Fitness chains strive to diversify offerings

The American chain Gold’s Gym is eyeing up the UK as many indigenous fitness firms explore ways of securing customers. Will the new arrival stir up the market? asks Branwell Johnson

The gym and fitness centre sector is seeing a sudden burst of activity, with the American brand Gold’s Gym looking to muscle in on the UK action and homegrown chains overhauling their offerings.

LA Fitness, the only UK chain still publicly quoted, has just announced a plan to trial small “weight loss” centres in partnership with supermarkets, hospitals and other suitable locations.

The planned centres would strip out intimidating high-maintenance lifestyle trappings, such as mirrors and MTV video monitors, and instead focus on affordable courses designed to help people shed the pounds. The chain is feeling particularly bullish after good results revealed last week show a 27 per cent increase in pre-tax profits to &£8.1m, on turnover up 20 per cent for the year to July.

Meanwhile, Gold’s Gym, which began as a weightlifting centre at Los Angeles’ “muscle beach” and has 550 gyms and 2.5 million members worldwide, is planning an assault on the UK market. It has four UK gyms operating under a licensing agreement but wants to introduce its franchise model to the UK with the aim of getting ten sites up and running.

The health and fitness sector underwent rapid expansion earlier this decade. The value of the private health and fitness market increased by 62 per cent between 1998 and 2002, with revenue from membership fees alone topping more than &£1.3bn in 2002 (Mintel). But as Deloitte partner Adrian Balcombe, who heads the wellness division, points out: “The industry suffered through 2002/3 as the economy was doing badly. The South-east and the City, where there are a lot of gyms, were badly affected.”

Local authority gyms, which offer pay-as-you-go facilities, also raised their game. Opportunistic venture capitalists moved in to buy several chains, including Holmes Place, Esporta, Total Fitness and Fitness First.

Balcombe says once the market flattened, “a different style of management” was needed. Several chains have overhauled top-heavy management structures. Fitness First, Europe’s largest chain, announced 20 redundancies in the UK last week. The chain is also looking for a new marketing director (MW last week).

Fitness centres suffer from a huge churn in membership – as high as 50 per cent each year. Much effort is spent on keeping those who signed up in a flurry of guilt at their over-indulgence during Christmas. It is thought that the UK fitness sector only has a ten per cent penetration of the population – Mintel recorded 7.5 per cent in 2002.

Because of the Government’s message that society needs to be healthier, and the attention bestowed on the dangers of obesity in the media, the chains feel that there is huge potential at the moment to recruit from the majority of people to whom gyms have been anathema.

The debate over whether brands can play a part in grabbing business or whether the consumer is driven purely by price and location is hotting up. Gold’s senior vice president Luis Campalans made controversial comments last week in the national press. He said: “There were a lot of companies here over the past ten years that pumped investors for money and went on a building spree, manufacturing brands that have failed to connect with customers. No single brand dominates – it is very fragmented. Now is the time for a strong health club brand.”

Ian Sherman, head of interior and architecture at Corporate Edge, has worked with a number of fitness chains. He agrees in part with Campalans, although he believes that Gold’s Gym will have its work cut out to make an impact in the UK as it is perceived as a “downmarket brand” that sells rupture belts and lifting gloves.

He adds: “The industry still has an image of Lycra-clad beauties and muscly men lifting weights. The entrepreneurs who built the sector did not have branding on their radar because they did not come from a consumer goods background.”

The gyms argue that evolution is occurring. Virgin Active, which is 40 per cent owned by Virgin Group and has a strong brand to build on, has just introduced a fitness programme aimed at children and launched its Diamond Membership. The latter offers the chance to sign up to a capped monthly rate for life, currently set at &£39.95.

LA Fitness marketing director Zoe Sharp says the company, with its 67 high street locations, aims to be “part of everyday life” and recognises changes in health trends. She says: “Ten years ago, it was all about high-impact aerobic classes – now yoga and Pilates are the key classes.”

The most powerful attraction to the gym-shy may be an appeal to the wallet. Prudential has just launched private health cover PruHealth, which offers discounts for those who pursue a healthy lifestyle. The company has linked up with fitness chains, so expect to see similar tie-ups between finance companies and the fitness sector in the future.

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