Gym Sector Sweats Over Low-Cost Competition

The rise of gyms offering cheaper rates means more expensive clubs may have to up their game but analysts warn the low-cost clubs need to be canny about their expansion plans.

Published

6 months ago

Categories

Health

Topics

Exercise & Fitness

Transcript

It may appear to have all the offerings of a mid-market fitness club. But the Gym Group is using technology instead of manpower to make it cheaper. There are no luxury saunas and jacuzzis or flash studios. Instead video instructors take classes. It all means membership is half the price of other gyms. Although the gyms do have staff, one of the ways they're cutting down on costs, is by not having a reception area. You just punch in a code, and you're in. And it's this stripped down business model that's allowing them to expand so rapidly. This business opened in 2008 and has 32 clubs. It aims to open 20 more in 2013. Chief exec, John Treharne, says they appeal to a new type of gym-goer. SOUNDBITE (English) JOHN TREHARNE, THE GYM GROUP, CHIEF EXECUTIVE "40 percent of our members have never been in a gym in their lives before. So clearly we have a product people want therefore there's no reason why we shouldn't expand quickly. I sign off on every site we do. For every site we do, we probably reject three." The number of low-cost gyms is shooting up, and the fitness industry looks set for a shake-up. High end gyms won't necessarily be squeezed out but they are being kept on their toes. Nick Batram is a leisure analyst at Peel Hunt SOUNDBITE (English) NICK BATRAM, LEISURE ANALYST, PEEL HUNT, SAYING: "If you've got a nice club and it's in the middle of the market and you've got a good membership base then I don't think the budget market is necessarily a threat to you but if you've got not a nice club, and you're not delivering a good service, then I think the budget operator's going to eat your breakfast." Low cost gyms are flourishing partly because in the current market, they're able to get property at a good price, but that might not last Some firms, like the mid-market chain, Fitness First, fell into the trap of having too many expensive properties on their books. It recently avoided receivership after restructuring its lease agreements. But for budget gyms, the current economic conditions seem fit for purpose.