How Does ClassPass Work and Make Money?

ClassPass, Inc. makes money by selling monthly subscriptions, which allow customers to take exercise classes at many boutique fitness studios. Rather than being confined to the classes available at a local gym, ClassPass allows users to choose from a wide range of activities and explore what different facilities have to offer.

In 2013, Payal Kadakia and cofounder, Mary Biggins, launched ClassPass to fill two big problems in the health and fitness industry: consumer boredom and provider waste.

Many people join gyms with the best of intentions but end up failing to follow through after a few sessions due to boredom. In addition to neglecting fitness goals, paying for a pricey gym membership that's never used is a drain on finances. While going to select classes at different locations may keep things interesting, one-time attendance fees are often quite high – sometimes up to $30 – so staying in shape can really add up.

On the other side of the coin, gyms and fitness studios lose money when classes aren't filled. Just as airlines still operate flights that aren't fully booked, fitness classes aren't cancelled because of a few empty yoga mats. Even if a class is purchased at a reduced rate, the business doesn't lose money because its expenses are stable regardless of attendance. Any discount is better than an empty spot.

In order to solve both problems, Kadakia and Biggins created a way for consumers to purchase an unlimited pass to dozens of boutique fitness studios for one flat rate. ClassPass enables participating businesses to fill spots that would otherwise have been left empty, while consumers are able to pick the types of activities they most enjoy in various locations. The end result is an influx of new customers for local studios and a fitness regimen that is totally tailored to each consumer's needs.

As of 2015, the price of a ClassPass ranges from $79 in cities such as Seattle and Atlanta to $125 in New York City. Most cities sit near the middle – around $90 to $100. ClassPass is also available in Toronto, Vancouver and London, where prices are a bit lower and higher, respectively, due to exchange rates.

While ClassPass isn't much cheaper than many gym memberships, the true value of the ClassPass lies in its diversity. Since its launch in 2013, it has skyrocketed in popularity and raised more than $54 million in funding. All that goodwill and investor enthusiasm means that ClassPass has been able to secure agreements with hundreds of boutique fitness studios in over 30 cities.

For a flat monthly fee, ClassPass members are allowed to take an unlimited number of classes in their home city. If members move or travel, ClassPass comes along for the ride. If a member is away for an extended period or suffers an injury that prevents her from working out, she can put her ClassPass on hold until she's back in the game.

ClassPass facilitated more than 1 million reservations in 2014 alone and is valued at over $200 million. The primary reason why so many people are flocking to ClassPass is that it allows members to explore new activities with ease. Its massive list of participating studios – over 4,000 – means that all kinds of classes are available year round, from traditional classes such as yoga and Pilates to more adventurous options such as aquatic spinning and strip aerobics.

Though it may seem like ClassPass aims to replace traditional fitness memberships, its founders feel differently. ClassPass members are restricted to three visits per studio each month, so members who would like to visit a particular location more often are encouraged to purchase classes through the studio directly.

The creators of ClassPass hope that people will use it to find the activities they really love. ClassPass should be an introductory tool, and then its users can use it in addition to traditional memberships to maintain diversity and flexibility in their fitness regimens.