Low-cost vs luxury gyms

Are gym users becoming disillusioned with traditional, expensive, fitness clubs? Miles Rimell believes that there is a place in the market for budget

Market drivers

The experiences of low-cost gym providers in the UK, Europe and the US show that if the model is right, consumers will flock in droves. Take McFit, Europe’s leading low-cost gym business. It has been trading in Germany for 13 years, is credited with fundamentally changing the structure of the entire German fitness industry, and should have a million members at the end of 2010.

“The factors we’ve seen driving the growth of low-cost gyms have been affordability, simplicity, consumer opinion of ‘traditional’ clubs and a backlash against conspicuous consumption,’ explains Algar (see Figure 2: Key market drivers).

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“Many first-time gym goers are attracted because low-cost gyms cost at least 50% less than the average rate, often with a ‘no contract’ proposition. This means they can try, safe in the knowledge that they can leave at any time.

“Stripping away the extra facilities associated with a ‘full-service’ club also makes the proposition very clear. Coupled with this, the pricing policy is reduced to a maximum of one or two options (a monthly ‘leave-at-any-time’ price or a lower contract price) taking away the ‘choice trauma’ that comes from having too many membership types and prices,” Algar adds.

For customers who are already gym members, but attend infrequently, the low-cost offering can make ‘traditional’ clubs look poor value. These gym switchers are drawn because they can choose service elements that have specific personal value to them. A consumer who never uses the pool at their gym still ‘pays’ for it, whereas at a low-cost gym, the term ‘you get what you pay for’ comes into its own.

“McFit, for example, charges members 0.50 cents for a shower. Some may think that’s foolish, because the accepted ‘wisdom’ is that this is included in the membership price. However, the reality is that many members don’t use club showers. So showers ‘included’ provides no value to them,’ says Algar.

Lastly, the move away from conspicuous consumption is not to be underestimated. “Not so long ago, surrounding oneself with ‘aspirational’ items and showing them off at every opportunity helped to define our place in the social ‘pecking order,’” says Algar. “Consumers now seem less concerned with purchasing ‘status’ and more interested in receiving value. It’s no longer a contradiction to ‘mix and match’ premium and ‘low-cost’ brands.”

Moving forwards

The UK low-cost sector now has a strong sense of momentum, with several brands planning to take advantage of affordable property created by the recession to increase their club portfolio. In the last two years, six new low-cost brands have launched, each with aggressive growth strategies.

“In Germany, where the low-cost formula has been established for 13 years, approximately one-third of all members now belong to this category,” says Herman Rutgers, executive director of the European Health and Fitness Association.

The trend has already begun to infiltrate the Middle East’s fitness scene — Fit4less (an énergie fitness clubs brand) has opened a low-cost club in Qatar.

“Location is key. We target territories that are well catered for by mid-market and premium operators. These areas already have the savvy past and present fitness club members who value the Fit4less proposition,” says group brand and marketing director, David Beattie.

Even in a region that defines itself by offering unmatchable luxury, it’s a trend that can only continue. The mid-market and premium sectors will play a key role, but they must clarify their added value.

“We shouldn’t expect consumers to automatically flock back to premium goods and services after a recession,’ says Algar.
The market, ultimately, drives the price and in the long run, the consumer will define which sectors will succeed. Those who provide the facilities to meet the need will reap the benefits.