Below is an excerpt from my current budget health clubs article for Leisure Report Journal.
I can vividly recall the discussion with the Chief Executive of Holmes Place PLC. ‘I have put together an exciting deal for a purpose-designed club to form part of a stunning new college development in Newbury. The numbers are good; what do you think?’ After, reflecting on my comments, he replied, ‘We can’t open in Newbury; the town already has a private health club.’ A few years ago, that was the unwritten market rule; the first to enter, won. Why waste resources competing; let’s just find our own town. How the rules of the game quickly change. Now clubs stand side-by-side and compete hard, and not just small clubs. Some towns now have two £13 million health and racquets club within a mile of their respective front doors. ‘If the town is good enough for them, it’s good enough for us’, became the new mantra, as chains rushed to build a national estate.
What’s in your wallet?
As competition intensified, one rule seemed to remain constant. Prosperous consumers joined the premium clubs, while those of moderate financial means frequented the ‘affordable’ private mid-market club or leisure centre. A David Lloyd membership card used to proudly sit alongside the ‘platinum’ credit card as a key symbol of success. However, unlike the credit card, they were not often pulled out of the wallet. Everyone is now well aware that the principle of neatly defined homogeneous consumer segments is now in turmoil and causing marketers sleepless nights. Promiscuous buying behaviour is everywhere, where shopping at Lidl now suggests, more ‘smart’ and ‘savvy’, than skint. ‘Geiz ist geil’ is how Hans Muench, European Director for IHRSA (International Health, Racquet and Sportsclub Association) characterises German consumers attitude to low-cost purchasing. ‘Stinginess is cool’, is how it translates.
The first UK budget club
Fitness First created an early generation ‘budget’ or low-cost club back in the early 1990’s with a £29 per month membership positioned as ‘affordable fitness’. Core facility areas such as swimming pools, café bars and indoor tennis courts were stripped out to reduce capital and operating expenses and pass on lower prices. However, it was still clearly related to its more affluent and larger club cousin. Smaller, doing less, but still related.
Who changed the rules?
Rainer Schaller, the entrepreneur and founder of McFit in Germany fundamentally changed the rules in the mid 1990’s, when he opened his first ‘no frills’ health club. At just 645 square feet (60 sq m), equivalent to one squash court, it was now just a distant relative to what most people would recognise as a typical club. This first generation McFit club was a simple room above his family’s grocery business (he understood the Lidl/Aldi business models), with a modest collection of fitness equipment. The price to friends was 10 Deutsche Mark’s per month, about £4. This modest pilot has now grown into Germany’s largest club chain (by membership size) with 97 outlets, over 630,000 members and revenues of €100 million (£79 million). The present generation McFit club has grown a little and now occupies around 27,000 square feet (2,500 sq m), filled to the brim with cardio-vascular and strength machines. The flat-rate membership rate now stands at €16.90 (£13.40) per month to access this super-sized gym.
What is a budget club?
Presently, there is no official definition for a UK budget or low-cost health club, so here is mine:
· A price point that is at least 50% below the UK average. This means a price of no more than £21 per month. Deloitte consulting in Germany define their low-cost sector at below £16.
· Gym-only proposition.
· Extended opening hours with a 24/7 aspiration.
· Extensive use of technology and online joining.
· Ability for a single staff member to operate the entire club.
Email me if you would like to read the full article.
Tags: Budget clubs