Mega clubs, budget operators and out-of-club offerings – what does the future hold for the health and fitness industry? Michael Oliver analyses the findings of Mintel’s
2014 Health and Fitness Clubs report
By Michael Oliver | Published in Health Club Management 2014 issue 10
Members who can’t always get to their club might pay to have a live class streamed into their home / photo: www.shutterstock.com/Yeko Photo Studio
The UK health and fitness club industry survived much of the economic downturn relatively unscathed, but the past two years have seen tougher conditions as consumers have had to cut their expenditure further in the wake of a prolonged period of real terms declines in living standards. The structure of the fitness industry has also changed significantly in this period, with budget clubs hitting the mid-market hard.
Expectations are for modest growth in market value and volume by the end of 2014, reflecting likely improvements in living standards in the second half of the year, as well as a rise in consumer confidence and falling unemployment. Forecasts suggest that the market will then grow by 5.9 per cent in the next five years, to a value of £2,823m by 2018.
Demise of the mega club? The future of the mega club is a key issue in the market. Over the past three years, full-service clubs with wet and dry facilities have only grown in number by 5 per cent, compared to 9 per cent for larger dry clubs and 30 per cent for smaller gymnasia/fitness suites (an area which includes many budget clubs).
Most of the growth in terms of new site openings during the economic downturn came from the budget sector and, more recently, from microgyms, which often specialise in one type of instructor-led group activity, whether that’s cycling, dance or fitness classes.
This reflects a growing expectation on the part of consumers for personalisation and customisation of products and services. Additionally, it reflects the lack of availability of suitable sites for the large club formats, and the fact that the market is almost saturated with this type of outlet.
Mintel believes that operators will have to start looking at ‘infilling’ with smaller clubs, in the same way that the major supermarket chains have switched to building smaller convenience stores serving local neighbourhoods. This has already been recognised by operators such as David Lloyd Leisure, which has begun to open its DL Studio sites in high street locations, as well as Fitness First with smaller clubs such as The Beat being opened near other full-service clubs operated by the chain; more such clubs will follow across London.
However, the problem for the larger operators is that many of these types of sites have already been taken by the burgeoning budget clubs sector.
Battle of the budgets Another key issue in the market is the future of the budget sector. Between 2011 and 2014, the number of budget clubs in the UK has grown by 203 per cent, from 73 to 221. However, the annual rate of growth in budget club site numbers has decreased, from 95 per cent in 2012 to 29 per cent in 2013 and 21 per cent in 2014.
The budget sector has thrived during the harsher economic times of the past five years, but conditions for the budget sector may become tougher in the next few years: the UK is in the early stages of what looks likely to be a strong economic recovery, consumer confidence has really bounced back and unemployment is falling much more rapidly than anticipated. The combined effect of these factors means that consumers may be more prepared to look at increasing their monthly outgoings again, which could potentially include trading up to a more expensive health club membership.
Additionally, there’s some evidence that saturation of budget options (encompassing budget clubs, plus some local authority leisure centres) is being approached in some areas. This is leading to budget clubs cutting joining fees and, in some cases, monthly fees. Competition – whether budget club vs budget club, or budget club vs local authority gym – is likely to intensify, and this is not going to be good for margins.
Not only that, but the emergence of the budget sector has caused a tremendous polarisation within the health and fitness club market. Mid-market operators have either had to move further upmarket to more clearly differentiate their offering from that of the budget operators, or else they have moved more towards a low-cost model in order to compete more effectively – and with it making the budget segment even busier.
In the meantime, the only mid-market clubs likely to continue to thrive are the established local sites with an extremely loyal local following and not much competition, which succeed because of the strong personal service they deliver.
Revenue growth Finally, there’s the issue of how clubs can increase revenues from existing members and non-users.
Other than perhaps some modest potential to increase ancillary spend as the pressure on household income eases, the indications are that the best opportunities for clubs to increase member spending lie in extending their services beyond the club environment.
So for example, a member may not be able to physically visit a club as often as they want to – perhaps because of childcare commitments, for example – but might be willing to pay extra for the option to follow classes at home using a live stream, or to be able to download classes from an online library.
They may also welcome the opportunity to rent fitness monitoring equipment that will measure their activity levels throughout their day, not just when they are in the health club.
Others may not want to visit their club more often because they don’t enjoy working out indoors. Offering a variety of outdoor activities led by a member of staff from the fitness club – outdoor classes in a local park, for example – may be one way in which members can be encouraged to do more without visiting their actual health clubs more regularly.
And for the non-user, as well as a desire to be offered a pay as you go option when they visit a club, there’s almost certainly a market among potential users – and indeed among people who haven’t yet expressed an interest in joining a health and fitness club – for at-home and outdoor services. This could be a home-based personal training session, the hire or sale of fitness equipment to use in the home, the hire of fitness monitoring equipment, or the running of outdoor classes.
Potentially there’s a whole new audience who may never have had any desire to enter a physical club, but who would welcome the opportunity to take part in some outdoor or home-based structured fitness activity, whether that’s an outdoor run or class in a park, or a class streamed to their home.
Outdoor activities could attract those who don’t want to work out in a club / photo: www.shutterstock.com/LUMOimages
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Mega clubs, budget operators and out-of-club offerings – what does the future hold for the health and fitness industry? Michael Oliver analyses the findings of Mintel’s
2014 Health and Fitness Clubs report
By Michael Oliver | Published in Health Club Management 2014 issue 10
Members who can’t always get to their club might pay to have a live class streamed into their home / photo: www.shutterstock.com/Yeko Photo Studio
The UK health and fitness club industry survived much of the economic downturn relatively unscathed, but the past two years have seen tougher conditions as consumers have had to cut their expenditure further in the wake of a prolonged period of real terms declines in living standards. The structure of the fitness industry has also changed significantly in this period, with budget clubs hitting the mid-market hard.
Expectations are for modest growth in market value and volume by the end of 2014, reflecting likely improvements in living standards in the second half of the year, as well as a rise in consumer confidence and falling unemployment. Forecasts suggest that the market will then grow by 5.9 per cent in the next five years, to a value of £2,823m by 2018.
Demise of the mega club? The future of the mega club is a key issue in the market. Over the past three years, full-service clubs with wet and dry facilities have only grown in number by 5 per cent, compared to 9 per cent for larger dry clubs and 30 per cent for smaller gymnasia/fitness suites (an area which includes many budget clubs).
Most of the growth in terms of new site openings during the economic downturn came from the budget sector and, more recently, from microgyms, which often specialise in one type of instructor-led group activity, whether that’s cycling, dance or fitness classes.
This reflects a growing expectation on the part of consumers for personalisation and customisation of products and services. Additionally, it reflects the lack of availability of suitable sites for the large club formats, and the fact that the market is almost saturated with this type of outlet.
Mintel believes that operators will have to start looking at ‘infilling’ with smaller clubs, in the same way that the major supermarket chains have switched to building smaller convenience stores serving local neighbourhoods. This has already been recognised by operators such as David Lloyd Leisure, which has begun to open its DL Studio sites in high street locations, as well as Fitness First with smaller clubs such as The Beat being opened near other full-service clubs operated by the chain; more such clubs will follow across London.
However, the problem for the larger operators is that many of these types of sites have already been taken by the burgeoning budget clubs sector.
Battle of the budgets Another key issue in the market is the future of the budget sector. Between 2011 and 2014, the number of budget clubs in the UK has grown by 203 per cent, from 73 to 221. However, the annual rate of growth in budget club site numbers has decreased, from 95 per cent in 2012 to 29 per cent in 2013 and 21 per cent in 2014.
The budget sector has thrived during the harsher economic times of the past five years, but conditions for the budget sector may become tougher in the next few years: the UK is in the early stages of what looks likely to be a strong economic recovery, consumer confidence has really bounced back and unemployment is falling much more rapidly than anticipated. The combined effect of these factors means that consumers may be more prepared to look at increasing their monthly outgoings again, which could potentially include trading up to a more expensive health club membership.
Additionally, there’s some evidence that saturation of budget options (encompassing budget clubs, plus some local authority leisure centres) is being approached in some areas. This is leading to budget clubs cutting joining fees and, in some cases, monthly fees. Competition – whether budget club vs budget club, or budget club vs local authority gym – is likely to intensify, and this is not going to be good for margins.
Not only that, but the emergence of the budget sector has caused a tremendous polarisation within the health and fitness club market. Mid-market operators have either had to move further upmarket to more clearly differentiate their offering from that of the budget operators, or else they have moved more towards a low-cost model in order to compete more effectively – and with it making the budget segment even busier.
In the meantime, the only mid-market clubs likely to continue to thrive are the established local sites with an extremely loyal local following and not much competition, which succeed because of the strong personal service they deliver.
Revenue growth Finally, there’s the issue of how clubs can increase revenues from existing members and non-users.
Other than perhaps some modest potential to increase ancillary spend as the pressure on household income eases, the indications are that the best opportunities for clubs to increase member spending lie in extending their services beyond the club environment.
So for example, a member may not be able to physically visit a club as often as they want to – perhaps because of childcare commitments, for example – but might be willing to pay extra for the option to follow classes at home using a live stream, or to be able to download classes from an online library.
They may also welcome the opportunity to rent fitness monitoring equipment that will measure their activity levels throughout their day, not just when they are in the health club.
Others may not want to visit their club more often because they don’t enjoy working out indoors. Offering a variety of outdoor activities led by a member of staff from the fitness club – outdoor classes in a local park, for example – may be one way in which members can be encouraged to do more without visiting their actual health clubs more regularly.
And for the non-user, as well as a desire to be offered a pay as you go option when they visit a club, there’s almost certainly a market among potential users – and indeed among people who haven’t yet expressed an interest in joining a health and fitness club – for at-home and outdoor services. This could be a home-based personal training session, the hire or sale of fitness equipment to use in the home, the hire of fitness monitoring equipment, or the running of outdoor classes.
Potentially there’s a whole new audience who may never have had any desire to enter a physical club, but who would welcome the opportunity to take part in some outdoor or home-based structured fitness activity, whether that’s an outdoor run or class in a park, or a class streamed to their home.
Outdoor activities could attract those who don’t want to work out in a club / photo: www.shutterstock.com/LUMOimages
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