing open today, whether it be an Equinox fitness club, a SoulCycle studio, or a Blink Fitness. And I've publicly stated that we're not going to rush to open up. We're going to do what's prudent in protecting our community, both of our employees, our members, our riders, whatever it may be.

And so right now, we have nothing open-- opening. We're working with local guidelines. This will vary by market in terms of how we open. But we're also working with our team of experts, infectious disease experts, who are helping guide us in terms of what that opening's going to look like.

So you're going to see, from Equinox, a new standard, what we call the Equinox standard. We've always been recognized for our standards around cleanliness and safety, but we have a whole new standard that takes it to a much more advanced level that we think is a big part of our responsibility. Our members, our community, our riders trust us, and so we take that very seriously. And so we're very focused on creating the safest environment possible for them.

MYLES UDLAND: And then I guess thinking about, you know, where the Variis platform fits into what Equinox looks like for the next couple of years, do you still-- I guess one, what's the engagement been like on that from your members? And two, how big a role do you think offline or out of location fitness, if that kind of makes sense, is going to play for your members in the next couple of years while, I guess, you're working with, you know, whether it's restricted attendance or new kinds of standards in terms of how many people can be in the building and in a class at one time?

HARVEY SPEVAK: So-- so we believe the future-- and I'll use the word the future down the road, and this is how we think we'll win big-- will be an offline-online combination. And so in the near-term, that we think a lot of our members will come back and our riders, day one. We've done some surveys, you know, 70-plus percent they said they would come back day one because, once again, they trust us.

If you look at guidance from Asia, six weeks after gyms and studios have been open in Asia, six weeks later, 85% of the typical attendance is back, which is staggering high. But we-- we were already executing against the vision that we started a year-plus ago, where we created this new company called Equinox Media to marry the physical with the digital, created an integrated online-offline experience, because we've always done a good job-- and Equinox Hotels is an example of this-- of anticipating where the consumer is going. So right now, there's tremendous demand, and that demand is accelerating for people who want to live a healthy lifestyle. But I think the future is going to be more about marrying the online and offline together, and that's where we're uniquely positioned.

MELODY HAHM: Harvey, I was chatting with an analyst earlier today, and he was saying that it was interesting to think about Peloton actually being seen as a downgrade from Equinox. So as people don't have access to the Equinox gyms right now, of course, they buy the hardware, but then that $39 a month is kind of easy to digest and swallow. Are you afraid that kind of that high-end luxury consumer is, you know, has a captive audience right now with Peloton, even though I know that SoulCycle has also released a bike?

HARVEY SPEVAK: Yeah, I mean, look, our early bike sales are very strong. We've accelerated the rollout of the bike. The feedback has been tremendous. We've accelerated the early release of the Variis app. We've got tremendous feed-- feedback there.

We initially launched some classes on IDTV and have had over a million views. So we're getting a lot of demand and a lot of excitement of what we're doing there. But at the end of the day, what we do is heavily physical. People want the community. And no matter what you do, and no matter how great the digital is, the community is being together.

And people are learning how to do it virtually right now, but there's a lot of pent-up demand. And I think that's why the surveys that I referenced before are demonstrating how our members, our riders want to get back in front of their instructor live. They want to be with their-- their best friend, their partner, their girlfriend, their boyfriend, their husband, whatever it may be.

They want to be together. And so while it might take time to get there, I think, ultimately, people want the physical and the digital. They want the complement, and that's where, I think, that we, in terms of our-- our leading brands and now Variis through Equinox Media, will continue to win and win big in the future.

DAN ROBERTS: Harvey, Dan Roberts here. Thanks for being with us. Just to play off this idea a little bit, you know, you mentioned mixing the physical and the digital. And obviously, a lot of gym chains right now with physical presences are also really focused on digital. And it's interesting to hear your optimism that people eventually will want to return to the gym.

I'm just curious to explore this idea a little further, because a lot of people think that even once the coast is clear, having lived through this time, people who used to go the gym maybe won't want to go anymore, even months and months from now. I mean, just to have that as a contingency plan, are you thinking about what Equinox would do if that trend emerges and that becomes the case? I mean, could you imagine closing some gyms [AUDIO OUT] and at times maybe [AUDIO OUT] would be more of a focus for the business than physical?

HARVEY SPEVAK: We don't-- we don't see it that way. I mean, we think that it might take time. There's a certain percentage of people that will not want to come back right away. But we think, as the data suggests-- and it's early, I'm surprised, quite frankly, of the data. There's a lot of unknowns here.

But we do think most people want to come back. Some will come faster than others. We've had many people demanding us to open as fast as possible. We've been very thoughtful in terms of how we're proceeding. I mean, we have the ability to open in Texas on the 18th. We're evaluating that right now, whether that's the right thing to do, whether we should lag a couple of days, a week, or what have you.

But ultimately, what we do is very much about the community and the live experience. And so there might be a period of time where it takes a while to come back, but we believe very strongly that it's a physical, digital world and, you know, on the Equinox side, we don't anticipate closing any locations. And if we do, it'll be more because of a specific situation in one market versus across our portfolio in the US, Canada, and the UK.

JEN ROGERS: Hey, Harvey. As you're making these decisions about opening, those first gyms that you do open, do you think there'll be temperature checks? Do you think people will be wearing masks? How will you deal with lines on equipment? How does all of that actually just work?

HARVEY SPEVAK: So I'm very proud. We created a task force many weeks ago working with the infectious disease experts. A lot of them are external consultants to the CDC. And we have a very comprehensive plan of how we're going to create a safe environment for our teams, and for our members, and for our riders.

And so there'll be things that we'll do around cleaning, and a higher-level disinfectant, and electric static sprays to create a safer environment and more deep cleaning and more thorough cleaning. We've always been recognized for our high standards, so we're going to take that standard, obviously, to another level. But we've also created health-- health declarations. So before you come in every day, you're going to declare that you're well.

We're going to do temperature checks of both members and employees. We will have PPE for our employees. We will ask our members to wear masks when they come in, not when they're rigorously working out, but then to wear the mask when they-- when they leave. There'll be certain aspects that you'll have to schedule in advance. So we'll be using our app, so we will ask you to schedule when you want to come in.

That will be a way how we can regulate how many people in the club at any given time. And so we're going to be doing a lot of things to regulate the density, to create social distancing. And you know, some of this, look, some of this will be permanent change. Some of this will be interim changes. But we're going to be very thoughtful, very comprehensive in terms of how we create a very safe environment to-- to protect our community of members and employees.

MYLES UDLAND: All right, well, I think some of the members of the panel disagree with me. I'll be first in line to-- I can see the Equinox from my seat right here. I'll be first in line to come back in when you guys are open. Harvey Spevak, Executive Chairman of Equinox, thanks so much for joining us today.

HARVEY SPEVAK: Thank you, and I look forward to having you back.