property
the changing face of fi tness
P
erhaps one of the greatest difficulties with the health and fitness sector is the limited amount of research
and statistics available. However, it is my view that the industry recognised it was in for a difficult period in autumn 2007 – confirmed by the recession in 2008/2009. We are now in a new world order
with low interest rates and government stimuli being required just to maintain a slow-growing economy. The spending review on 20 October 2010 (which will have occurred by the time of publication) is also likely to have a signifi cant impact on public sector jobs and employment; given that a higher percentage of public jobs are situated provincially, it is reasonable to anticipate that the greatest impact on the economy will occur in such areas. Looking back a few years, it’s almost
as though the health and fi tness sector recognised the threat of the low-cost sector establishing itself – which started in 2006 with Fitspace in Bournemouth – and reacted accordingly. Numerous transactions and general consolidation of the sector occurred in 2006/2007. Examples include Virgin Active acquiring Holmes Place, Bannatyne acquiring LivingWell, London & Regional Properties acquiring the David Lloyd brand from Whitbread and, more recently, Nuffi eld Hospitals acquiring 52 Cannons clubs. Multi-site operators saw that pressure
on consumer spending – translating to an increasing number of under- performing sites – would result in a growing number of clubs being offered either for conversion to alternative use, or for assignment to smaller operators or the low-cost sector.
In the UK, low-cost operations such as Pure Gym are expanding rapidly
54 Read Health Club Management online at
healthclubmanagement.co.uk/digital november/december 2010 © cybertrek 2010
site selection: new or old? It has, however, proved difficult to acquire under-performing clubs from existing groups, mainly because they continue to make a contribution towards fixed overheads including rent, rates, service charge, insurance, maintenance and so on, and because the risk of assigning a lease to a smaller company risks a liability that may return in the future. The worst case would be the return of a closed club that’s been stripped of its equipment and left in a poor condition, requiring investment if it is to be re-opened. There are some exceptions to this: for
example, LA Fitness sold fi ve clubs to nuyuu and Fitness First disposed of clubs to Fitspace, which currently operates eight sites. However, it is unclear how successful these ventures have been in comparison with the purpose-built low-cost operators, where new sites have been acquired and developed in
Colin White, leisure partner at Edward Symmons, reviews the market, ponders how groups with under-performing sites will fare and considers the impact of the low-cost sector on the future of the health and fitness industry
line with corporate strategy; certainly questions have to be asked of the model following the recent sale of nuyuu to The énergie Group. The advantage in acquiring existing clubs is that growth can take place quickly, but the concept that’s then created through re-branding the clubs may not ideally suit the concept proposed, especially where swimming pools exist. Furthermore, halving the membership
price of a 2,000-member club will also have the effect of halving the turnover and, if the underlying costs and service levels cannot be reduced drastically at the same time while the membership is being built up to hopefully higher levels, the impact on profi t can be dramatic. The club will also come with ‘baggage’,
in that the existing members will have expectations of service levels and facilities offered which may not be continued, thereby causing signifi cant attrition despite a reduction in rates.
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