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18 Oct 2014
IHRSA 2014: Health clubs under threat from march of microgyms, says Ray Algar
BY
Jak Phillips
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Ray Algar, the man behind Oxygen Consulting, said gyms must be decisive if they are to thrive in a changing marketplace
Traditional health clubs offering a broad selection of activities at a mid-range price are at serious risk of having their business ‘salami-sliced’ away by specialised competitors. That was the view of respected industry analyst Ray Algar during his address at the IHRSA Europe Congress in Amsterdam yesterday afternoon (17 October).
He said activity providers must decide whether they wish to pursue the path of low-cost self-service gyms, which have been a big success story in recent years, or go-down the path of offering a high-quality support structure for their clients - as found in the new wave of microgyms - if they are to thrive in a changing marketplace.
The mid-market gyms charging an average of £42 a month in the UK may find that small chunks of their members will be lost to low-cost competitors and microgyms specialising in the activities they most prefer - such as yoga, functional training or group cycling - until the business is no longer viable, Algar added. Approximately 120 private gyms are closing in the UK every year as their business model becomes no longer feasible, he lamented.
The new price points which are forming, Algar said, are approximately £16 per month maximum for a low-cost operator (slightly more in London), while microgyms are able to charge between £20-30 per hour session for the unique experience that they offer. He stated that the talented trainers are a key part of the high price point for microgyms, describing them as ‘rockstars’ who are vital to building loyal communities around new aspirational brands, such as Psycle and Soul Cycle, in a way mid-market gyms haven’t managed.
He highlighted this by citing a quote from Fitness First CEO Andrew Cosslett, who on joining the company from the hospitality industry noted: “The gym industry might be great at fitness, but it has never been very good at connecting with customers.”
In response to these new competitors, traditional mid market giants such as Fitness First and David Lloyd are piloting their own microgym brands, while some industry observers believe that embedding these boutique concepts within existing health clubs could preserve their status as the traditional centre of active lifestyles.
Algar pointed out that, as with the initial wave of microgyms, many of the entrepreneurs behind boutique clubs are arriving from outside the health and fitness industry, bringing new ways of thinking. Whichever path traditional gyms choose to take, he concluded, they will need to be clear in their approach and embrace innovation if they are to succeed.
The focus on the emergence of microgyms served as an apt precursor to Algar’s forthcoming report on the sector - which is expected to be released in December.
Health Club Management will be in attendance for the duration of the event and (WiFi permitting) will be live reporting on key developments via the HCM website.
A preview of the event can be found in the September edition of HCM magazine on pp.26-27.
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