Fitness First is investing in its product to ensure it remains relevant
Nigel Bland
Partner, corporate fi nance travel & leisure Deloitte LLP
A
s far as the concept of health club membership goes, I believe there’s no product lifecycle in the
classic sense: Romans had baths and Victorians had running clubs. There may be a tech revolution that
we can’t yet imagine, and there’s already a risk of substitution as technology impacts the market: almost two-thirds of adults now own smartphones, which has led to an increase in the number of health and fi tness apps available, many of which don’t require the use of a health
club. However, my guess would be that, in 2100, there will still be gyms with members – they will simply offer more advanced machines and classes. The sector has also seen a new
generation of specialist operators emerging that specifi cally concentrate on classes, such as Cyclebeat and Barry’s Bootcamp. These allow for a more fl exible membership approach, with consumers only paying for classes attended. However, although recently the
budget operators have grown at the expense of the mid-market, I believe
Specialist brands like Cyclebeat offer flexibility
there’s room for everyone going forward if they provide a clear brand proposition, have the right locations and are value for money. Although the UK health club market is forecast to grow at a slow rate (around 1 per cent a year), I believe the established operators can re-group and begin to grow their businesses, for four key reasons. Firstly, health and fi tness is an
established, mainstream market that’s here to stay, with many macro factors underpinning demand. Second, while the growth in memberships may be modest, the improving economy will allow membership pricing to increase, giving a much greater growth in the value and profi tability of the sector. Third, this is not retail, which is
suffering long-term online substitution by online shopping. Operators can respond to technology innovations by incorporating them: DLL and Pure Gym among others have started to do this, creating mobile apps offering exercise programmes and dietary advice. And fi nally, the sector was overbuilt in
the 90s and the noughties, but capacity has gone out of the market through restructurings. In addition, with most balance sheets now much stronger, ongoing investment is being made (eg Fitness First) to keep the groups relevant and competitive. But while there is a case for investors
to re-engage, management will need to work hard to make those cases, as investors will be wary given the recent history of the established businesses.
January 2015 © Cybertrek 2015 Read Health Club Management online at
healthclubmanagement.co.uk/digital 83
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