The health club business would make a good choice for a business-degree thesis on how markets are born, grow and reach maturity. There have been three phases so far:
PHASE ONE: In the beginning was the sweaty urban gym, transformed in the 1990s into a new leisure destination: a hybrid of the local leisure centres and the best of the pumping-iron gyms. City money flooded in as company after company floated on the Stock Exchange, an entirely natural phenomenon because sharply dressed dealers and analysts were among the most to cough up for a subscription to an exclusive health club. (Like so many leisure sectors, private equity has since stepped in at most of the major club companies.)
PHASE ONE: In the beginning was the sweaty urban gym, transformed in the 1990s into a new leisure destination: a hybrid of the local leisure centres and the best of the pumping-iron gyms. City money flooded in as company after company floated on the Stock Exchange, an entirely natural phenomenon because sharply dressed dealers and analysts were among the most to cough up for a subscription to an exclusive health club. (Like so many leisure sectors, private equity has since stepped in at most of the major club companies.)
PHASE TWO: Market maturity came quickly, and by the early 2000s there were plenty of clubs (5,000+, according to the Fitness Industry Association) serving all the UK's cities and large towns. Most were standalone, but hotel clubs and semi-private gyms within leisure centres added to the wide choice. Several UK companies, fearing saturation, started to expand abroad, into Europe, Australia or South Africa.
PHASE THREE: Saturation, consolidation and differentiation are the ugly but inevitable words to describe this market (2005-2008) as it reaches middle age:
Saturation: by 2006, there were too many names competing for the same customers.
Consolidation: late 2006 and early 2007 saw Virgin taking over Holmes Place, Bannatyne buying up the standalone LivingWell clubs and the merger of market leader David Lloyd Leisure with Next Generation. At mid-2007, with the possibility of more mergers still on the cards, the largest companies - all of which have at some point bought up a competitor - were David Lloyd, Fitness First, Virgin Active, LA Fitness, Esporta, Bannatyne and Cannons. They operate some 600 clubs across the UK with just over 2 millon members.
Differentiation: brands can be similar to each other in a growth phase, but now they need to start differentiating themselves. For adults or families (or women only)? Budget or premium? For sports or exercise? "Wellness" or traditional fitness and weight loss?
Saturation: by 2006, there were too many names competing for the same customers.
Consolidation: late 2006 and early 2007 saw Virgin taking over Holmes Place, Bannatyne buying up the standalone LivingWell clubs and the merger of market leader David Lloyd Leisure with Next Generation. At mid-2007, with the possibility of more mergers still on the cards, the largest companies - all of which have at some point bought up a competitor - were David Lloyd, Fitness First, Virgin Active, LA Fitness, Esporta, Bannatyne and Cannons. They operate some 600 clubs across the UK with just over 2 millon members.
Differentiation: brands can be similar to each other in a growth phase, but now they need to start differentiating themselves. For adults or families (or women only)? Budget or premium? For sports or exercise? "Wellness" or traditional fitness and weight loss?
So, is the market heading for a Phase Four (decline) from the current plateau of Phase Three? Probably not. The enlarged (consolidated) club companies are still full of ideas to attract new customers, recent examples including Family Yoga at LA Fitness, a BUPA health check at Fitness First, evening classes at Esporta or open-air aerobics classes at Virgin Active.
And there is no immediate sign of the prices that clubs can charge falling off, which would be the first sign of market decline. Already, there is a wide choice of price brackets: eight different types of membership by price at Fitness First, for instance.
Underpinning the club market are some solidly favourable trends: the movement away from complicated, time-consuming team sports and towards simple fitness pursuits; the public-private initiatives at fighting obesity; and the way that larger clubs are filling a demand as family-friendly venues for healthy, safe activities under one roof.
