Monthly vs. Annual Gym Membership: Pros and Cons for Gym Owners

The gym membership market is expanding rapidly, with forecasts showing an increase from $48.5 billion in 2021 to $70.1 billion by 2031. Fitness business owners can take advantage of this growth by creating or promoting gym memberships. There are two popular subscription gym membership models:

1. Monthly
2. Annual

At first glance, these models might seem interchangeable — after all, does it really matter how often you get paid? However, your subscription type can significantly affect your business operations and customer behavior. This article explores the pros and cons of each membership model and offers tips for choosing the right one for your fitness business.

Monthly Gym Memberships: Pros and Cons

Monthly memberships are recurring charges that clients pay for access to fitness facilities. Some gyms charge their memberships at the beginning or end of each month, while others allow customers to choose their billing date.

Pros of Monthly Memberships

Monthly memberships offer the most flexibility for clients. This model allows customers to adjust their membership based on their budget and schedules. For example, a client might pay for a membership for January and February, then take March off while traveling. That way, they’re not paying for a membership they can’t use.

This model also attracts members who prefer low commitment. Many customers want to check out a new gym without being locked into an annual contract. Similarly, people who have never worked out before may prefer to start with a monthly membership as they develop their fitness routines.

For gym owners, monthly memberships offer a consistent revenue stream. These regular payments make it easier to handle financial emergencies. If your business experiences unexpected challenges — like a flood or broken equipment — you’ll have a steady cash flow to cover the expenses.

Monthly memberships also have more opportunities for upselling. You can easily promote new services each month when you send clients reminders to renew their membership. For instance, you could invite them to join you for a special goat yoga session or sign up for a discounted personal training session. This approach helps you diversify your revenue streams and keeps clients engaged.

Cons of Monthly Memberships

While clients often appreciate the flexibility of monthly memberships, this lack of commitment can lead to increased cancellations. You might experience sudden drops in membership during the holidays or in the spring when some customers abandon their New Year’s resolutions.

The fluctuating number of memberships can cause revenue instability. You won’t always know how much cash flow you’ll have each month until the actual payments come in. This unpredictability can make budgeting difficult and cause monthly stress while you wait to see how much you’ll earn.

Monthly memberships also have a higher administrative workload than annual ones. You’ll need to manage more frequent renewals and cancellations as customers adjust their subscriptions. The onboarding process also requires more effort because you’ll need to repeatedly add returning members to your system. These tasks can be time-consuming and may require hiring additional staff.

Annual Gym Memberships: Pros and Cons

An annual fee gym membership gives customers 12 months of access to your facility. This model typically requires clients to pay the full amount in a lump sum.

Pros of Annual Memberships

A gym annual membership model improves cash flow and provides more stable revenue for your fitness business because you collect upfront annual payments from customers instead of relying on monthly dues. It also makes budgeting easier because you can predict how much money you’ll receive over the year.

Members are also more likely to stay engaged if they’ve invested in an annual membership — after all, they don’t want their money to go to waste. This long-term commitment can increase retention rates and help you build a loyal customer base.

Plus, an annual membership gym has a lower administrative burden. Since customers pay for the entire year upfront, you’ll have fewer billing cycles and renewals to manage. Your team can use the time they save to focus on more exciting projects, such as launching new services or filming promotional Instagram reels.

Cons of Annual Memberships

The higher upfront price tag associated with an annual membership may deter customers on a budget or those still determining whether your gym is right for them. Fitness beginners, especially those who have never been to a gym before, may hesitate to commit to an annual membership.

Annual memberships also come with the risk of inactive members. Some people may stop attending your gym but retain their membership for the full 12 months. While you’ll still have their upfront payment, these absent members won’t contribute anything to your gym’s community. As a result, engagement may decrease over time as members drift away.

Additionally, annual memberships have fewer upselling opportunities. Because customers pay just once every 12 months, you’ll have limited chances to offer upgrades or extra services. This lack of interaction can make it challenging to promote new offerings throughout the year.

Choosing the Right Membership Model

There’s no one-size-fits-all approach to gym memberships. The fitness industry is vast and serves a wide range of customers, so what works for one business may not work for yours.

Considerations

Here are a few things to keep in mind as you decide between monthly and annual memberships:

Customer demographics 

Analyzing your existing customer base will help you understand their membership needs. Does your business attract a lot of fitness beginners or budget-conscious customers? These groups often prefer the flexibility of a monthly membership. On the other hand, committed fitness enthusiasts may appreciate an annual membership's reliability and cost savings.

Cash flow needs 

Take a close look at your business’s finances. If you need a predictable revenue stream, annual memberships provide the most stability, but you won’t get paid as frequently. By contrast, monthly memberships offer a more consistent cash flow. While this income can fluctuate, it allows you to reinvest in your business throughout the year.

Competition

Check out local competitors to see which models they’re offering. If most gyms only offer annual memberships, you could distinguish your brand with convenient monthly subscriptions or vice versa.

Upselling opportunities 

Some businesses are constantly experimenting with new offerings, such as adding a new cycling class one week and hosting a wellness workshop the next. Monthly memberships can help you upsell these services to your clients and grow your bottom line.

Hybrid Model Option

Are you still torn between annual and monthly subscriptions? Get the best of both worlds with a hybrid model. This approach caters to more customers by letting them choose the best memberships for their budget and needs.

Many businesses offer discounted annual memberships to encourage longer commitments. For example, you might offer a $40 monthly membership or a $400 annual one, allowing customers to save $80 by paying for an entire year upfront. This pricing strategy rewards loyal customers and can boost retention rates.

Tips for Testing

You don’t need to commit to a membership model right away. Consider testing each model to see which one works best for your business.

Start by creating a one- to two-year pilot program. Let your customers choose between annual and monthly memberships, and collect engagement data throughout this period. This strategy will help determine which model leads to the most active and happy members.

Pay attention to your financial situation during this period, too. Track how each model affects your budget, cash flow, and profits. Use this data to assess which option will provide your gym with the most financial stability.

Enhance Member Retention With Fitness On Demand

Both annual and monthly memberships have benefits and drawbacks. As you weigh your options, consider your business goals and customer preferences. You should also factor in your cash flow needs to make sure your chosen model will support your business year-round.

No matter which model you choose, Fitness On Demand can help you provide more value for your clients. Our accessible platform offers over 1,500 on-demand classes for different fitness levels, community challenges, and other services. These offerings will improve your retention rates and boost engagement.

Request a demo to learn more.