From warehouse clubs to third-place clubs: market structure, demand dynamics, and the economics of the membership business model.
This report has been prepared by Value Masters Academy on behalf of A Level Alliances for the information of the named recipient only. It is confidential and may not be reproduced, distributed or quoted, in whole or in part, without prior written consent.
This report does not constitute investment advice, legal advice, tax advice or accounting advice, and is not an offer or invitation to buy or sell any security. Value Masters Academy is not an investment bank, broker-dealer or licensed investment adviser and does not act in those capacities. No agency or fiduciary relationship arises with the recipient.
Information has been compiled from publicly available sources and has not been independently verified. Market-size estimates diverge materially between providers; those divergences are shown as ranges rather than concealed. Pricing data rests on statements reported in the press, since most clubs do not publish their fees. Unit-economics work is illustrative and is not a projection. The recipient should conduct independent diligence and consult its own advisers before taking any commercial decision.
The United States has turned selling membership from a business model into economic infrastructure. A consumer now buys shopping (Costco, Sam's Club, Amazon Prime), health (the health club), work (co-working), social life (the private members' club) and increasingly rest (the social wellness club) as separate subscriptions.
The core proposition of the Atmosphere membership philosophy — that a fee is not a barrier but a signal of commitment — is broadly consistent with the market evidence. Two qualifications are required. First, the commitment a fee produces is formed at entry; sustaining it is a function of frequency of use. Costco's renewal rate is arithmetic rather than sentimental. Second, in the young cohort a fee is assessed as a budget line before it is felt as commitment: 41% of Gen Z respondents report spending more on subscriptions than they can afford.
The right question is not "what should the fee be" but "can we build a rhythm in which the member feels the fee returned several times over within the first ninety days." Belonging begins with a fee. It is not preserved by one.
The study treats the US direct-to-consumer membership market in five layers. Scope is deliberately broad: the competitive set is not only comparable clubs but every subscription competing for the consumer's monthly membership budget.
Three data tiers are used: reported financial and operating metrics of public companies; annual research by trade associations; and commercial research providers together with pricing statements reported in the press.
Table 1 — Definitions used throughout
| Term | Definition |
|---|---|
| Membership | A periodic charge for access, standing or inclusion, independent of volume of use. Distinct from per-transaction and per-usage payment. |
| Initiation fee | A one-off, usually non-refundable charge on admission. A selectivity signal and a means of pulling cash flow forward. |
| Non-dues revenue | Additional in-house spend by the member: food and beverage, services, events, guest passes, retail. |
| Renewal rate | Share of members renewing. The "tenured" version measures members past their first year and is the more meaningful figure. |
| Third place | A levelling social setting outside home and work where voluntary, regular gathering occurs (Oldenburg, 1989). |
| Share of wallet / share of week | The operator's share of the member's category spend or free hours. More explanatory than member count where multiple memberships are held. |
Source: Value Masters Academy definitions; Oldenburg (1989).
The distinction between layers is what the member is buying: saving, access, or identity. That distinction determines pricing, renewal behaviour and the capital intensity required.
Table 2 — Layer map of the US membership market
| Layer | Representatives | Typical price | What is bought | Economic logic |
|---|---|---|---|---|
| I. Utility / warehouse club | Costco, Sam's Club, BJ's, Amazon Prime, Walmart+ | $65–139 / year | Saving and convenience | The fee subsidises a thin retail margin. Payback is measured in weeks; renewal is arithmetic. |
| II. Digital subscription | Streaming, music, gaming, software, AI tools | $10–30 / month | Content and function | Zero marginal cost, zero physical friction. The most easily cancelled layer; consolidation pressure sits here. |
| III. Health and fitness club | Planet Fitness, Crunch, Life Time, Equinox, boutique studios | $15–300+ / month | Access and habit | High fixed cost, over-subscription against capacity. Value rises linearly with frequency. |
| IV. Workspace | IWG/Regus, WeWork, independent operators | $225 / month (median) | Space and infrastructure | Real-estate arbitrage: long lease, short membership. Below a critical occupancy the model fails. |
| V. Social / private club | Soho House, Zero Bond, Casa Cipriani, Core Club, Aman Club; social wellness clubs | $2,750–15,000+ / year (plus initiation) | Identity, network, exclusivity | Manufactured scarcity. Value derives from those not admitted; growth in capacity degrades the product itself. |
Source: Value Masters Academy analysis; company disclosures, CoworkingCafe (2026), reported pricing statements.
Atmosphere occupies the intersection of layers III, IV and V. That intersection is the fastest-growing and operationally hardest part of the market: the model carries the cost structure of all three — the capital intensity of a sports facility, the real-estate burden of an office, the service intensity of a club — while charging the member a single fee. Where the model works, the common factor is that non-dues revenue becomes the principal lever. The clearest scaled US expression is Life Time, which describes itself as a "premium athletic country club" and takes its growth from in-club spend rather than member acquisition.
An essential caution: the figures below rest on different definitions. The retail membership line measures fee revenue only; the health club line measures total sector turnover; the co-working line measures physical supply rather than revenue. The rows cannot be added.
Table 3 — US market scales by segment (2026)
| Segment | Scale | Growth | Structural note |
|---|---|---|---|
| Paid retail membership fee revenue | ~$61.4bn | Double digit; ~10.8% YoY estimated for 2025 | Amazon Prime 68.4%; Costco 9.0%; Walmart+ 5.2%; Sam's Club 4.6%; BJ's 0.9%. |
| Health and fitness club sector | ~$47bn (turnover) | 2021–26 CAGR ~3.6–3.7% | ~108,000 businesses. 81m members, 26.1% penetration; 100m+ users including day passes. |
| Consumer fitness spending intent 2026 | ~$60bn | Rising | 86% of Americans consider facility access important to their 2026 goals. |
| Flexible workspace | 166.4m sq ft / 9,384 locations (Q2 26) | Locations +2.7% QoQ; area +1.5% QoQ | Only 2.34% of total office stock. Top five operators hold 2,184 locations; the remaining ~77% sit with independents. |
| Private social clubs (global) | ~$25.8bn (2027 estimate) | ~11.2% CAGR 2022–27 | US demand is geographically concentrated; New York is decisive. |
| Social wellness clubs | No discrete measurement; early stage | Venture and private-equity backed | Priced in a $51–375 monthly band. |
Sources: eMarketer/commercial compilations; IBISWorld; HFA 2026 US Health & Fitness Consumer Report; CoworkingCafe Q2 2026; Empower/YouGov (January 2026). Not additive.
(i) The fee pool is dominated by a single player. More than two-thirds of it going to Amazon Prime shapes the consumer's expectation of what a membership is: immediate, measurable, continuous benefit. A third-place club prices against that expectation whether it wishes to or not. Prime's reach among US adults fell to 54% in June 2025 and recovered to 64% by May 2026 — evidence that even here membership is not a given.
(ii) Physical membership is more durable than digital. Consolidation has begun in digital subscriptions, with 59.9% of consumers holding at least one they never use. Physical facility membership, by contrast, is at a record. The difference is friction: cancelling a digital subscription takes two clicks and no one notices; leaving a club means leaving a community. Social cost is the strongest cancellation barrier there is.
(iii) Co-working supply grows; profitability is selective. Average site size is falling (17,728 sq ft in Q2 2026), indicating a shift toward smaller, neighbourhood-scale operators. Industry surveys put roughly half of operators in profit, rising to about two-thirds in cities above one million people and falling to around one in five in small towns. Scale and urban density are the primary determinants.
The strongest variable behind structural growth in membership demand is sociological rather than economic. The 2024 Harvard survey reports 67% of adults experiencing loneliness attributed to not belonging to a meaningful group. The WHO Commission on Social Connection reports that 13–17 year-olds have the highest loneliness rate globally at close to 21%.
The gap is commercialising quickly. Run clubs formed the first wave; Strava reported clubs on its platform reaching one million in 2025, with running clubs growing 3.5x and hiking clubs 5.8x. The second wave was sauna and cold-plunge clubs promising alcohol-free, phone-free sociability. The third wave is the paid, premises-based version of both.
The demand is not for "somewhere to exercise." It is for a safe place with known rules where the same people are met regularly. Sport, workspace or sauna is the carrier of that demand; it is not the product.
Adults aged 18–24 hold the highest US facility penetration at 35.5% and accounted for roughly half of all new joins in 2025 — while posting the highest churn at 54.4%, against 26.5% in the 65+ cohort. Two tendencies sit underneath: health spending has moved into the essential category, partly displacing nightlife and alcohol; and budgets are fragile, with 41% of Gen Z reporting subscription spend above what they can afford and 40% cancelling and resubscribing within six months.
Table 4 — Generational behaviour and design implications
| Cohort | Behavioural signature | Exposure | Design implication |
|---|---|---|---|
| Gen Z (18–24) | Highest penetration; ~half of new joins; high community and digital expectations | 54.4% churn; price sensitivity; pause-and-return | Low entry threshold and a freeze option; ritual-based programming; early attachment to the social graph. |
| Millennials (25–40) | Highest total subscription spend; portfolio approach to multiple memberships | Systematic under-estimation of spend; consolidation pressure | Bundling and single billing; depth in non-dues services; family and partner membership. |
| Gen X and above | Lower penetration, longest membership life | Exclusion if programming is built only for the young cohort | Differentiated morning bands; longevity services; use as a referral source. |
| 65+ | Fastest-growing cohort (+8.6% YoY); churn only 26.5% | Neglect in capacity planning | Economically the most efficient user of daytime capacity; the most valuable segment on margin. |
Sources: HFA 2026 Consumer Report; ABC Fitness Wellness Watch; Deloitte Digital Media Trends.
Different methods put total monthly subscription spend per person between $90 and $273; the common finding is that consumers under-estimate their real spend by roughly two and a half times. The memberships that survive the coming clean-up will be those whose cancellation costs the consumer not a service but a habit, a rhythm and a circle of people.
Price here is a statement of position rather than a recovery of cost. The width of the range — from $65 a year to a $200,000 initiation fee — shows that one word describes entirely different products.
Table 5 — US membership price architecture
| Format / example | Initiation | Periodic fee | Note |
|---|---|---|---|
| Costco (Gold Star / Executive) | — | $65 / $130 per year | US–Canada renewal held at 92.3% despite the September 2024 increase. |
| Amazon Prime | — | $139 per year | Held by ~64% of US adults (May 2026). The category's price anchor. |
| Planet Fitness | Low / promotional | ~$15 per month | Base fee raised 50% in summer 2024 with revenue growth intact; Gen Z its fastest-growing segment. |
| Life Time | — | Quarterly revenue per membership $993 (dues + in-club) | Not a pure fee; this is the essence of the model — much of the revenue comes from in-club services. |
| Co-working (US median) | — | $225 per month; $30 day pass | Meeting rooms ~$45/hour; virtual office ~$159/month (Q3 2025 medians). |
| Social wellness clubs | $0 – 500 registration | ~$51 – 375 per month | Othership, Remedy Place, Heimat, The Well. The band institutional capital has just entered. |
| Zero Bond (New York) | $750 / $1,000 / $5,000 by age | $2,750 / $3,850 / $4,400 per year | Age-tiered pricing; one of the few clubs publishing a rate card. |
| Casa Cipriani (New York) | ~$2,000 | ~$3,900 per year | Reduced tier under 30; figures rest on press reporting, not disclosure. |
| Core Club (New York) | $30,000+ first year, all in | — | Candidacy requires nomination by an existing member. |
| Aman Club (New York) | ~$200,000 | ~$15,000 per year | The top of the range; the product is exclusivity itself. |
| Casa Cruz (New York) | ~$250,000 – 500,000 | — | International ultra-wealthy segment. |
Sources: company disclosures; CoworkingCafe (Q3 2025 medians); reported membership pricing (2025–2026). Undisclosed prices are indicative and subject to change.
Assessments from inside the New York market indicate that clubs at the top (whose members are price-insensitive) and accessible formats at the bottom are healthy, with pressure concentrated in the middle, which can compete with neither on exclusivity nor on price. A further observation from the same market is more cautionary still: the remark from within the industry that everyone is competing for the same 4,500 people suggests demand is shallower than it appears. Members commonly hold several club memberships at once. The operational consequence is that member count is a misleading metric; the right measure is what share of a member's non-home, non-work hours are spent on the premises.
Results in the first half of 2026 show the US consumer separating by income. In the premium segment Life Time raised dues without losing demand, growing revenue 13.7% and net income 40.6%. In the mass segment Planet Fitness reported strong growth but a more cautious 2026 outlook, raising concerns about softening demand among lower- and middle-income members. Premium positioning is at present more defensible than mass positioning.
What distinguishes membership revenue is that its marginal cost is near zero and the cash arrives before the service is delivered.
Table 6 — The leverage of membership revenue: Costco
| Item | Value | Comment |
|---|---|---|
| Net sales (FY2025) | $269.9bn | +8.1% YoY |
| Membership fee revenue (FY2025) | $5.32bn | +~10% YoY; ~1.9% of turnover |
| Operating income (FY2025) | $10.38bn | Fees equate to ~51% of operating income |
| Paid households (Q3 FY26) | 82.9m | +4.1% YoY |
| Executive members | 41.2m | About half of paid memberships; ~73–74% of worldwide sales |
| Renewal rate (US/Canada) | 92.3% | Held through the fee increase |
| Executive member annual spend | $4,629 / 36 visits | Standard member: $2,252 / 21 visits |
| Fee as share of spend | ~2.8% / ~2.9% | Payback completed within the first one or two trips |
Sources: Costco financial reports (FY2025, Q3 FY2026); Numerator retail loyalty analysis (2026).
Costco's 92% renewal is often attributed to brand loyalty. The more accurate explanation is arithmetic. The psychological effect of a fee — the effort-justification mechanism described by Aronson and Mills — operates at the moment of joining; what decides renewal in month twelve is how many times the member felt a return over the preceding twelve months. In a club visited four times a month the fee is never questioned. In a club visited once a month, no philosophy document will save the renewal.
Life Time grew memberships to 860,041 in Q2 2026, up only 1.2%, while average revenue per membership rose 11.8% to $993 and total revenue rose 13.7%. Full-year 2026 guidance is $3.30–3.33bn of revenue and $910–925m of adjusted EBITDA.
Growing member count by 1% is easier than growing revenue per member by 10% — and far less valuable. In a capacity-constrained third place, growth must be vertical, not horizontal.
Table 7 — Illustrative framework (fee indexed at 100)
| Component | Index | Basis |
|---|---|---|
| Annual fee revenue | 100 | Base |
| Non-dues revenue | 150 – 300 | In-club revenue is the principal source of growth in the Life Time model. |
| Total member revenue | 250 – 400 | |
| Variable service cost | (90) – (150) | Depends on food-and-beverage and service intensity. |
| Contribution per member | 160 – 250 | The pool covering fixed facility cost. |
| Member acquisition cost | 20 – 60 | Falls as referral share rises; the strongest available lever. |
| Average membership life | 2.0 – 4.0 years | At 85% renewal, ~6.7 years; at 55%, ~2.2 years. |
| Lifetime value / CAC | 6x – 15x | The expected range in a healthy membership model. |
Source: Value Masters Academy analysis; illustrative framework, not based on audited financials.
The critical sensitivity is that membership life is acutely responsive to the renewal rate. A fall from 85% to 55% cuts average life to roughly a third and erodes lifetime value in the same proportion.
Table 8 — Selected transactions
| Transaction / player | Size | Reading |
|---|---|---|
| Soho House & Co — take-private (consortium led by MCR Hotels) | $2.7bn including debt; $9.00 per share | Approximately an 83% premium to the unaffected price. Listed in 2021 at a ~$2.8bn valuation, the company returned to private ownership four years later. More than 270,000 members and 46 Houses as of June 2025. The transaction closed in January 2026 after MCR halved its commitment and Apollo and Goldman Sachs increased the unsecured notes facility from $150m to $220m. |
| Life Time Group Holdings | FY26: $3.30–3.33bn revenue; $910–925m adjusted EBITDA | 14 new clubs in 2026, 12–14 in 2027. Capital intensity managed through a targeted $400m of annual sale-leaseback. |
| VICI Properties → Canyon Ranch | $150m | Institutional real-estate capital entering the urban social club format. |
| RSG Group (Gold's Gym, McFit) → Heimat | Direct investment | A mass-fitness incumbent repositioning toward a ~$350-per-month social club model. |
| Othership | ~$20.6m in total | Institutional capital scaling the sauna and cold-plunge social wellness format. |
| Remedy Place | $5m (2022, ~$60m valuation) | The segment's early-stage valuation reference. |
Sources: company announcements, SEC filings and reported transaction news (2025–2026).
The company succeeded in growing both members and revenue while failing to produce profit for most of its four years as a public company. Reaching more than 270,000 members delivered financial scale while eroding the product's central promise — the sense of having been selected.
In a third place, capacity is not a constraint; it is a product. Increasing member count raises revenue in the short term and, in the long term, either raises belonging or destroys it. That threshold must be fixed in advance and in writing.
Table 9 — Principal risks and mitigations
| Risk | Impact | Likelihood | Mitigation |
|---|---|---|---|
| The squeezed middle | High | High | Clear positioning on a single axis; proving a "best community" claim through programming rather than a "best price" claim. |
| Young cohort churn (54.4%) | High | High | Freeze option; 90-day activation programme; a target of introducing each new member to at least three others in month one. |
| Capacity–exclusivity paradox | High | Medium | Member cap and waiting-list policy fixed in writing in advance; management of the peak occupancy band. |
| Subscription consolidation (4.4 → 3.4) | Medium | High | Positioning membership as uncancellable infrastructure rather than cuttable entertainment; making the social cost visible. |
| K-shaped macro divergence | Medium | Medium | Service depth at the premium end, flexibility at the entry end; avoiding dependence on a single price point. |
| Multiple memberships / wallet erosion | Medium | High | Measuring and incentivising visit frequency and share of week rather than member count. |
| The fee being perceived as a paywall | Medium | Medium | Pairing every price increase with a concrete extension of service. |
| Fixed cost and real-estate burden | High | Medium | Sale-leaseback and staged opening discipline; no expansion below the occupancy threshold. |
| Auto-renewal and cancellation regulation | Low–Medium | Medium | Designing cancellation as transparent and frictionless from the outset. |
Source: Value Masters Academy analysis.
Strength of evidence. Aronson and Mills (1959) is a classic of social psychology, but the magnitude and generalisability of the severe-initiation effect have since been debated. The effect was measured principally on attitude toward the group; establishing a direct, replicated chain of evidence for long-term retention behaviour is harder. Revising "those who pay are more committed" to "those who pay are more committed at the outset; sustaining that commitment depends on use" is both more accurate and more operationally useful.
The cost of exclusion. A fee is a selection mechanism, and selection is by definition exclusion. There is a real tension between the levelling quality in Oldenburg's definition and the selectivity of paid membership. The resolution is not to remove the fee but to tier it and to design unpaid points of contact.
Table 10 — Membership health indicators
| Indicator | Definition | Benchmark / target |
|---|---|---|
| Tenured renewal rate | Renewal among members past their first year | ≥ 85% (Costco 92.3%; BJ's ~90%) |
| Visits per member per month | Total visits ÷ active members | ≥ 4 (the weekly-ritual threshold) |
| 90-day activation | New members making ≥ 6 visits in the first 90 days | ≥ 70% |
| Social tie ratio | Members who know at least three others | ≥ 60% — the strongest leading indicator of renewal |
| Non-dues revenue / dues | In-house spend relative to the fee | 1.5x – 3.0x |
| Revenue per member growth | Annual | ≥ 8% (Life Time +11.8%) |
| Referral share | New members arriving through existing members | ≥ 40% |
| Peak occupancy | Share of capacity | 70% – 85% |
| Young cohort churn | Annual loss, ages 18–24 | < 40% (industry 54.4%) |
All pricing, spending and penetration data here is American and cannot be transferred directly. Household disposable income, the prevalence of card and auto-payment, the existing density of third-place alternatives and the culture of paying dues all differ. Price points should be recalculated on purchasing power parity; the behavioural findings can largely be treated as transferable.
"Our measure is not profit but belonging" is valuable if treated as a measurement commitment rather than a slogan. Belonging is measurable: visit frequency, social tie ratio, referral share and renewal. If those four numbers improve, the belonging is real.
Tier one: reported financial and operating data of public companies — high reliability. Tier two: annual research conducted by trade associations on a standard methodology — methodologically consistent, subject to sampling limits. Tier three: market-size estimates from commercial providers and pricing statements reported in the press — material divergence between providers; indicative only.
Corporate (B2B) membership sales; detailed treatment of the golf and country club segment; the points economics of airline and hotel loyalty programmes; insurance-linked memberships; detailed treatment of non-US markets.