THE BUDGET OPERATORS HAVE FUNDAMENTALLY CHANGED THE HEALTH AND FITNESS INDUSTRY FOREVER

Posted By Will Royce

27 July 2015 - 9:40am

The phenomenal growth of PureGym from just 4 sites in 2009 to 141 sites in 2015, with its recent purchase of LA Fitness, reflects the staggering increase in the number of budget gyms in the UK. This article assesses why the lower end of the market has wrestled market share away from the high, but particularly the middle market.

The obvious answer is of course the recession, but this is a facile explanation which not only underestimates the quality of product offered by the likes of PureGym, but also gives the mid/high end of the market an excuse which no longer cuts the mustard.

In my view the key to the success of PureGym and other budget operators is summed up by one word, ‘Differentiation’. Having spent 10 years selling high end health and fitness memberships one of our most common objections was that prospects did not want to sign up to a 12 month contract. They were worried understandably that after an initial bout of enthusiasm their usage would tail off and they would effectively be spending money on a club that they were not using. The budget operators removed this fundamental fear by introducing no contract memberships. The revenue created by the extra number of sales made by removing the contract without question exceeded the lost revenue by early cancellation. In addition, according to Peter Roberts, the founder of PureGym, about 35 percent of the members who left re-joined within a year anyway.

The phrase “budget gym” is also a misnomer. Budget does not necessarily mean lower quality. At Puregym for example, on average, there are over 200 pieces of high quality equipment. Instead of scrimping on the quality of their equipment, PureGym have saved massively in other areas. In terms of labour costs for example each PureGym site has only 2 Full time staff allied to a personal training team. They have also cut out all of the areas of the higher end of the market that take up space but don’t generate as high revenue per square foot, such as swimming pools and sauna/steam rooms.

In a nutshell customers are asking why they would spend from £60 upwards on a more premium environment rather spend than anything from £10 to £25 with PureGym, if they can’t see a significant difference between the two ?

The net result of this is that the middle market has suffered in particular - with the takeover of LA Fitness and the near collapse of Fitness First - although Fitness First has recovered significantly under the excellent leadership of their CEO Andy Cosslett. Even the higher end of the market operators have struggled and have lost a significant number of members to the budget chains.

In my opinion the middle market will continue to struggle. There is still considerable demand for the higher end of the market who can offer more wide ranging facilities such as spa, tennis, swimming and hospitality, but these operators will now have to work harder to be successful. Fundamental to this is revolutionising the quality of service they offer which needs to be exceptional for customers to justify the extra outlay. The customers using the budget operators are not paying for services they don’t use.

In my personal experience the quality of service within most high-end health clubs is poor and a major reason for this is the pitifully low rates of pay amongst Reception staff. Without wishing to be overly critical I have lost count of the times when I have seen exasperated members paying over £100 a month speaking to a Receptionist who struggles with fairly basic English. Higher end health clubs need to realise that paying staff so poorly is a false economy. While it is not just about money, if you are going to attract the level of staff needed to deal with members who can afford this level of subscription, you need to pay them properly. There are thankfully some notable exceptions to this but they tend to be the high end independent clubs rather than the higher end chains.

Until the middle and higher end operators start to take service seriously the budget operators will continue to grab market share from them. Optimistically thinking the necessity for change should only improve the experience of members, as the mid/high end of the market realises they genuinely need to be differentiate themselves or risk being swept away by the budget market tide.

The budget operators are like baked beans – they do what they say on the tin!

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