by Hans Muench
Europe has more fitness clubs now than does USA, though USA still has more members. Reasons for this is generally smaller clubs in Europe, and higher number of members per club in USA. Plus, Europe has caught up with America in many ways, in fact has surpassed the motherland of fitness in some areas. This article will show some examples of this with insights that provide food for thought for Italian clubs, inspiration and perspectives that can help operators improve their performance.
Facts and Figures:
Comparing countries in terms of number of clubs and members shows, in a macro sense, that Italy is in the top five in terms of clubs and industry revenue, and seventh in total members. Some smaller countries, Netherlands and Scandinavia in particular, have higher penetration rates than Italy, we will examine reasons for this.
An analysis of strengths, weaknesses, opportunities and threats can be done by country as well as by operator. I choose the former in this article, comparing countries by numbers of clubs, members and penetration rates. In a future article specific examples will be offered, such as the Dutch-based Health City group (who currently have 265 clubs in seven countries, including Italy).
The article will touch on some leading players in Europe, both in terms of number of clubs / members (chart 2) as well as business models and recent growth: besides Health City (with clubs in the Netherlands, France, Spain, Germany, Belgium and Italy) other “hot” club groups include Evo Fitness in Norway-Finland, Fitness Hut in Portugal, Fitness World in Denmark, Inge Sport in Spain and Prime Time Fitness in Germany as wel as McFit (German based but now involved in four countries). Innovation is driving most of these growing companies. More detail on these in future.
More competition is coming from smaller (concept or specialty) facilities (such as EMS/vibration micro clubs), PT studios, physiotherapists and hospitals. Boxing centers are gaining in popularity, and franchises are starting in some of these areas already.
“It is an exciting time to be in the fitness business,” states Rasmus Ingeslev of Fresh Fitness / Wexer (Denmark / Norway, and member of IHRSA´s European Council. “I see many opportunities for growth, particularly using current technology and networking with other successful operators.”
Here are 11 areas I have identified as being relevant to European clubs in general:
1. Economic Survival: there have been hundreds of club closings in PIGS countries in the past 2-3 years, with more to occur in 2013. Clubs also close, or are taken over in other countries: the Netherlands experience a contraction of 100 clubs in 2012 alone, and at one point in early 2012 there were several clubs closing each week. Portugal was particularly affected by the increase in VAT from 6 to 22% as well as government regulations harmful to the business. The purchasing power loss by many citizens as well as high unemployment were also major causes.
One Portugese franchise operator, Viva Fit, had 30 of their locations close. In consolidating, they adapted their business model by making nutrition a compulsory part of their offering. Thus, they could apply a reduced (blended) rate of VAT (15% vs. 22%), as well as reach out to the over 20.000 former members with an online nutritional support package. They also expanded into other countries (Singapore, India).
2. Positioning – now and in 5 years: some operators have chosen to focus on one model, target market, type of offering. Prime Time Fitness in Frankfurt is serving the business market in Frankfurt with prime locations, quick workouts in limited space (no Group X) and a high level of quality supervision at a mid-market price (49-59 Euros/month). The same footprint is Evo Fitness´ model, but they essentially outsource instruction to 5-8 personal trainers per club, who pay a rent and coordinate their schedules to ensure coverage at all times in what is otherwise a staffless club concept.
Repositioning is what Health City has been involved with, since taking over (in two steps) the Fitness First clubs (BeNeLux first, then Italy, France and Spain nine months later). Where there were overlapping clubs in the same geographical market, Health City closed, rebranded and / or repriced a number of their clubs, moving from three models to two (now all inclusive or budget). Moving away from the traditional muscle (body building) image to being part of the health care and prevention solution, which is also linked to an increasingly ageing population with different wants and needs is part of this process (see point 10 on club standards for more on this point).
3. Short and Long Term Strategies / Exit: David Patchell-Evans, principal of the 312 all-Canadian “Good Life Clubs” stated “When you get into a business you should also be thinking of how you get out of (sell) the business in five years time.” It is never too early to prepare for selling your clubs (or in the case of the Good Life Clubs buying clubs from other, struggling operators) by being well networked, well-financed and properly positioned (including staff) for the right opportunity at the right time.
4. Trial programs vs. long term contracts / Supplementary Spend: how we price and package our offering is changing. While in Eastern Europe the habit of a one year commitment is mostly not established, more western European countries are facing pressure with their primarly (12 month contract): be it for competitive reasons or government / consumer protection agency pressure, I am observing a trend away from longer-term contracts to shorter commitments. Pure Fitness in the UK, Evo Fitness in Scandinavia and Fitness Hut in Portugal all offer monthly cancellation options. Many former members who signed contracts but did not use the clubs are vary of longer term commitments. Others would prefer to only go the the club during the 2-3 seasons of bad weather. We should be listening to these voices.
Slim Belly is an example of a four week program that brings in new prospects into the club without a long-term commitment. Once people have seen initial success and overcome their prejudices / pre-conceived notions of clubs (e.g. being only for fit people), they are more likely to make a longer term commitment. Leading clubs are now seeing 30% and more of their total revenues coming from non-dues sources, and this number will continue to grow as we understand and define our business differently…see next point as well.
5. Personal Training / Functonal Training; Home Market and services outside the club: Tobias Mews is addressing this issue in his Forum presenation on “Leaving the Box”. Personal Training now amounts to 8-11% of total revenues in many leading clubs. The “new” functional training movement (started 15 years ago in USA) is helping this development on a global scale, as new, innovative methods such as suspension training, ropes, kettlebells, power bags, etc. require new skills to be able to be used safely. Beyond this, offering your services outside your clubs´four walls is being discovered by more operators (Health City has identified this as a major growth area, along with online sales of products). Before confident personal trainers leave your club and become your competitor, consider partnering and creating saltellites.
6. The Asset Called Health – changing consumer values: the good news for our industry is a growing awareness that the current health care system increasingly cannot finance their health care needs alone. People are developing a growing willingness to pay for solutions on their own. Partly caused by the financial / monetary crisis of late, job insecurity and the need to be physically and mentally competitive with younger workers to maintain an income level to keep their standard of living, consumers are looking to us (but also physiotherapists, osteopaths, personal trainers and other “life coaches” to help them stay competitive. The solutions here are not price sensitive, but results-oriented.
7. Public ‐ private partnerships (Inge Sport): as local and national governments are forced to reduce their expenditures, running deficit-laden swimming pools and other public recreation facilities is increasingly coming under scrutiny. The UK, under Prime Minister Margaret Thatcher, began the process of privatising local community centers three decades ago. Inge Sport in Spain is taking advantage of the same development in Iberia, also now expanding into Portugal with the same model. Other countries (Sweden) have also been adapting to this model. Now in Europe several thousand of these facilities (10% of all health and swimming centers in Europe) are being managed by private companies.
8. Use of Technology, Web Offers (Fitness Hut, McFit, Wexer, Gantner): online memberships are growing, not only in the budget sector. At Pure Fitness (UK), Fitness Hut (PO) and Evo Fitness (NO-FI) you cannot join at the club. Armbands providing cashless payment inside the club are growing in acceptance (Austrian-based Gantner supplies McFit, Prime Time Fitness, Fresh Fitness and other clubs with this solution). Members are self-administering their accounts. Tech-savvy clubs are using SMS and Email marketing to their members extensively. Wexer, Playoke and other suppliers are also offering virtual class solutions.
9. Popular Group Programs: The phenomenal global success of concepts and programs such as Les Mills and Zumba is worth including in your offering if you have the space. The increasing abundance of instructors who can teach these courses reduces dependency on GroupX teachers. Beyond this, yoga and pilates offerings demonstrate your core competence. Such courses should allow you to charge an extra fee as these classes are usually smaller, require more specialised (and high paid) instructors. Virtual classes can complement your offering.
10. Budget Club Growth: also in Italy this global trend is having its impact. This sector is also becoming more diverse, with premium budget, add-on services and using technology (virtual classes, cashless payment in the clubs and online memberships.
How do you compete (if you can´t beat ´em, join ´em?) – there are a number of options. Not everyone is looking for the lowest price. A new, low-price competitor can take away 10-20% of your business short term. You and your staff need to be focused on providing a better customer experience to survive.
11. Club Standards – quality, image, confidence: to differentiate yourself from low priced offerings it helps if your club has a verified standard of quality and an image of being a place customers can get individual help and proven results. Being aligned with other health care providers (doctors, physiotherapists, even hospitals) can help your image. But standards need to be verified externally and maintained for consistent quality of delivery. Switzerland is leading the way (Qualicert), with insurance companies and corporations providing partial reimbursement of health club fees to those customers / employees who work out in approved (certified) facilities. This trend is now beginning in Germany and other countries with the introduction of the DIN norm.
Some operators and countries have been able to reach double digit penetration rates. They have done so by changing their models. Become inspired to do things differently, to grow and to thrive in increasingly competitive markets.
Hans Muench is Directorof Europe for IHRSA, International Health, Racquet & Sportsclub Association. Born in Canada and now based in Munich, Germany, he can be reached at firstname.lastname@example.org
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