Trends in UK Health & Fitness Trends in Health & Fitness Trends in UK Health & Fitness Edexcel Pre-Release 2017 www.a-zbusinesstraining.com

The past 10 years There have been 4 phases: Pre-recession (consumer spending boom) The recession 2008/9 and its ‘austerity’ aftermath 2010-2012 The 2012 Olympics – sport and fitness bonanza The recent years/back to normal: 2013-2016

Pre-recession The market was growing steadily; the private sector was still dominated by big, multi-sport leisure centres with high annual membership fees In 2008 11.9% of the population were members .. And the value of the market (its ‘market size’) was £3.66bn The average spend per member was about £430 a year

2009 – 2012 The Recession This was the first recession of the modern Health & Fitness era. Would membership be treated as a luxury – and cancelled? Or as a necessity – as a spending priority? Market growth slowed in these years, but between 2009 and 2012 membership numbers rose by 3.6% and income by 2.4% But the growth came from new-style, dedicated, low-membership-cost gyms

2012 London Olympics There may have been a slight acceleration in memberships around and after the 2012 London Olympics (but it’s not that clear Before 2012, % population penetration was growing at 0.2% a year – but in the 3 following years it grew at more like 0.6% a year – helping the market size to grow faster too

Recent years Quite fast growth in the number of new clubs and in market penetration. The growth from 11.9% of the population belonging to a club in 2011 to 14.3% in 2016 is striking. But there are clear signs that bigger clubs are struggling against the low-cost gyms. The average revenue per club member is not rising in line with inflation (in real terms)

Market growth, but average revenue falling

Trends in the number and size of UK health & fitness clubs Number of clubs % change 2008 5754 2011 5852 +1.7% 2012 5924 +1.2% 2013 6019 +1.6% 2014 6146 +2.1% 2015 6292 +2.4% 2016 6435 +2.3%

Trends in size: rapidly growing importance of low-cost gyms % of all private sector clubs % of all private sector revenue % of all private sector membership 2013 6.0 14.0 2014 7.7 7.3 18.7 2015 9.0 10.0 24.0 2016 12.0 13.0 32.0 Source: State of UK Fitness Industry

Growth by takeover There are two main periods for takeovers: during rapid market growth, as slow- growers make bids to avoid getting left behind During the early stages of market decline, as falling capacity utilisation forces consolidation In this market, the rapid growth of the low-cost sector creates the former pressure While decline in the traditional, full-service sector creates the latter pressure

Takeovers & the low-cost sector Pure Gym founded 2009 by a group of investors By Feb 2012 it had made its first £1m of profit By May 2013 it had 45 gyms and was bought by a private equity group which injected £50m to finance growth In Feb 2014 Pure Gym and The Gym Group announce a merger In July 2014 merger abandoned after CMA announces a more detailed inquiry into the plan In May 2015 Pure Gym buys LA Fitness, a 45- strong chain. £20m is spent converting them

Takeovers & the full-service sector The consolidation period 2008-2016 has seen various mergers, often from a position of weakness. 2011: Esporta’s 55 clubs bought by Virgin for £77m 2015: Pure Gym buys LA Fitness for around £70m and converts them to a low-cost format 2016 Nuffield Health buys 35 Virgin Active Gyms 2016: DW Fitness buys Fitness First But it’s probably true to say that not enough capacity has been taken out of the full service sector.