industry insights
predictions
HCM invited industry experts from around the world to warm up their crystal balls and share thoughts on what the next year will hold
Alicia Whistlecroft Assistant director Deloitte corporate advisory
PHOTO: Deloitte
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There will always be demand for bricks and mortar fitness operators, because there are some types of training which just cannot be achieved online or at home to the same effect. 30
Handbook 2021
anticipate people showing a renewed appreciation for their health and wellbeing and looking to increase the amount they exercise. The industry has seen some membership attrition due to the anticipated economic challenges for consumers. This was probably less severe in the budget segment when compared to the mid-market and premium segments, as a consequence of the proportion of discretionary income the membership accounts for. Many operators believe a large part of their initial attrition was from sleeping members. Since the start of the pandemic, businesses have been forced to explore ways of engaging more with customers which goes to the heart of the biggest challenge in the industry: minimising churn. The quick pivot to adapt offerings, by developing digital content sharing platforms enabled operators to keep members engaged, which is expected to have a positive impact on customer retention figures going forwards.
As the lockdowns reoccurred, several operators were able to introduce charges for their various online offerings, such as pay-as-you-go or new online subscriptions. Nonetheless, the pandemic has put a huge financial strain on many UK operators, due to the large periods of 2020 where revenues were essentially zero. The initial hit on the industry signalled yet another downturn in the already squeezed midmarket and less focussed businesses, which resulted in a few distressed merger and acquisition processes last summer, including Xercise4less and DW Sports, largely from the rump of the mid-market sector.
Strong balance sheets
Operators who have been able to weather the storm the best are those who had strong balance sheets going into the pandemic and have been able to support their liquidity by negotiating rent holidays with landlords, business rates holidays and tax deferrals and using furlough. Where operators are still liable for these payments, more distressed assets are likely to come to market as these amounts fall due. So it’s likely we’ll see more consolidation within the industry, as the disruption continues to www.HCMhandbook.com
