property
The sooner existing operators react to the budget sector threat, the sooner the industry will move forward
typifi ed by David Lloyd Leisure, and the traditional mass market sector typifi ed by Fitness First – although given that there is limited trading information, this is diffi cult to substantiate. However, what’s clear is that this
pattern could be dramatically impacted by the low-cost sector that’s now emerging. John Treharne, CEO of The Gym Group, certainly believes that the fi tness sector will polarise into “two dominant sectors: the high quality racquet clubs and the low-cost gyms”. The table on p55 lists the low-
cost operators, the number of sites they currently operate and the new developments in the pipeline as at September 2010, together with the price point currently being charged. Together these companies had 40 sites operating as at September 2010; if forecasts are to be believed, by the end of 2011 we could see well over 100 low-cost gyms in operation. The best evidence currently available
for the impact of the low-cost sector on existing gym offerings is the growth of McFit in Germany since 1997, where they now have 120 clubs with an average membership of 7,083 per club. This is up from 89 clubs at an average of 6,180 members in December 2007. By contrast, Fitness First Germany has seen a reduction in the number of clubs from 107 (December 2007) to 102 (December 2009), with an average of 2,755 members per club, and broadly remained static between 2007 and 2009. Fitness First currently charges 55 (£48) a month while McFit charges just 16.90 (£15).
56 What’s not clear is what impact
growth of McFit has had on the Fitness First estate in terms of average yield and profi tability. Based on the 2007 accounts published by McFit, the company turned
over 86m and produced an EBITDA of 28m (32.5 per cent) with an amazing level of staff costs of just 3 per cent of turnover across the estate (source: Oxygen Consulting’s 2010 UK Low-cost Gym Sector Report). It’s not unreasonable to anticipate that the McFit brand has grown turnover and profi tability since these accounts were published, and to a degree at the expense of the established health and fi tness sector in Germany.
a potential fight-back? We can reasonably conclude from this case study in Germany that there will be an impact on the traditional mass- market sector as well as on the mid-market sector in the UK. Although the low-cost sector is likely to generate a large number of new members, estimated at 40 per cent first-time users, there will also be a significant migration from the existing health club offering. But no doubt existing groups such
as Fitness First will adapt to compete with the new-style, low-cost offerings. Indeed, given the strength and size of operations such as Fitness First, the impact on the new entrants to the low- cost sector could be dramatic. One thing is certain: whether the existing fi tness players adapt their offering to fi ght back, or whether low-cost operators tighten their grip on the market as has been witnessed in Germany, the sector will change beyond all recognition.
Read Health Club Management online at
healthclubmanagement.co.uk/digital
Fitness First has seen a reduction in number of clubs in Germany, where it is battling with McFit
In conclusion, change is inevitable
as evidenced by the McFit case study in Germany, and the sooner existing operators recognise these threats and react, the sooner the industry will move forward and supply the offering that consumers in the current economic climate require. Inevitably further consolidation is likely to occur, particularly among the mid-priced sector, but change may also be required within the existing traditional mass- market sector. Whatever happens, it will be an exciting time in the development of the sector and hopefully we will see the fi nancial institutions providing strong support, given its growth potential.
ABOUT THE AUTHOR Colin White is a fixed equity partner
colin.white@edwardsymmons.com
at Edward Symmons and heads up the firm’s Hospitality and Leisure Agency team, having worked for the firm for over 16 years. He is an expert in the commercial leisure sector and has
advised major lending institutions, leisure operating companies and insolvency practitioners.
healthclub@leisuremedia.com colin white
november/december 2010 © cybertrek 2010
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84