Is the future unclear for the smaller Leisure Trust?
In my early career I worked in the world of outsourced leisure and for the last 17 years I have supported the industry with executive search services on senior and executive appointments. My experience in working with a wide variety of councils, trusts and leisure management companies, and looking at the recent moves, has enabled me to recognise that the industry is experiencing stresses and strains the likes of which have never been seen.
In the 1980’s & 1990’s under compulsory competitive tendering, many local authorities took the decision to outsource the day to day operation of their leisure services provision. This development resulted in the creation of “leisure management” companies to service the demand. The likes of DC Leisure, Parkwood Leisure, Leisure Connection and Serco Leisure offered local authority clients a range of professionally managed services across the variety of their sports and leisure facilities. Similar charging models were created, usually via a management fee.
While the commercially structured, outsourced leisure companies developed, a number of “leisure trusts” (such as GLL, Fusion, Everyone Active) were also created. These trust models offered a similarly professional management service, but without having the pressure of shareholders, or private ownership – and among other benefits of a trust status they were, in many cases, able to offer reduced management fees. Over the lifetime of the management contract (usually ranging from 5 – 25yrs) the “management fee” enabled the organisation (trust or management company model) to invest in staff, training, services and facilities.
The rules have changed
The rules of engagement have changed significantly over the last few years and, as a result of the changes, it is likely that the end customer will begin to experience reduced services, poorer facilities and a lack of investment – whether they use the gym, swimming pool, tennis courts or sports hall. It’s now an uneven playing field, with reduced competition, which may impact on the quality of the service.
Like many public services the financial pressure is on. Local authority leisure, like so many other services, is feeling the pinch. A result of this is that authorities are developing tender criteria that require operators (trust or management company model) to demonstrate much higher minimum levels of capital availability or balance sheet position. This one small factor of change in the established process is, in itself, creating a less competitive environment. Smaller operators now do not qualify – even if their excellent services are proven.
And if that’s not enough….
Local authorities need to fill their budget holes. They are moving away from paying an operator to run the facilities on their behalf. Instead, in many cases they are asking bidders for a substantial annual payment for the privilege of running these facilities. Once again, only the largest operators can compete effectively.
Eyebrows are raised…
There are examples where price has become the key and most important measure for contract award. It’s easy to see why the larger contractors with more capital reserves and financial clout become so attractive.
It’s not just about the budget hole in 2017? These facilities will be providing localised services in 2027….2037 and beyond. Is the ability to invest in facilities and infrastructure at the outset or during the duration of the contract an important consideration when assessing the award of a contract for leisure services. The buildings are ageing and they are still being asked to provide vital community and education services.
A recent article by Judith Burns on BBC News titled “Pools and sports halls could be forced to close” highlighted the issue for local authorities who are facing a deficit in their leisure budget and the impact this could have on the local community and leisure services. For the full article please visit – http://www.bbc.co.uk/news/education-41779230
Differentiation is the future for smaller leisure trusts and management companies…
So, what does the future look like for the smaller leisure trusts / management companies??? Well in some cases, it looks bleak……. but, with the right leadership, then all is not lost because they can offer something that, perhaps the larger players, cannot.
A more personalised relationship
- Differentiated services.
- A priority relationship where the contract they manage is their only one and not one of many so has true importance and prestige.
- Local knowledge and expertise, translating to a real understanding of the local customer and their specific requirements.
- A heritage and history within a local market which has brand resonance and affiliation with the community.
So, the smaller leisure trusts have a challenge ahead of them to stay competitive and relevant, it is unclear what this industry will look like in several years’ time. Perhaps Brexit has provided a window into their future…like the UK voting public, will local authorities turn their back on the powerful, large operators and focus on their community and back operators with passion and local expertise????