Virtual workouts ‘seem to be subsiding’ as more people return to gyms: Mindbody CEO
Mindbody and ClassPass CEO Josh McCarter sits down with Yahoo Finance Live to discuss late-pandemic consumer trends in the health and wellness space, enhancing customer experiences with various services, and the company's outlook.
- Welcome back, everyone. Lots of us made fitness-related pandemic purchases. Some of us ended up regretting it. But now that we're out and about again, how is the fitness industry keeping up? For more on this, let's bring in Mindbody, and ClassPass CEO Josh McCarter. Josh, thank you for joining me today.
So as I mentioned, a lot of us returning to work, got hybrid work schedules, people trying to get back in the gym. What sort of demand are you seeing now versus pre-pandemic?
JOSH MCCARTER: Well, we're definitely seeing a resurgence in demand. About 83% of consumers now are booking in-person classes, so that's really great news for a lot of the small and medium businesses that serve the market that were closed due to restrictions over the last couple of years. We're also seeing that virtual seems to be subsiding quite a bit even though people still have a hybrid approach. They might work out one time virtually a week rather than four or five times like they used to during the pandemic.
- Well, it's interesting because you talk about consumer habits really changing during COVID as the gyms were closed, 40% of people paying for virtual workouts from companies and businesses they've never actually set foot in. So what are the key trends that you see really shaping the future of wellness and fitness?
JOSH MCCARTER: Well, there's definitely a lot that's happening. Right now, it's just coming back into the physical spaces. We certainly have seen the trend with boutique fitness that Mindbody has really been part of and supported that industry ever since its inception in the early 2000s. And so we do see a move away from the larger-format gyms into more boutique fitness, whether that's spin or yoga or Pilates. That market still seems to be growing nicely.
The other part of wellness that we're seeing is a lot more that's around integrative wellness, so companies like Restore that are offering IV therapies or red light therapies or cryo. That's something that people are really leaning into because of the opportunity to improve their wellness and improve their resilience against diseases like COVID.
- And you raise an interesting point, because it really does speak to the broadening definition of what comes under wellness these days. You mentioned beauty. There's also mental health, things like red light as well. How is that impacting where you see the growth opportunities ahead?
JOSH MCCARTER: Yeah, well, it starts with how the consumers think about wellness. And we say that COVID really created this global wellness imperative where people think about wellness differently. 80% say that wellness is more top of mind than ever. And as part of that, one of the things that we found in our 2022 Wellness Index Survey where we surveyed 16,000 people, so this was a big survey-- we found out that 50% are thinking and saying that mental wellness is the most important part of their overall total wellness.
And so as we see that now, more and more people are thinking about things like meditation and also those type of practices that can help them with their stress management and with their mental health. And so we think that services around that area will continue to grow.
- And so a lot of people are wondering-- you have this tight labor market, a lot of people trying to see which companies have the best, perhaps, perks in terms of wellness. How much growth do you expect from some of these companies looking to add perks like this? And what's the demand looking like for that?
JOSH MCCARTER: Yeah, it's a great question. And it's certainly something that we've seen with what is called corporate wellness and more folks that are leaning into that. We acquired a company last year called ClassPass. It's really like an alternative wellness membership product. And they have a corporate wellness program. And that has been growing by leaps and bounds, especially as businesses aren't seeing consumers or their employees coming back to the offices.
Where in the past, they might have had a gym or they might have had on-site wellness services, now they're thinking about how do they deliver those wellness services in the markets where their employees live. And so that's been something that we've seen really-- it's been escalating over the last couple of years. And I think it's going to be an increasing trend.
- Now, obviously, with inflation still stubbornly high at about 8.3%, people are having to make some tough financial choices. Can they afford some of these extra services, some of these wellness services? How concerning is that for you?
JOSH MCCARTER: Well, it is concerning on one level. But on the other side, again, of our business with ClassPass, that really is a model that allows somebody to buy, effectively, a discounted service and be able to go to multiple different properties to redeem, effectively, points that they get in exchange for their membership. And so that's something that we've seen actually a nice increase on that side of the house where people are thinking about having different modalities being able to tap.
And maybe one week, they want to go to a Pilates or yoga, and then the next week, they want to go get a massage. And so being able to offer those type of services at a discount, I think, is really where the market is going right now. And that's one way that we can help more consumers get into the broader wellness industry.
- And speaking of expanding in the industry, you launched Mindbody Capital to give the wellness business better access to funding. How is that different from what's already out there? What are your goals with this?
JOSH MCCARTER: Yeah. Well, during the pandemic, we stayed really close to our customers and really listened to what they were looking for. And one of the things we did is we gave $15 million of fee relief out to really help them as they were navigating it. But a lot of these small businesses didn't have the opportunity to tap into the federal aid that was available to larger businesses.
And so what we heard time and time again is, it's too hard for me to get a small business loan. It's too hard for me to get a loan from my bank. And so what we did was we identified a partner that we could work with that would offer loans effectively through our platform to these businesses. These are no-recourse loans because we're able to see the transactions that are happening day in and day out through the point of sale and through the merchant processing across our platform.
And so that enables us to give them a pre-approved offer ahead of time. It's very transparent in what the payments will be. And in many cases, we already see people that have taken down one loan, paid it off, and then applied for a second one. And we've already been able to grant more than $4 million of loan loans. And this is just a product that launched a couple of months ago.
- Well, certainly great success you're seeing there. I do just quickly want to ask you, because we're running out of time-- plans for an IPO-- what are we expecting?
JOSH MCCARTER: Yeah, not any plans right now. I think that we're just focused, really, mostly on integrating Mindbody and ClassPass, and then also really helping the industry get back on its feet. It's been a brutal two years for the wellness industry. And we were fortunate with the ClassPass acquisition to also secure a $500 million in Financing we've got some great private equity firms that are behind us. And really looking at trying to just integrate the businesses and help the industry rebound after a couple of tough years.
- And certainly, we could all use some better health at this time. Thank you so much mind, Mindbody and ClassPass CEO Josh McCarter. Thank you.