Bouncing Back

Nigel Benton draws together an array of recent research and opinions on the performance of and future prospects for fi tness clubs

Highlighting that the performance of Australian fitness facilities over the past five years has been “volatile” - and not entirely due to the pandemic - a series of reports from market research group IBISWorld has charted a steady rise in health consciousness as supporting the fitness industry’s growth over the period from 2017.

IBISWorld’s Bound to work out: Gyms and Fitness Centres in Australia study explains how the proliferation of budget 24/7 gyms has taken significant market share away from traditional full-service gyms, particularly from major players Fitness First and Jetts Fitness during the last half decade.

The study shows the resilience of chains such Anytime Fitness and Snap Fitness and their continued expansion across all states and territories, consolidating their marketleading positions.

IBISWorld Industry Analyst, Darcy Gannon explains “while the increased accessibility of 24-hour gyms is attractive to many consumers, their affordability has been the main factor driving their popularity.”

However, repeating predictions made by IBISWorld in both 2018 and 2019, Gannon cautions that “the budget gym market has become increasingly saturated, with growth in membership numbers slowing and strong price-based competition pressuring operators in this segment.” Approaching Market Saturation? Providing insights on location openings and closures, GapMaps annual Health & Fitness report tracked location openings and closures among 22 fitness brands over 3,424 exercise locations for the year ending 30th June 2022 - with 159 facilities opening and 49 closing.

Among the brands reported on, Body Fit Training Australia (BFT) added 38 centres, followed by Anytime Fitness (25),

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Plus Fitness team members celebrate at the business’ 2022 awards.

Fitstop Australia (24), Studio Pilates (15) and Snap Fitness (13).

Looking at closures, Jetts Fitness accounted for 11, followed by Curves with nine, Anytime Fitness with five and EFM Health Clubs with four. The remainder were spread across 12 other brands.

The final quarter of the 2021/22 financial year saw 30 centres open and eight closures with openings during this period led by Anytime Fitness with seven and Fitstop Australia with five.

A 3:1 ratio of gym openings to closures suggests an industry in good health.

While overall membership numbers across the industry are hard to ascertain, Viva Leisure’s most recent bi-monthly presentation shows ongoing growth, from 321,000 in June and July to 325,000 in August.

At the end of the 2019/20 financial year Viva Leisure had 94,000 members, before its Plus Fitness acquisition saw it reach 298,000 members at the end of the 2020/21 financial year.

IBISWorld also points to Viva Leisure’s emergence “as a major player”, stating that its acquisition of “the Plus Fitness brand in August 2020, substantially increased its number of locations, members and overall market share.”

Franchising Key to the sector’s performance has been franchising.

With Australians embracing franchising across fashion, fast food and retail (IBISWorld estimate the industry as a whole is worth over $180 billion in annual revenue) - much of the fitness industry’s growth has been driven by franchising. 9Round, Anytime Fitness, BFT, EFM Health Clubs, F45, Fitstop, Jetts, Plus Fitness, Snap Fitness and World Gym are among the leading fitness franchises.

With confidence that the sector will continue to thrive, Chris Caldwell, APAC Chief Executive for 9Round and Snap Fitness franchisor Lift Brands, notes “franchising is gaining popularity, so much so that we are expecting a 25% increase in franchises from December 2021 by the end of 2025.

“Franchising offers a support network, existing brand reputation, resources and so much more than if you were to start a completely new business from scratch.

“Through COVID and now in the face of inflation and much financial uncertainty, franchising can provide more security and seems to be the more appealing option for many young people wanting to try their hand at business ownership.”

International Success and … While Australia, like much of the world, has traditionally looked to the USA for leads in fitness, Fitstop, F45 and BFT have reversed that trend in recent years by exporting fitness, ‘Oz-style’.

At the end of last year, BFT secured a $60 million cash upfront financial injection from Xponential Fitness for its intellectual property, with US-based Xponential, now the Master Franchisors for the brand in the USA and Canada while BFT’s APAC team are now focusing their energy on more launches in Australia, Asia, Europe and the UK.

In July, Fitstop announced it would also be expanding in the USA, backed by a $3.3 million investment from Lift Brands with the capital injection following on from the company securing a 30% stake in Brisbane-based franchisor early last year.

If writing in the first half of the year, an account of F45 would be very different from the Sydney-founded franchisor’s current status.

From its creation in 2013 (offering 45-minute high-intensity group workout), growth to 1900 franchises sold across 40 countries at the end of 2020, attracting Hollywood actor Mark Wahlberg (pictured right) among its investors and listing on the New York Stock Exchange in July 2021 at a value of around $2 billion ($US1.46 billion), the business’ trajectory had only been up.

Having been one of the fastest growing franchises in the world with a target of opening 1,000 new studios in 2022, as of July the company revealed it would not attain this growth.

Instead, it reduced its income projections by more than half, announced that it was cutting staff and experienced an 88% fall in its share price.

What happens next is uncertain. With its costs now lower and its projections more realistic, F45 executives seem confident the group will come out the other end, and are reported as being ready to take F45 private again.

However, by comparison with its years of growth, it is now facing far more competition and faces the risk of losing customers and franchisees departing.

Nonetheless, Wahlberg, who apparently still owns 26% of the company, has recently shown his ongoing support for the brand, calling it “the best workout on the planet.”

Membership, Spending and Attendance Key to industry growth has been an increase in real household discretionary income over the period, which Gannon says “has facilitated consumer expenditure on high-value added gyms and fitness centre services.

“The rise in consumer sentiment over the same period has encouraged spending on premium and functional training gym memberships (so) while budget gyms have captured many casual gym attendees, premium gym establishments have successfully targeted fitness enthusiast markets.

“As a result, consumers have become more willing to spend on high-value industry services.”

Willingness to spend has been supported, Gannon says “by a steady rise in health consciousness based on greater awareness about the health risks of sedentary lifestyles, including increased risk of heart disease, hypertension, diabetes and osteoarthritis.

“Furthermore, the increase in the

level of obesity over the same period has underpinned demand for industry services as people have sought to assuage their health concerns. For many, use of gyms and fitness centres is seen as a leisure activity and heightened working hours have constrained the amount of time individuals have been willing to allocate to industry services.”

IBISWorld also caution that “COVID-19 has severely limited industry revenue and profitability”, advising that “industry revenue is expected to decline at an annualised 5.5% over the five years through 2021/22, to $2.2 billion.”

It also advises that “lingering unfavourable trading conditions stemming from the pandemic have hampered industry recovery.”

However, within this growth, IBISWorld Senior Industry Analyst Suzy Oo has identified that a notable number of Australians are falling off the fitness wagon, referring to findings that while one-third of the Australian population have a gym membership, roughly half of members visit their gym less than once per week.

Oo explains “the dominant reason behind this contradiction can be attributed to a lack of sufficient time or having too many commitments. Approximately 55% of the adult population do not meet the recommended physical recreation guidelines.”

Technology and the Hybrid Fitness World Findings from a recent survey commissioned by digital agency Accedo show that 87.5% of fitness providers list new technologies, like virtual reality (VR) and augmented reality (AR) as being important to their operations.

Accedo Solutions Director, Shawn Zeng sees this acceptance as being part of “the very nature of working out” explaining “fitness classes are popular because consumers get that interaction with an instructor, as well as other participants, and get real-time and valuable feedback on how to improve.

“VR and AR are key to helping providers replicate that online.”

Although impacted by gym closures

Encouraging Activity: Awarding Excellence

AUSactive’s upcoming Senior Management Summit will show how it is putting its strategic plan into play with latest events and initiatives

Having evolved from Fitness Australia at the end of last year, AUSactive’s most significant rebrand ever has seen it powered up for a post pandemic future, giving according to AUSactive Chief Executive Barrie Elvish (pictured), “a renewed focus on what it is our association represents, stands for and advocates for (with) a strategic plan that ensures we remain on the right trajectory for our members as well as the broader health and wellbeing sector.”

Advocacy One of AUSactive’s most significant steps forward, Elvish explains “has been in government advocacy and the preventative health space, which will see us meet soon with the Assistant Minister for Health and Aged Care, Ged Kearney to discuss the importance of physical activity and exercise in preventative health care.

“This follows a productive meeting with Dr Mike Freelander MP, who is the Chair of the Australian Government’s Standing Committee for Health, Aged Care and Sport.

“Support from all levels of government for our future public awareness campaigns will ensure we can reach all corners of the community, raise greater awareness and create a lasting legacy.”

AUSactive recently set out the strategic priorities it aims to achieve in its government advocacy based on priorities to have exercise, physical activity and fitness considered integral components of Australia’s preventative health thinking and policies.

Key among AUSactive’s objective is a national public health campaign funded over at least a five-year period encouraging greater participation in exercise and physical activity.

Elvish explains that this “will save the government significant costs in the health budget via less incidences of many physical ailments, stroke, diabetes, heart and kidney disease and the like as well as mental health problems.

“Such a campaign is not only desirable, it is essential for the nation’s health and wellbeing and to fulfil the 2018 commitment to the international campaign to encourage physical activity.

“Australia committed to a 15% increase in Australians participating in some form of physical activity by 2030 (and) time is running out.”

National Awards Program For the first time, AUSactive hosted state events to celebrate local success and achievements. In total 54 individuals and businesses were crowned at a State and/ or Territory level.

The culmination of the 2022 National Awards Program will be the National Gala on 21st October at the Ivy Ballroom Sydney where winners across 28 categories will receive their awards.

Significantly, this will be the first national event of its size AUSactive has held in almost three years.

AUSactive Awards Senior Management Summit In another first for AUSactive, it will be hosting a Senior Management Summit (SMS) on the day of the National Awards Gala.

The success of business roundtables during regional and state award events during September, presented by leading industry consultant Justin Tamsett of Active Management, prompted AUSactive to add the Summit in advance of the Awards Gala.

This inaugural Summit will be a day of tailored content carefully crafted exclusively for anyone in the health and exercise industry who is passionate about what they do and is looking to accelerate their learning and knowledge for the future.

It’s an exciting opportunity for business owners, corporate staff, key operating personnel and marketing professionals in the sector to come together, featuring keynote speakers, expert panels and international addresses.

Fernwood Female Fitness dominates the women only gym market.

due to the pandemic, Zeng notes that “some players have actually benefited from the fact that consumers were forced to stay at home” seeing that “the virtual boom” may continue with VR and AR having a role in a post-COVID fitness landscape.

Another report, A changing fitness consumer, published earlier this year by global management consultancy McKinsey & Company, found that postpandemic, wellness is a top priority in everyday life for 50% of all consumers. The report revealed that these findings are even more powerful among consumers with hybrid fitness routines - among this group, 61% now prioritise wellness more than they did pre-pandemic.

Reinforcing the importance of facilities, McKinsey found that fitness consumers now see digital offerings as complementary to, rather than a replacement for, the gym: even during the pandemic, only 17% considered livestreamed content a substitute for the gym, while only 15% and 21% respectively saw free and paid apps as gym substitutes.

Yet as McKinsey observes, “people’s fitness routines have evolved meaningfully” as consumers around the world have adopted “a more hybrid routine”. Gyms very much remain in the mix, but fitness consumers have quickly showed a willingness to embrace new digital habits within the norm of their wellness routines.

Indeed, today’s reality brings to bear the predictions of lockdown, when fitness consumers told McKinsey they planned to adopt more diverse, hybrid workout routines once fitness facilities reopened - routines that would incorporate digital and at-home alongside traditional facility visits.

Boutique Gyms Looking at the American College of Sports Medicine’s most recent Worldwide Survey of Fitness Trends, Davin Sgargetta, founder of Melbournebased Hook Media, has suggested that “there is an anticipation that boutique fitness facilities will also continue to see a sharp rise in the market”, pointing out that “boutique fitness facilities often outperform regular gyms in terms of retention.”

Australians identified in the ACSM study, also indicated that functional fitness, group exercise training, strength training with free weights, fitness programs for older adults and training with a registered exercise professional are their priorities.

Women’s Gyms Another IBISWorld report Out of breath: Women’s Gyms in Australia, identifies that revenue in the female-only gym market has contracted over the past five years, primarily due to growing competition and a highly saturated fitness market, as well as reduced demand in response to the COVID-19 pandemic.

It identifies that “requirements for more flexible exercise time, and mixed consumer sentiment have driven many members to migrate to more cost-effective 24-hour gyms that provide cheaper memberships (while) the growing presence of ladies-only training areas in some full-service gyms has also negatively affected women’s gyms, providing greater opportunities for consumers to find a comfortable workout environment.”

Nonetheless, IBISWorld predicts that market conditions will improve over the next five years with “changing population demographics, including a projected increase in the number of older and overweight women, set to support the industry while positive consumer sentiment and increases in household discretionary income are anticipated to benefit industry operators.”

Staff, Inflation and Pricing Among other challenges Justin Tamsett, Managing Director of leading consultancy Active Management, cites staffing issues and consumers’ inflation fears as chief concerns.

Quoted in the International Health, Racquet & Sportsclub Association’s mid-year State of the Health Club Industry 2022 report, Tamsett advised “there’s also a hesitation among owners to do anything with prices to cover the increased costs.

“(Owners think) if I haven’t got leads at my current price, then if I raise my price, I’m going to get even less leads, less sales. It’s not going to work for me.”

He notes that this isn’t the case elsewhere, adding “in the United States, they’re raising prices anywhere from 5% to 20%, but in Australia, they’re only raising their prices about two dollars.” Nigel Benton is Publisher of Australasian Leisure Management. Bound to work out: Gyms and Fitness Centres in Australia and Out of breath: Women’s Gyms in Australia are two of a series of industry reports released this year by the IBISWorld market research group.