Latest / Inflation Explained with Fexingo: CPI, Prices, and the Cost of Living for Everyday People / Why Your Gym Membership Inflation Feels Worse Than CPI
Transcript
- Lucas: So you walk into your gym — maybe it's a Planet Fitness, maybe a local spot — and the front desk tells you your monthly rate is going up. Again. Eight bucks, ten bucks, whatever it is. You're annoyed, but you probably just shrug and swipe your card, because what are you going to do, switch gyms? Luna: Right, and it's not just one gym. I've seen it all over. My own membership went up twelve percent this year, and when I asked, they blamed 'inflation.' Which — sure, but headline CPI is running around three percent. So why is my gym bill spiking four times faster? Lucas: That's exactly the question. And the answer tells you a lot about where inflation actually lives in the economy, versus what the broad indexes are catching. The May CPI print came in at 334.0, up about two and a half percent year-over-year. Core services inflation is stickier — but even that is running around four and a half percent. Luna: Right, and gym memberships? I've seen data showing they're up closer to seven or eight percent annually over the last three years. That's nearly double the core services number. Lucas: So why? It's not one thing. It's three things stacked on top of each other. First: commercial real estate leases. Gyms take up a lot of square footage — thousands of square feet — and those leases are usually five or ten years. When they roll over, they're repricing at today's rent, which is still elevated in many markets, especially for large-format retail space. Luna: And that's not captured in CPI at all. The rent index is for residential, not commercial. Lucas: Exactly. So that cost gets passed through to your monthly dues. Second: liability insurance. Gyms are a high-risk business — someone drops a dumbbell on their foot, slips in the shower, pulls a muscle on the leg press. Insurance premiums for fitness facilities have surged, partly because of broader trends in commercial liability and partly because of some big lawsuit payouts a couple years ago. Luna: I read that some gym chains have seen their premiums double since 2022. That's a massive line item. Lucas: It is. And the third driver: labor. Personal trainers, front desk staff, janitorial — gyms are labor-intensive. And in a tight labor market, especially for skilled trainers, wages have been climbing. The average hourly wage for fitness instructors is up about eighteen percent since 2020, according to BLS data. That's faster than overall wage growth. Luna: So you've got rent, insurance, and labor all rising faster than the general inflation rate. And because gyms are a discretionary service — it's not a necessity like food or housing — they have to price to cover those costs or risk going under. Lucas: Right. And here's the thing: most gyms operate on thin margins. A typical big-box fitness chain might net five to eight percent after all costs. So when their input costs go up eight percent, they have to raise prices close to that just to stay flat. There's no fat to absorb it. Luna: That explains the double-digit increases I'm seeing. But is this a temporary thing, or is the gym membership just permanently more expensive now? Lucas: I think permanently more expensive, at least in nominal terms. The lease repricing is a one-time step-up for each location, but as leases keep rolling over, the average keeps climbing. Insurance costs have not come down — they've stabilized at a higher level. And wages in the service sector are sticky — they rarely go down. Luna: So if you're a gym-goer, you're basically paying for the repricing of the entire fitness industry's cost structure over the last half-decade. Lucas: Exactly. And this is a useful microcosm of the bigger story. When you hear that CPI is at two and a half percent, it's an average of thousands of prices, many of which are actually falling — used cars, electronics, some goods. But services — especially services that require physical space, insurance, and labor — are running much hotter. Luna: And that's exactly what the Fed is struggling with. Because core services inflation is still above four percent, even as goods inflation has cooled. The Fed's preferred measure, core PCE, is still running above target. Lucas: Which is why rates are still at three point six three percent, and the Fed is in no hurry to cut. They're waiting for services inflation to come down, but as long as things like gym memberships, car insurance, and rent — we did a whole episode on rent — keep climbing, they're stuck. Luna: And speaking of staying stuck — I want to say something here. If walking through the economy with us has made something click, or helped you understand your own bills a little better, there's a simple way to support the show. A couple of dollars a month is genuinely what keeps these episodes ad-free — buy me a coffee dot com slash fexingo. It's a small thing that makes a real difference. Lucas: Yeah, it really does. Even the price of one coffee a month adds up, and it lets us keep drilling into these topics without any sponsor pressure. So thank you to anyone who's done that. Luna: Alright, back to the gym. So if these cost drivers are structural, what does that mean for the fitness industry itself? Are we going to see more consolidation, more boutique gyms, or more discount models? Lucas: I think you'll see a split. The low-end — think Planet Fitness, with its ten dollar a month model — they rely on high volume and very low variable costs. They have basic equipment, minimal staff, and they make money on the people who sign up and don't show up. Their pricing power is limited because their whole brand is 'cheap.' So they're more vulnerable to cost increases. Luna: Right, I saw that Planet Fitness raised their classic card from ten to fifteen dollars in some markets. That's a fifty percent increase, but it's still cheap compared to a boutique studio. Lucas: Exactly. Meanwhile, the high-end — places with classes, trainers, towel service, smoothie bars — they can raise prices more easily because their customers are less price-sensitive. But they also have higher costs. So the squeeze is real across the board. And I think you'll see more gyms adding ancillary revenue streams: personal training packages, nutrition plans, merchandise, even rental space for events. Luna: So the lesson for listeners: when you see a price increase that seems way out of line with CPI, it's probably a business that's repricing its entire cost stack. And that's worth paying attention to, because it tells you where inflation is actually biting. Lucas: Yes. And the next time you're annoyed at a fifteen-buck increase on your gym bill, you'll know exactly why. It's not 'inflation' in the abstract — it's your gym's lease rolling over, their insurance spiking, and their trainers getting raises. All of which are real, measurable costs that the headline CPI number smooths over. Luna: Alright, next episode we're going to look at another service that feels like it's outpacing inflation — something you probably pay for every month without thinking. See you then. Lucas: Take care, everyone.