“If you want to train in the 5-p.m. class, the rate is 20 percent more.”
Can you imagine saying that to a client?
I can’t.
But according to the Wall Street Journal, an increasing number of businesses are using “surge pricing” to maximize their revenue during peak hours.
You can read the WSJ article here (it might be paywalled for some users): “$418 for Bowling? Surge Pricing Creeps Into Restaurants, Movies, Gym Class.”
The short summary: Businesses such as bowling alleys, movie theaters, restaurants, internet providers and even gyms are charging a premium during prime time.
Surge pricing, also called “dynamic pricing,” is more common in the transportation, utility and tech industries. For example, Uber users pay increased rates at very busy times. Airlines have long adjusted the prices various people pay to get to the same location—think seat sales and first class vs. coach. In some areas, you’ll pay more for electricity during peak hours, and internet service providers such as Starlink will add overage charges when you hit your limit of peak-period data.
According to the Washington Post, airlines have gone even further with “dynamic pricing” as technology allows what we might call “cyber stalking” of consumers: “It prices the tickets according to what the airline knows about you, including your ability to pay more—or less—for the ticket.”
You can see how that plan would maximize profit but provide many, many opportunities for gouging. In fact, the Post suggests using browser “incognito modes” and virtual private networks—VPNs—to reduce the risk of paying too much as companies track your browsing and spending patterns.
The upshot of ever-changing prices and all the cloak-and-dagger stuff: Consumers have every opportunity to get suspicious when prices are inconsistent.
Surge Pricing in Gyms
So how does surge pricing work in gyms?
The WSJ article featured a Philadephia woman who used ClassPass to book training sessions. When she noticed constantly changing prices, she quit using the system.
“ClassPass said it has made changes to its platform and dynamic pricing since then, and said ‘the idea of dynamic pricing is simple: classes in high demand can be sold at a premium while a class with many open spots might need a temporary price drop to drive up attendance,’” Harriet Torry reported.
As a longtime gym owner, I can see a temptation. Our noon and 4-p.m. classes had great attendance, but our other slots were never near capacity. It would have been great to have generated more revenue per person during peak hours.
But that’s just looking at the surface. If I dig deeper, I see a lot of problems.
Problems With Surge Pricing in Gyms
If you’re going to charge more at peak times, you might need to reduce prices to encourage people to come at slower times. You could end up back at even financially—or even underwater—if you aren’t careful, but you’d likely have new problems such as client confusion and irritation.
“Why did I get billed an extra $5 for the Wednesday class?” Who wants to deal with that message? Not me.
I’d also expect outright anger from a few people, and that’s not good for business. Indeed, most articles on surge pricing feature someone who’s mad about it, from the birthday-party-organizing dad who feels gouged by the bowling alley to the woman who just wants to see a movie at 7 p.m. without paying an extra fee.
You might even cheapen your brand by presenting some slots as “discounted sessions.” (We know discounts kill gyms.) “Bargain-basement training,” even for an hour a day, just isn’t a good look for any fitness business that offers high-value coaching services.
Further, surge pricing would only work if you constantly had maxed-out classes and waiting lists at peak times. I’d suggest those waiting lists would become a problem in short order even without surge pricing. But in my personal experience, maxed-out classes and waiting lists are rare in microgyms.
Two-Brain data backs that up. According to our 2022 “State of the Industry” report, average class attendance is 6.6. This figure is well below actual max capacity in the majority of gyms. You can train 4-5 people in 500 square feet if you’re creative, and the average size of gyms in our report was 5,220 square feet—more than enough for 7 people, or even 17.
Don’t Guess. Consult an Expert
With all that in mind, surge pricing seems very risky in a coaching gym. At best, it’s inferior to a host of other ways to generate cash quickly.
Further, Two-Brain has long recommended service businesses focus on consistency when it comes to pricing. Discounts, legacy rates and special deals have sunk many fitness businesses, and our data shows gyms become stronger when carefully set rates are standardized across the board, not adjusted from hour to hour.
Two-Brain has a solid, tested, plug-and-play plan to get the right rates in place so gym owners don’t have to resort to unproven tactics that might damage their businesses. If I were really struggling to reach my revenue goals at the gym, I’d consider a precisely calculated rate increase way before I’d spin the wheel and take risks with dynamic pricing.
But surge pricing is out there now, and you’re going to run into it as a consumer. As a business owner, you might even be tempted by it.
The best plan? Discuss any big changes with a mentor who can lay out the pros and cons and help you make the right decision for your clients and your business.
