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Peloton Puts Brakes on Apartment Community Sales

spin bike
November 2019

It turns out, ordering Peloton spin machines for apartment community fitness rooms is not as easy as riding a bike. Called “the best cardio machine on the planet” by Men’s Health, the manufacturer of the popular, subscription-based fitness equipment recently changed gears and is no longer selling to apartment communities.

A few months before it made its initial public offering (IPO) in late September, Peloton announced to commercial clients that it will focus its sales on individual consumer accounts. Many apartment communities currently offer Peloton bikes—and much to their residents’ delight. A 2019 Amenities Survey by Multifamily Design+Construction showed that 19 percent of survey participants installed them in the past few years.

The bikes took hold of fitness fanatics about two years ago and Peloton rode that popularity to great profit. The key selling point was that the spin bikes included software programmed with exciting visuals and touchscreens that enabled streamed live group workouts with live instructors. Users could also train remotely and in real-time with their friends or like-minded cyclists—all for a monthly individual membership fee of $20 to $40, based on the plan. One market analyst called the company, “the Netflix of fitness.”

Marissa Gilbert, Associate Director of health and wellness at Mintel, a market research firm, told The Washington Post, “[Peloton] has built a lifestyle around its classes, hooking customers in through workouts that make people feel connected to a broader fitness community,” an environment that many Millennials and others crave. Peloton users can share their stats on social media and get shout-outs during a workout.

Changing Lanes

Apartment operators found Peloton’s business decision perplexing: Why would a company shun an audience that is enthusiastic about its product?

“These bikes are a hugely popular resident amenity,” Chad Christian, Regional Manager, Avenue5, says. “When we added them, the feedback was great. I have one or two bikes in each of my fitness centers and they are always being used. We have had countless residents ask us to add more because they say they don’t get to use them enough.”

One Nineteen Apartments in Naperville, Ill., has one Peloton bike among the four bikes it has in its fitness center. Property Manager Julie Rossini says prospective residents touring her property “see it right away and comment favorably.”

“When we got it, there was one resident who always used it,” Rossini says. “And when others noticed that, the [Peloton bike] began to get much more use by other residents.”

Clay Hicks, President of TDC Management, recently inquired about Peloton’s commercial sales and received this response from his Peloton sales representative:

“Our Commercial Sales team is committed to placing our Bikes in locations where our Members work and travel. We partner with corporate wellness facilities, multi-tenant office developments, country clubs, and hotels so our Members stay connected to their fitness routines while they are away from home.

Our commercial team, showroom employees and Web store no longer sell Peloton products to multi-family housing developments. This decision returns focus to our original model of bringing high-quality, instructor-led fitness into our Members’ personal homes. We have learned that the best Peloton experience begins with a Member purchasing and exercising on his or her own personal Bike.”

That response is not unlike what other apartment communities have been receiving.

Hicks responded by sending this incredulous note to his rep:

“I kind of understand your position, although I think you all will miss out on building a lot of fans since most of our residents just sign one-year leases and then move on to houses. So, their ability to get familiar with a Peloton in our luxury high-rise and mid-rise residences could/should make them fans enough that they would want to buy one when they move to their own house.”

Princeton Properties’ Chief Marketing Officer and Executive Vice President Sarah Greenough also raises an eyebrow.

“As a personal Peloton owner, I have been a big fan of the bike and its fitness programs,” Greenough says. “We have been outfitting our fitness centers with Peloton bikes over the last few years. It was very disappointing to hear that the company no longer will sell its bikes to multifamily communities. This was a big let-down to us. Spinning has gained significant popularity in the fitness world. It made sense to add this amenity to our fitness centers.”

Greenough says she thinks Peloton’s decision might be a “thinly veiled play to make more money on sales – period. Peloton probably figured an apartment community of 200 apartments, for example, has 200 potential customers, not just two commercial bikes sold to us for our clubhouse. I think our industry started cramping their sales!”

Holli Beckman, Vice President of Marketing & Leasing Operations, W.C. Smith, says, “I’ve read that they believe the apartment industry is interrupting with [Peloton’s individual customer] sales. This seems super short-sighted in my opinion. Their bikes in our studio fitness rooms are basically showrooms for potential buyers – when you think of it, we are paying Peloton for the opportunity to promote their product instead of them paying thousands on demo showrooms in malls. But with their IPO approaching, I imagine generating individual unit sales has been a priority [rather than one bike shared by many].”

Units requested comment from one Peloton sales rep via email about the company’s policy or strategy for multifamily housing but did not hear back. Peloton’s public relations firm acknowledged questions we sent about topics mentioned in this article but says it is unable to comment because the company is in a quiet period after having filed its IPO. Its IPO share price was set at $29. But out of the chute, it has investors sweating. It fell well below $22 during its first week of trading.

Just Keep Pedaling

Christian purchased bikes for Avenue5 about one month before apartment community sales ended. He spent between $2,499 and $2,750 per bike and pays $55 per month for a commercial membership. The key differentiators between individual and commercial bikes is that the commercial model includes multi-user software and dual-sided pedals to enable more participants.

“They ‘say’ that they still service bikes, but I have found otherwise,” Christian says. “I constantly am told, ‘We no longer service multifamily’ from them when we have issues. I don’t want to say that Peloton bikes have a lot of issues, but we have had to call for service at least once a month about one or more features on the bikes.”

Greenough says she hopes Peloton doesn’t backpedal on what it said it would do to service the bikes through general maintenance and updating existing hardware.

“From what I’ve read, this decision to discontinue future bike sales to multifamily should not impact maintenance on existing Peloton bikes,” Greenough says. “[The company] stated that Peloton will continue to send current content, software updates, warranty, support and service outlined in our original commercial subscriptions.”

What Others are Peddling

Technology, trends and innovation are producing alternative products. Expresso, Hydrorider, Nordic Trac and Technogym are competitors in the virtual cycling space that have been mentioned in online forums for property management professionals. Membership-based fitness platforms such as FitterClub also are emerging.

“At the end of the day, our industry will be just fine,” Greenough says. “Products come and go. New technology is ever-evolving. There are so many options for on-demand streaming fitness. We liked the prominence and prestige that the Peloton brand brought, but we will find an alternative way to give high-quality, on-demand fitness to our residents through streaming applications and other available fitness brands.”

Residents can experience on-demand virtual fitness in ever-increasing ways. Virtual fitness kiosks, flat-panel TVs, commercial display panels and synchronized phone apps in apartment fitness rooms can all now deliver thousands of hours of self-selected training sessions on-demand. These potentially free property managers from needing to invest in equipment that will be in vogue one moment and then quickly dating and depreciating the next.