Gyms and Fitness Centres in Australia
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Budget brawn: Discount gym franchises demonstrate strong growth IBISWorld Industry Report R9111 Gyms and Fitness Centres in Australia January 2014 David Whytcross 2 About this Industry 13 International Trade 26 Operating Conditions 2 Industry Definition 14 Business Locations 26 Capital Intensity 2 Main Activities 27 Technology & Systems 2 Similar Industries 16 Competitive Landscape 27 Revenue Volatility 2 Additional Resources 16 Market Share Concentration 28 Regulation & Policy 16 Key Success Factors 28 Industry Assistance 3 Industry at a Glance 16 Cost Structure Benchmarks 18 Basis of Competition 29 Key Statistics 4 Industry Performance 18 Barriers to Entry 29 Industry Data 4 Executive Summary 19 Industry Globalisation 29 Annual Change 4 Key External Drivers 29 Key Ratios 5 Current Performance 20 Major Companies 7 Industry Outlook 20 Fitness First Australia Pty Limited 30 Jargon & Glossary 9 Industry Life Cycle 21 Ardent Leisure Group 22 24/7 Brands Pty Ltd 11 Products & Markets 22 Anytime Australia Pty Ltd 11 Supply Chain 23 YMCA Australia 11 Products & Services 24 GHF Pty Ltd 12 Demand Determinants 24 Fernwood Women’s Health Clubs Pty Ltd 12 Major Markets www.ibisworld.com.au | (03) 9655 3881 | firstname.lastname@example.org
WWW.IBISWORLD.COM.AU Gyms and Fitness Centres in Australia January 2014 2 About this Industry Industry Definition This industry consists of businesses mainly engaged in operating health clubs, fitness centres and gymnasia. These businesses provide a range of fitness and exercise services. Main Activities The primary activities of this industry are Fitness centre operation Gymnasia operation Health club operation The major products and services in this industry are Casual entry Classes Memberships Merchandise Personal training Similar Industries R9114 Sports Administrative Services in Australia Businesses in this industry facilitate or participate in sporting activities, or provide services to sporting activities including coaching services. S9539 Babysitting and Other Personal Services in Australia Companies in this industry provide personal trainer services. P8211 Sports Instructors in Australia This industry provides organised sports coaching and lessons, with instructors performing a role with clients similar to that of personal trainers. R9113 Sports and Recreation Facilities Operation in Australia This industry operates indoor or outdoor sports and physical recreation venues, grounds and facilities (excluding health and fitness centres and gymnasia). Additional Resources For additional information on this industry www.abs.gov.au Australian Bureau of Statistics www.ausport.gov.au Australian Sports Commission www.fitness.org.au Fitness Australia
WWW.IBISWORLD.COM.AU Gyms and Fitness Centres in Australia January 2014 3 Industry at a Glance Gyms and Fitness Centres in 2013-14 Key Statistics Revenue Annual Growth 09-14 Annual Growth 14-19 Snapshot $1.3bn -0.7% 4.8% Profit Wages Businesses $155.0m $487.3m 2,834 Revenue vs. employment growth Health consciousness Market Share Fitness First Australia 15 67 Pty Limited 19.4% 10 Ardent Leisure Group 66 12.4% 5 Percentage % change Anytime Australia Pty 0 65 Ltd 11.2% −5 64 24/7 Brands Pty Ltd −10 9.3% −15 63 YMCA Australia 7.8% Year 06 08 10 12 14 16 18 20 Year 05 07 09 11 13 15 17 19 Revenue Employment SOURCE: WWW.IBISWORLD.COM.AU p. 20 Enterprises Key External Drivers 1.8% 1.7% TAS ACT Health consciousness 6.0% Real household SA 0.6% NT discretionary income 9.2% 33.2% Total time available for WA leisure and recreation NSW Levels of obesity 22.4% Household savings ratio QLD 25.1% VIC p. 4 SOURCE: SOURCE: WWW.IBISWORLD.COM.AU WWW.IBISWORLD.COM.AU Industry Structure Life Cycle Stage Mature Regulation Level Light Revenue Volatility Medium Technology Change Low Capital Intensity Medium Barriers to Entry Medium Industry Assistance Low Industry Globalisation Low Concentration Level Medium Competition Level High FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 29
WWW.IBISWORLD.COM.AU Gyms and Fitness Centres in Australia January 2014 4 Industry Performance Executive Summary | Key External Drivers | Current Performance Industry Outlook | Life Cycle Stage Executive The overall structure of the Gyms and affordable gyms, which offset the Summary Fitness Centres industry has changed discretionary spending decline during over the past five years, steering the the economic downturn. Budget 24-hour industry towards healthy growth. While gyms such as Anytime Fitness and Jetts discretionary spending plunged at the Fitness have driven industry growth over onset of the global financial crisis and the past five years. These gyms generally instigated a trough in industry revenue in operate unstaffed, with the wage savings 2008-09, spending on fitness has since flowing down to consumers in the form increased. Industry growth has been of cheaper membership prices. The largely stimulated by the advent of market has become saturated, however, budget 24-hour gym chains, which have with stifled revenue growth of 2.2% grown exponentially over the past five forecast for 2013-14. years as consumers have been attracted Market saturation is expected to to their affordability and accessibility. contribute to an industry slowdown over Rising health awareness and obesity the next five years, with revenue forecast levels have triggered further uptake in to be worth $1.27 billion in 2018-19 gym memberships. These factors have following a 0.7% annualised decline. contributed to the industry being worth Consumers have abundant choices, an estimated $1.31 billion in 2013-14 including full-service gyms, women-only after annualised growth of 4.8% over the gyms and budget 24-hour gyms. past five years. Membership uptake is expected to fall as Health awareness has grown over the most consumer markets have already past five years, with TV shows like The been tapped due to niche gyms catering Biggest Loser promoting the benefits to all pockets of the population. Further and effectiveness of physical activity substitution from full-service gyms to through demonstrating the achievement cheaper 24-hour gyms is projected to of weight loss goals. With Australia’s cause revenue to drop. The revenue obesity levels continuing to rise, The decline is expected to move slowly Biggest Loser has provided added though, as an ageing population more incentive for overweight or obese people habituated to the gym environment than to attend gyms. Further growth has previous generations drives demand for occurred through the expansion of more full-service gyms. Key External Drivers Real household discretionary income moves into retirement and has more Higher discretionary incomes give available time to attend gyms. consumers greater scope to spend money on fitness products and services. An Health consciousness expected decline in discretionary income Spending on gyms and fitness centres is in 2013-14 threatens industry revenue, as positively correlated with improvements consumers can shift from gyms to cheaper in general health awareness across alternatives such as jogging and cycling. the population. A slight increase in health consciousness is projected in Total time available for 2013-14, which is likely to result in leisure and recreation greater inclination for consumers to An increase in the availability of leisure attend gyms and fitness centres. time has a positive effect on consumer demand for industry products and Levels of obesity services. While leisure time is expected to The ratio of overweight and obese people remain stable in 2013-14, a revenue to the overall population has grown opportunity exists for gyms and fitness year-on-year for the past 10 years, with a centres as the baby boomer generation further increase expected in 2013-14.
WWW.IBISWORLD.COM.AU Gyms and Fitness Centres in Australia January 2014 5 Industry Performance Key External Drivers Growth in obesity levels can drive disposable income. The savings ratio continued consumers into attending gyms as skyrocketed during the global financial overweight and obese individuals aim to crisis due to uncertain economic increase their general health. conditions. Expected growth in the savings ratio in 2013-14 will negatively Household savings ratio affect the industry as consumers spend The household savings ratio measures less on non-essential items like gym consumers’ propensity to spend their memberships. Health consciousness Total time available for leisure and recreation 67 0.8 0.6 66 0.4 Percentage % change 65 0.2 0.0 64 −0.2 63 −0.4 Year 05 07 09 11 13 15 17 19 Year 05 07 09 11 13 15 17 SOURCE: WWW.IBISWORLD.COM.AU Current The Gyms and Fitness Centres industry has grown strongly over the past five growth of 24-hour gyms is pushing the industry towards market saturation. Performance years despite encountering a downturn as The growth of 24-hour gyms has discretionary spending plummeted in the driven substantial increases in aftermath of the global financial crisis. establishment numbers, which are Post-global financial crisis growth forecast to rise by 6.5% annualised over occurred with the explosion of budget the five years through 2013-14. The 24-hour gyms such as Anytime Fitness smaller size and lower cost bases of these and Jetts Fitness. These gyms have added gyms have made finding suitable bulk to the industry through targeting a locations easier for new entrants, thus consumer market that was less likely to lowering barriers to entry and enabling purchase memberships to full-service industry revenue growth. With gyms like Fitness First and Goodlife franchises continuing to expand, the Health Clubs. Rising obesity levels and ratio of establishments to enterprises has increased awareness of the benefits of increased. Employment has grown by an gyms due to TV programs like The annualised 1.4% over the past five years Biggest Loser have also driven industry as strong marketing by personal training growth in the wake of the economic schools has resulted in the industry downturn in 2008-09. Industry revenue being viewed as a respectable career is expected to grow at a compound option. Wages have also grown overall annual rate of 4.8% over the five years despite falling as a percentage of through 2013-14, to total $1.31 billion. revenue. As fully qualified personal Revenue is forecast to grow by a slower trainers are taking up a greater 2.2% in 2013-14, indicating that the percentage of industry employment
WWW.IBISWORLD.COM.AU Gyms and Fitness Centres in Australia January 2014 6 Industry Performance Current Performance across all gym segments and can attract has resulted in profit margin growth, continued greater wages, the average wage has with low-cost gyms supporting this increased slightly. The overall industry growth through shedding the weight of recovery after the global financial crisis wage costs. Global financial crisis The economic downturn in 2008-09 had a has continued to grow through 2013-14. major effect on industry revenue. Demand With increased saving comes less for industry services is based on money to spend on non-essential items discretionary spending. While most such as gym memberships. Despite this, health-related expenditure is non- the eruption of budget gyms has driven discretionary, spending on gym industry growth as these cheap gym memberships is largely considered memberships do not greatly eat into discretionary because consumers can consumers’ finances. Intense competition participate in inexpensive exercise outside throughout the industry has also resulted of gyms. Although household in price competition and added flexibility discretionary income has actually grown in contracts. Some gyms have been over the past five years due to extensive renowned for locking consumers into interest rate cuts, consumers’ propensity long-term, expensive contracts. Added to spend that discretionary income has competition has resulted in gym dropped. The change in mindset of many membership prices generally falling, consumers is evident in household savings while the number of facilities offering ratio growth. The amount of disposable no-contract memberships, where income that households saved grew from members pay through direct debit and 3.9% in 2007-08 to 8.8% in 2008-09 and can cancel anytime, has grown. 24-hour gym boom The major difference in the industry in limited service resulting in limited wage 2013-14 compared with five years ago is costs and the savings flowing through to the acceptance and prevalence of membership prices. Chains with this budget 24-hour gyms. These gyms business model include foreign enable their members access at any companies Anytime Fitness and Snap time of day with their own individual Fitness, along with Australian-owned pass. While the increased accessibility chains such as Jetts Fitness and Zap of 24-hour gyms is attractive to many Fitness. Growth in 24-hour gyms has consumers, it is the affordability that is resulted in high market saturation as most attractive. 24-hour gyms generally nearly all consumer markets have been do not provide classes and are unstaffed tapped into, providing limited room for at most times of the day, with the further growth. Levels of obesity Further revenue growth can be achieved more individuals reach a point where with increased fitness awareness and a they decide they need to attend a gym to larger number of overweight and obese lose weight and become healthier. There people that require gym memberships is little incentive for healthy people who – from any type of gym – to lose weight. do not already attend a gym to sign up if Over 60.0% of Australia’s population is they are not going to actively improve considered overweight or obese, and this their fitness levels. ratio continues to grow. Higher obesity The popularity of TV program The levels drive industry revenue growth as Biggest Loser over the past five years
WWW.IBISWORLD.COM.AU Gyms and Fitness Centres in Australia January 2014 7 Industry Performance Levels of obesity has also driven growth in gym in at gyms and fitness centres. The continued memberships, particularly when coupled substantial weight loss of contestants with rising obesity levels. The Biggest provides added incentive for consumers Loser promotes the benefits of intense to join the industry’s increasing exercise that can easily be participated membership. Industry The Gyms and Fitness Centres industry returned to strength after the global Industry revenue Outlook financial crisis, with the wide variety of 15 gyms allowing consumers to choose a facility that perfectly suits their 10 requirements. These gyms have all 5 generally established their position in the % change market and have tapped potential 0 consumer markets. Thus, market −5 saturation is expected to cause growth to wane over the next five years. Industry −10 revenue is forecast to be worth $1.27 −15 billion in 2018-19 following an estimated Year 06 08 10 12 14 16 18 20 decline of 0.7% annualised, with more consumers substituting full-service gyms SOURCE: WWW.IBISWORLD.COM.AU for budget gyms that are more profitable but generate less revenue. Continued the next five years, while increased health awareness and interest in fitness pressure on profit margins due to intense activities will keep demand for gym price competition is expected to force services steady, while Australia’s ageing some operators out of the industry. population is likely to stimulate demand Growth in employment is expected to end for more class-based activities in full- as budget 24-hour gyms continue to service gyms. decrease staff requirements and The number of establishments within subsequently staff levels per industry the industry is expected to fall by a establishment. Wages are forecast to fall compound annual rate of 0.7% over the slightly over the next five years, with the five years through 2018-19. The average wage decreasing as there are less exponential growth of budget 24-hour available hours for the abundance of gyms is not expected to continue through part-time and casual employees to work. Market saturation There has been a rationalisation of exponential growth of budget 24-hour industry operators over the past five gyms has tapped what are potentially the years. The industry is clearly segmented final available consumer markets: those between full-service gyms such as Fitness who could not afford other gyms and First and Goodlife Health Clubs; women- those who could not attend gyms during only gyms such as Fernwood, Curves and regular opening hours. The penetration Contours; and budget 24-hour gyms such into these markets is largely complete. as Anytime Fitness and Jetts. There are With rationalised industry operators also exercise-specific gyms, such as and no innovative gym structures on the locations that specialise in CrossFit. Such horizon, the industry has reached a point rationalisation was not the case five years of market saturation because all available ago, when budget 24-hour gyms were consumer markets have been tapped. This beginning to enter the industry. The is expected to result in reduced
WWW.IBISWORLD.COM.AU Gyms and Fitness Centres in Australia January 2014 8 Industry Performance Market saturation membership uptake over the next five Continued migration to budget 24-hour continued years, with substitution between different gyms is also expected to occur as types of gyms to be more common than consumers find benefits in low new members joining a gym for the first membership prices and 24-hour access time. Potential areas of growth through despite the absence of staff and instructed gym substitution include high-intensity classes. Coupled with fierce price martial arts training and CrossFit, which competition among other established has erupted in the United States. segments, revenue is expected to fall. Interest in fitness Interest in exercise and fitness as a means levels, which have grown consistently to better health is expected to increase over the past 10 years. over the next five years. The industry has The revenue decline is expected to be benefited from lifestyle TV shows and partially offset by growth due to the magazines, better health education within ageing population. Customers in older schools and the workplace, childhood age groups are expected to drive growth obesity concerns and the growing as their health and gym awareness accessibility and affordability of industry increases. This age group tends to favour operators. Awareness can only reach a structured, less strenuous, leisure-based certain point, however. The popularity of fitness activities. The demands of this The Biggest Loser and state government demographic can stimulate growth for initiatives in schools and workplaces for full-service gyms that provide a range of better health have already increased structured group classes that are impact- health awareness and the benefits of free. The age group has increased attending the gym. Thus, with awareness capacity to pay for memberships from already commonplace, there are likely to full-service gyms and more experience be only incremental increases over the with and propensity for spending on next five years that will not significantly fitness activities than any previous affect the industry. Room for growth generation. As such, the decline of chains comes from expected increases in obesity such as Fitness First is expected to slow.
WWW.IBISWORLD.COM.AU Gyms and Fitness Centres in Australia January 2014 9 Industry Performance Life Cycle Stage Limited innovation in fitness techniques outside of CrossFit Market saturation means there are only few potential new customers Varied gym structures already tap into most niche markets 20 Maturity Quality Growth % Growth in share of economy Key Features of a Mature Industry Company High growth in economic consolidation; importance; weaker companies Revenue grows at same pace as economy level of economic close down; developed Company numbers stabilise; M&A stage importance stable technology and markets Established technology & processes Total market acceptance of product & brand 15 Rationalisation of low margin products & brands 10 Quantity Growth Health Insurance Many new companies; minor growth in economic importance; substantial 5 technology change Sports and Physical Recreation Clubs 0 Sports Instructors Gyms and Fitness Centres Sports and Recreation Facilities Operation Toy and Sporting Good Manufacturing -5 Decline Shrinking economic importance -10 -10 -5 0 5 10 15 20 % Growth in number of establishments SOURCE: WWW.IBISWORLD.COM.AU
WWW.IBISWORLD.COM.AU Gyms and Fitness Centres in Australia January 2014 10 Industry Performance Industry Life Cycle The Gyms and Fitness Centres industry is has occurred over the past five years, with in the mature phase of its life cycle. While the industry reaching market saturation its contribution to the economy and expected to stagnate over the next Thisindustry plummeted due to the global financial five years. is M ature crisis, a recovery has since ensued with Market saturation has resulted in little strong revenue and establishment growth. room for growth over the next five years. The industry is mature due to its high level The advent of low-cost 24-hour gyms of market saturation, limited technological contributed to industry growth over the change and relatively slow-moving past five years, but there is no new changes to the structure of gyms. business structure becoming popular nor Industry value added (IVA), which new consumer markets to tap into, measures the industry’s contribution to indicating industry maturity. There is the overall economy, is estimated to rise also limited innovation in the field as by 3.0% annualised over the 10 years weights, cardio and studio class exercises through 2018-19. IVA growth thus generally involve tried and tested exceeds estimated real GDP growth of the methods. The CrossFit boom represents overall economy of 2.5% over the same the only notable industry innovation over timeframe. The majority of this growth the past five years.
WWW.IBISWORLD.COM.AU Gyms and Fitness Centres in Australia January 2014 11 Products & Markets Supply Chain | Products & Services | Demand Determinants Major Markets | International Trade | Business Locations Supply Chain KEY BUYING INDUSTRIES R9112 Sports and Physical Recreation Clubs in Australia Sports and Physical Recreation Clubs require their athletes to be in constant peak physical condition, leading these organisations to utilise these services on a frequent basis. Z Consumers Consumers are the major market for fitness products and services. KEY SELLING INDUSTRIES C2592 Toy and Sporting Good Manufacturing in Australia Manufactures sporting goods used in this industry, particularly in the health and fitness club segment. K6321 Health Insurance in Australia Gyms and Fitness Centres have to pay for insurance to cover possible costs from incidental injuries occurring on their premises. R9114 Sports Administrative Services in Australia Supplies services to the industry such as fitness coaching. Products & Services Gyms and fitness centres offer a range of and wellbeing classes such as Pilates and facilities. General gym activities such as yoga; and cardio-based activities such as weights and cardio are covered under the popular Les Mills classes. Classes are membership fees. Gyms and fitness generally included in membership fees centres also provide more interactive and provide an exercise alternative that services such as studio classes and can be considered more entertaining, personal training. Additionally, gyms often interactive and social. Zumba and sell merchandise through in-house stores. CrossFit have become more popular over the past five years. Zumba is a dance Memberships fitness program, while CrossFit involves a With a combination of weights, cardio, combination of timed exercises that classes and personal training services promote strength and aerobic fitness. The generally required to draw consumers in, growth of these two classes has resulted the industry’s primary revenue stream is in the segment increasing its share of membership fees. These fees typically revenue over the past five years. allow consumers access to facilities at a set weekly, fortnightly, monthly or Personal training annual cost. Many consumers do not Personal training is a gym service used by maximise their membership investment those who struggle to motivate due to lack of attendance, resulting in themselves to exercise. Many personal memberships achieving high margins for trainers operate independent of gyms or gyms. Membership fees have increased as fitness centres and these activities are a source of industry revenue over the past consequently not included in this report. five years as the growing budget 24-hour Personal training at gyms and fitness gym segment relies solely on membership centres ranges across specialised fees for revenue. workouts for professional athletes and guidance for amateurs. Personal training Classes revenue is highly reliant on discretionary Classes are offered by gyms, fitness income levels, as there are numerous centres and specialised fitness providers cheaper exercise alternatives to personal such as yoga and Pilates studios and training such as classes or home exercise. martial arts gyms. Classes typically The segment’s contribution to industry include cycle or spinning classes; health revenue has therefore fallen over the past
WWW.IBISWORLD.COM.AU Gyms and Fitness Centres in Australia January 2014 12 Products & Markets Products & Services five years as consumers have the industry’s main offerings. continued demonstrated less propensity to spend Merchandise sold includes sports drinks, their discretionary income. protein bars, other health-related food and drinks, towels and clothing. This Merchandise segment has not changed significantly Merchandise is used as a supplement to over the past five years. Products and services segmentation (2013-14) 4.5% 3.9% Casual entry Merchandise 9.8% Personal training 65.3% Memberships 16.5% Classes Total $1.3bn SOURCE: WWW.IBISWORLD.COM.AU Demand Factors influencing demand in the Gyms Factors such as age, location, weather Determinants and Fitness Centres industry range from and general consumer trends also practical issues facing consumers, such as influence consumers’ preferred types of the amount of time and money available fitness activity. People in their teens and for spending on fitness, to consumer early twenties tend to have relatively high trends regarding the type and amount of participation rates in organised sport, fitness activity undertaken. Growth in which can act as an alternative to the discretionary income tends to drive products and services offered by the Gyms demand, with many consumers viewing and Fitness Centres industry. Awareness spending on fitness as non-essential of the benefits of an active lifestyle in later given the inexpensive do-it-yourself years is driving increasing demand from alternatives available. Increases in the this market from the middle-aged cohort. amount of leisure time available tend to In terms of location, areas with pleasant lead to greater uptake of fitness products outdoor spaces and nice weather tend to and services. Health consciousness and see lower demand for fitness facilities. obesity levels can also influence demand, Similarly, demand for fitness facilities stimulating demand for gyms and fitness tends to be seasonal in areas with harsh for both obese individuals and the winters, picking up in the cooler months as Australian population. indoor options becomes more attractive. Major Markets Users of gyms and fitness centres can be those aged 15 years and over, gym use classified by age. People aged under 15 tends to decline as people age. years are not included because industry revenue from that demographic is People aged between 15 and 34 generally paid for by their parents. For People from 15 to 34 years of age are
WWW.IBISWORLD.COM.AU Gyms and Fitness Centres in Australia January 2014 13 Products & Markets Major Markets estimated to account for 48.1% of more per capita because they are more continued industry revenue in 2013-14 despite only likely to be members of full-service gyms. accounting for 34.6% of Australia’s Over the past five years, the segment is population aged 15 and over. The expected to have declined as DIY overrepresentation occurs because alternatives have become increasingly younger people are generally more popular substitutes. image-conscious, can withstand the impact of training and often have more People aged 55 and over available leisure time as many have not People aged 55 and over are estimated to yet started families. The segment is account for 18.9% of industry revenue expected to have grown over the past five while making up 31.5% of Australia’s years as the growth of budget gyms population aged 15 and over. The provides further fitness options for underrepresentation occurs due to many consumers with lower incomes, such as older individuals being unable to high school and university students. withstand the impact of vigorous training on their bodies. In addition, People aged between 35 and 54 many participate in more leisurely People aged between 35 and 54 are activities such as golf, lawn bowls, forecast to generate 33.0% of revenue in tennis, aquarobics and walking. While 2013-14 while comprising 33.9% of per capita expenditure has remained Australia’s population aged 15 and over. relatively unchanged, the segment’s While less individuals within this revenue contribution has risen over the segment are gym members compared past five years as Australia’s age profile with the younger age group, they spend continues to grow. Major market segmentation (2013-14) 18.9% People aged 55 and over 48.1% People aged 15 to 34 33.0% People aged 35 to 54 Total $1.3bn SOURCE: WWW.IBISWORLD.COM.AU International Trade The industry largely services the fitness needs of resident Australians and the extent of international trade is low. Some parts of the industry may import specialist sports equipment, but such transactions are registered at the manufacturing level.
WWW.IBISWORLD.COM.AU Gyms and Fitness Centres in Australia January 2014 14 Products & Markets Business Locations 2013-14 NT 0.6 QLD 22.4 WA 9.2 SA 6.0 NSW 33.3 ACT 1.8 VIC 25.1 Enterprises (%) Cold Zone (
WWW.IBISWORLD.COM.AU Gyms and Fitness Centres in Australia January 2014 15 Products & Markets Business Locations The geographic spread of the Fitness Distribution of enterprises vs. population industry closely follows population distribution. Successful gyms have 40 premises located close to where customers work and/or live in order to 30 provide a convenient services. Thus, fitness centres tend to be centralised Percentage within metropolitan areas, with many 20 located within suburban shopping areas. Some gyms target the corporate 10 workforce by locating within central business districts. Areas of higher 0 average discretionary income tend to ACT NSW NT QLD SA TAS VIC WA have a greater concentration of establishments. Such distribution reflects the fact that the discretionary income of consumers is a driver of both industry Enterprises and company revenue. Consequently, Population although New South Wales and Victoria SOURCE: WWW.IBISWORLD.COM.AU are slightly overrepresented in enterprises when compared to population share, they are further overrepresented when taking into account their gym and fitness centres expenditure.
WWW.IBISWORLD.COM.AU Gyms and Fitness Centres in Australia January 2014 16 Competitive Landscape Market Share Concentration | Key Success Factors | Cost Structure Benchmarks Basis of Competition | Barriers to Entry | Industry Globalisation Market Share The industry is characterised by a their reach through various acquisitions, Concentration moderate level of market share while the budget 24-hour gym chains concentration, with the largest four Anytime Fitness and Jetts Fitness have players forecast to account for 52.7% of grown exponentially over the past five Level industry revenue in 2013-14. Fitness First years as consumers have become more Concentration in this continues to dominate the industry, price-conscious. Strong competition industry is M edium albeit to a far lesser extent than five or 10 between the major players and from years ago. The growth of medium-sized further gym chains such as Genesis companies and foreign entrants to the Fitness, Fernwood Fitness and YMCA industry has increased industry Australia means that the moderate concentration. Ardent Leisure Group’s industry concentration does not result in Goodlife Health Clubs have increased consumers being negatively affected. Key Success Factors Carrying out all necessary maintenance training sessions close to target markets to keep facilities in good condition is important in attracting time-poor Ensuring that facilities and equipment customers. IBISWorld identifies are well maintained will improve the 250 Key Success customers’ gym experience and help Effective pricing and cost control Factors for a prevent injuries. Gyms and fitness clubs must have business. The most appropriate pricing and cost Having a high profile in the market management strategies to survive in a important for this Gyms and fitness centres with a high highly competitive market. industry are: profile will find it easier to attract customers. Operators can gain credibility Provide value-added services through a relationship with a relevant In the fitness industry, clubs that sporting association or organisation. provide add-on services can gain an advantage over their competitors. Easy access for clients Services may include nutritional advice Locating fitness centres and personal and childcare services. Cost Structure With a high proportion of the industry’s low cost bases due to their facilities Benchmarks costs being fixed in nature, the profit largely operating unstaffed. margin is sensitive to movements in revenue. The dominant major variable Wages cost is wages, which are able to be Labour is the industry’s largest cost item. modified due to the high share of part- Labour is focused on exercise and class time and casual workers in the industry. instruction, customer service, marketing and personal training. While many Profit workers’ wages are fixed costs, the high The contraction in revenue in 2008-09 ratio of part-time and casual workers resulted in the profit margin falling as meant that the industry was able to many industry operators struggled to subdue wages pressure in the aftermath reduce costs. Other operators opted to of the global financial crisis. Many gyms ride out the effect on margins to gain are heavily reliant on labour because they market share by maintaining service focus on providing personal training and levels. While profit fell in 2008-09, it has class instruction, as well as aggressive since recovered with the introduction of marketing tactics. The growth of budget many budget operators that have very gym franchises that operate unstaffed
WWW.IBISWORLD.COM.AU Gyms and Fitness Centres in Australia January 2014 17 Competitive Landscape Cost Structure and market towards experienced gym equipment and the property within which Benchmarks users has cut wage costs across the the gym is situated. Depreciation has industry over the past five years. grown as a cost structure item over the continued past five years as the growing prevalence Rent of franchised budget gyms has required The other major cost for the industry is significant initial investment. rent because the rental of physical property is a requirement for businesses Other Costs to operate. Many businesses also rent Other cost segments for the industry exercise equipment, as it reduces capital include insurance, marketing, brand investment and allows easy changeover royalties for international franchises of equipment when it becomes too and machinery maintenance costs. The rundown or better equipment is released. proportion of these costs has increased As labour costs have declined over the over the past five years. This is partly past five years, rental costs have because 24-hour gyms have increased increased as they become a stronger insurance and security costs as they focus for the industry. are unstaffed. Growing competition in the industry requires greater Depreciation investment in marketing to attract new New gyms often invest in start-up capital customers. Royalty payments have also with a view to operating the business increased as several players that have long term, foregoing rental costs. Capital emerged locally have spun off from investment can be outlaid on gym international franchises. Sector vs. Industry Costs Average Costs of all Industries in Industry Costs sector (2013-14) (2013-14) 100 ■ Profit 8.1 11.8 ■ Rent 1.5 3.5 ■ Utilities 3.9 80 16.3 ■ Depreciation ■ Other 3.7 ■ Wages 5.3 ■ Purchases Percentage of revenue 60 47.8 22.1 40 22.1 37.1 20 13.1 0 3.7 SOURCE: WWW.IBISWORLD.COM.AU
WWW.IBISWORLD.COM.AU Gyms and Fitness Centres in Australia January 2014 18 Competitive Landscape Basis of Competition This industry is highly competitive, with consumers will go to full-service gyms for competition based on price, location and quality and range of facilities and services; quality of facilities and services. Gyms to 24-hour gyms for accessibility and low Level & Trend also target particular niche markets in prices; and to women-only gyms provide ompetition C in order to gain a competitive advantage. the overall gym environment, as females this industry is The industry also faces external often feel uncomfortable working out in Highand the trend competition from organised sport and unisex environments. Within each gym independent fitness instructors. segment, they will compete against each is I ncreasing other on the basis of price and location, as Internal consumers tend to favour gyms that are With the industry in the mature stage of within a convenient commute from home its life cycle, most market segments are or work. well covered in terms of geography and customer demographics. With a slow External supply of new members, gyms are Gyms and fitness centres face increasingly differentiating themselves in competition from all substitute forms of order to target specialised demographics. exercise. While many people who play With specialised structures, gyms can organised sport will attend a gym to target consumers based on quality and enhance their performance, other range of facilities and services, amateurs sportspeople will forego gym accessibility, price and the overall gym memberships as they gain their exercise environment. needs through sport. Fitness instructors Types of gyms include full-service gyms, or personal trainers that work outside of such as Fitness First and Goodlife Health the industry are also competitors, while Clubs; 24-hour gyms, such as Anytime general do-it-yourself exercise such as Fitness and Jetts; and women-only gyms, jogging, cycling and home fitness can such as Fernwood and Curves. Generally, reduce the number of gym members. Barriers to Entry Barriers to entry include significant initial capital investment, potential franchise fees Barriers to Entry checklist Level Level & Trend and cashflow issues, while the high degree Competition High of industry competition presents a Concentration Medium arriers to Entry B significant barrier to success. The initial Life Cycle Stage Mature in this industry are cost involved in opening a gym or fitness Capital Intensity Medium Mediumand S teady centre is relatively high. It can be difficult Technology Change Low to find a suitable location, which then has Regulation & Policy Light to be purchased or rented. Gym equipment Industry Assistance Low can also be very expensive, particularly as new gyms require new equipment to keep SOURCE: WWW.IBISWORLD.COM.AU up with existing, established players in the industry. Leasing gym equipment can be a industry. A number of large and medium- workaround to initial capital costs. New sized chains that account for the majority entrants also have to pay for public liability of industry revenue. New entrants can insurance, marketing investment and join the competition rather than opening initial wages for their staff, which can a new gym, applying to open a franchise result in cashflow issues as it takes time for of a particular chain. While opening a new entrants to build a critical mass of franchise for an existing chain will members that produce a profit. represent greater probability of future The strong competition in the industry success, franchise fees form an additional represents a disincentive for operators to cost to new entrants. Thus, the industry enter the Gyms and Fitness Centres exhibits moderate barriers to entry.
WWW.IBISWORLD.COM.AU Gyms and Fitness Centres in Australia January 2014 19 Competitive Landscape Industry Globalisation of the Fitness industry is The YMCA is also a global movement, Globalisation increasing with the Australian expansion although local operations are of international chains, such as Fitness independent. International investment First, Curves, Anytime Fitness and Virgin has been mostly one-way, with no Level & Trend Active. These players, originating in the Australia-based operator having lobalisation G in United Kingdom and the United States, significant offshore operations. Also this industry is have sought expansion into less mature contributing to the low level of Lowand the trend markets to drive growth, with Australia globalisation is the fact that international being an attractive market in itself as well trade is non-existent given the service- is I ncreasing as a stepping stone into Asian markets. oriented nature of the industry.
WWW.IBISWORLD.COM.AU Gyms and Fitness Centres in Australia January 2014 20 Major Companies Fitness First Australia Pty Limited | Ardent Leisure Group | Anytime Australia Pty Ltd 24/7 Brands Pty Ltd | YMCA Australia | Other Companies Fernwood Women’s Health Clubs Pty Ltd 6.9% Major players 24/7 Brands Pty Ltd 9.3% (Market share) Ardent Leisure Group 12.4% 27.4% Other GHF Pty Ltd 5.6% Fitness First Australia Pty Limited 19.4% YMCA Australia 7.8% Anytime Australia Pty Ltd 11.2% SOURCE: WWW.IBISWORLD.COM.AU Player Performance Fitness First was founded in the United Management took a majority stake in the Kingdom in 1993, with a single club company in a debt-for-equity swap with opening in Bournemouth. Three years BC Partners in June 2012. Fitness First later, the company was floated on Fitness First Australia Pty Limited is Australia Pty London’s Alternative Investment Market. the largest player in Australia’s Gyms Limited Public listing provided the company with and Fitness Centre industry, holding the capital to expand, with expansion considerable market share. By 2009, the Market share: 19.4% into Australia occurring in 2000. Fitness Australian operations had become the First now has operations in 10 countries largest revenue segment in Fitness including Australia, the United Kingdom, First’s global operations. Revenue Germany and India. In 2005, it was generated in Australia was more than acquired by BC Partners for £835.0 50.0% higher than the next largest million. In September 2005, Fitness segment, the United Kingdom, for the First became the largest health club year through October 2012. group in the world, with 424 clubs and 1.1 million members. Financial performance The global financial crisis caused a The strategies that originally delivered significant decline in Fitness First’s success to Fitness First when it entered global business. The company now owns Australia in 2000 have caused a severe about 380 clubs and services 1.0 million market share decline over the past five members, with 7,000 employees years. Its platform of aggressive worldwide. Fitness First has divested marketing, locking new customers into many clubs and complete operations in a long-term contracts and providing number of European countries. The large-scale, one-stop-shop gyms has divestment included the sale of Fitness become less successful. While the First’s entire South Australian catalogue entire industry softened in the of gyms, and a location in Essendon, VIC, aftermath of the global financial crisis, to Ardent Leisure Group. Oaktree Capital the effect on Fitness First was Fitness First Australia Pty Limited – financial performance Revenue EBIT Year* ($ million) (% change) ($ million) (% change) 2008-09 344.7 5.2 63.4 N/C 2009-10 341.7 -0.9 45.0 -29.0 2010-11 333.1 -2.5 -10.7 N/C 2011-12 318.0 -4.5 -216.5 1,923.4 2012-13** 272.3 -14.4 N/A N/C 2013-14** 255.1 -6.3 N/A N/C *Year end October **Estimate SOURCE: IBISWORLD
WWW.IBISWORLD.COM.AU Gyms and Fitness Centres in Australia January 2014 21 Major Companies Player Performance intensified as consumers shifted to revenue decline of 5.8% over the past continued cheaper gym alternatives. The industry five years. The company also endured rebounded from 2009-10 through significant operating losses during 2012-13 but Fitness First did not, 2011-12 as it made previously resulting in an estimated annualised postponed tax payments. Player Performance Ardent Leisure Group (ALG), formerly Australia, 21 in Victoria, six in Western known as Macquarie Leisure Trust, Australia and four in New South Wales. owns and operates a number of Growth in the number of establishment Ardent Leisure recreational facilities throughout has occurred through opening new Group Australia. Founded in June 1998 and facilities and acquiring existing gyms, Market share: 12.4% headquartered in Sydney, ALG owns and such as those divested by Fenix and operates Dreamworld and WhiteWater Fitness First in 2012. Industry Brand Names World on the Gold Coast, the Australian Goodlife Health Clubs arm of AMF Bowling, Kingpin Bowling Financial performance Lounges, d’Albora Marinas and Goodlife Since acquiring Goodlife Health Clubs in Health Clubs. It is through the fast- September 2007, ALG’s health clubs growing Goodlife Health Clubs that ALG segment has grown tremendously. Health operates in the Gyms and Fitness clubs revenue is estimated to rise by a Centres industry. compound annual rate of 18.7% over the The Goodlife Health Clubs chain was five years through 2013-14. While established in 1998 and acquired by ALG Goodlife Health Clubs operates with a in September 2007 for $59.7 million. similar business structure to Fitness First Goodlife was established in Queensland in locking new customers into long-term and expanded across Australia. In June contracts, it has maintained a strong 2008, there were 19 Goodlife Health public image and withstood the growth in Clubs in Queensland, six in South budget, unstaffed gyms. The strong Australia, four in Victoria and two in New revenue growth has resulted in ALG South Wales. Rapid expansion has gaining substantial market share over the occurred over the past five years. By June past five years and consolidating its 2013, there were 23 Goodlife Health position as the second-largest player in Clubs in Queensland, 12 in South the industry. Ardent Leisure Group (health clubs segment) – financial performance Revenue Operating Profit Year ($ million) (% change) ($ million) (% change) 2008-09 69.4 89.1 10.7 494.4 2009-10 73.4 5.8 9.0 -15.9 2010-11 90.0 22.6 12.9 43.3 2011-12 102.6 14.0 16.4 27.1 2012-13 140.7 37.1 30.3 84.8 2013-14* 163.2 16.0 N/A N/A *Estimate SOURCE: ANNUAL REPORT AND IBISWORLD
WWW.IBISWORLD.COM.AU Gyms and Fitness Centres in Australia January 2014 22 Major Companies Player Performance Anytime Australia Pty Ltd is the Australian subsidiary of Anytime Anytime Fitness – financial Fitness, a multinational, budget performance Anytime Australia franchise chain. Anytime Fitness was Revenue Pty Ltd established in the United States in May Year ($ million) (% change) Market share: 11.2% 2002 and was introduced in Australia in 2008-09. Anytime Fitness currently 2009-10* 23.1 N/A Industry Brand Names operates about 2,400 gyms across 2010-11* 34.2 48.1 Anytime Fitness Australia, North America, Europe, the 2011-12 89.0 160.2 Middle East and Asia. In Australia there 2012-13* 128.2 44.0 are about 318 Anytime Fitness gyms, 2013-14 147.1 14.7 with the strongest presence in New South Wales. *Estimate Along with Jetts Fitness, Anytime SOURCE: IBISWORLD Fitness has helped drive the trend of budget 24-hour gyms that are largely Financial performance unstaffed. These gyms provide Since its entry, Anytime Fitness has significant cost savings to the company become one of the fastest growing as it saves on wages. The gyms can be a franchises in Australia. In 2011-12, the better fit for consumers in terms of company’s growth was particularly high, opening hours, while all consumers with total franchise revenue estimated to benefit from lower prices as the wage have increased by 160.2%. This propelled savings flow through. Anytime Fitness is the company into the major player arena. also known for the consistent success of The franchise focuses heavily on providing its franchise model. Initial capital low-cost gym facilities that are available at investment to fit out a gym costs all hours, with the value provided to $350,000 on average, with Australian consumers paramount over the past five franchisees paying an initial franchise years in the aftermath of the global fee of $59,900 and a monthly network financial crisis. Subsequently, over the four fee of $900 to gain access to Anytime years through 2013-14, Anytime Fitness is Fitness’ company-wide systems. One- estimated to grow by 58.9% annualised. third of the monthly fee goes back to the Such rapid growth has resulted in a boom US parent company. in market share for the company. Player Performance The Australian gym franchise Jetts Fitness is owned by 24/7 Brands Pty Ltd. Like Jetts Fitness – franchise financial Anytime Fitness, Jetts Fitness has been a 24/7 Brands Pty Ltd pioneer in the 24-hour budget fitness performance Market share: 9.3% chain segment. Jetts’ growth in terms of Revenue Industry Brand Names both revenue and establishment numbers Year ($ million) (% change) Jetts Fitness has been spectacular since its founding, 2008-09 3.8 N/C leading to a listing in BRW in February 2009-10* 24.0 531.6 2012 as the fastest growing franchise in 2010-11* 43.0 79.2 Australia. The franchise was established in 2007, starting with one gym on the Gold 2011-12 74.5 73.3 Coast, QLD. The company has since 2012-13* 101.2 35.8 grown to over 200 franchises across 2013-14* 122.5 21.0 Australia and New Zealand. *Estimate Financial performance SOURCE: IBISWORLD Jetts Fitness maintains a similar focus to
WWW.IBISWORLD.COM.AU Gyms and Fitness Centres in Australia January 2014 23 Major Companies Player Performance its larger competitor Anytime Fitness and revenue growth is strong and indicates continued has achieved similar revenue growth over the attainment of significant market the past five years. Franchise revenue share, the company has encountered growth over the five years through diminishing returns over the past five 2013-14 is estimated to reach 100.3% years. Thus, it has underperformed its annualised. The exponential growth major segment competitor Anytime began from a low base in 2008-09, with Fitness, with higher start-up costs the company generating revenue of $3.8 required for franchisees slightly limiting million in its foundation year. While company growth. Player Performance The YMCA is a not-for-profit organisation that provides health and YMCA Australia (health and fitness services and recreation, YMCA Australia wellbeing segment) – financial accommodation, childcare, youth and Market share: 7.8% family services from over 500 centres performance throughout Australia. The YMCA is made Revenue up of 30 locally governed member Year ($ million) (% change) associations, under the umbrella of the 2008-09 63.5 10.6 National Council of the YMCAs of 2009-10 68.9 8.5 Australia. 2010-11 78.0 13.2 Financial performance 2011-12 89.3 14.5 Over the past five years, the YMCA has 2012-13* 99.9 11.9 generated 27.0% of its revenue from 2013-14* 104.2 4.3 health and wellbeing initiatives, including operating health and fitness *Estimate centres. As a not-for-profit organisation, SOURCE: ANNUAL REPORT AND IBISWORLD these fitness centres are perceived as another low-budget option for people better value fitness centre options. interested in attending a fitness centre. Following this trend, the YMCA’s Consequently, the organisation’s health industry-related revenue is forecast to and wellbeing segment has grown in line grow by an annualised 10.4% over the with the rest of the organisation as gym five years through 2013-14, resulting in a attendees search for cheaper, basic and gain in market share.
WWW.IBISWORLD.COM.AU Gyms and Fitness Centres in Australia January 2014 24 Major Companies Player Performance Fernwood Fitness is a gym franchise focused on providing full-service facilities Fernwood Women’s Health Clubs for women only. The company was Fernwood Women’s Pty Ltd – industry segment founded in 1989, with the first Fernwood Health Clubs Pty gym opening in Bendigo, VIC. The first performance Ltd franchise was opened in 1994. The Revenue company began to gain momentum in Year ($ million) (% change) Market share: 6.9% 1998 when it was initially listed in BRW’s 2008-09* 88.1 N/C Fast 100. Growth in the industry and 2009-10* 82.1 -6.8 Fernwood’s position as the most recognisable women-only gym generated 2010-11* 87.3 6.3 revenue growth from 1998 until the 2011-12 86.0 -1.5 global financial crisis – revenue increased 2012-13 88.4 2.8 from $25.0 million in 2001-02 to about 2013-14* 90.1 1.9 $75.0 million in 2006-07. There are currently 69 Fernwood gyms *Estimate across Australia, with a high number in SOURCE: IBISWORLD Victoria, New South Wales and Queensland. The company and its crisis initiated a revenue fall, increasing franchises employ about 2,200 staff. competition within its segment has also Capital investment for franchisees to open eaten into revenue. While Fernwood a new Fernwood gym is between $450,000 remains the dominant player in the and $500,000. Fernwood’s franchising women-only segment, the growth of system involves franchisees paying the competitors like Curves, Contours and company 7.0% of their gross revenue and EnVie has saturated the market. Unisex contributing 5.0% of gross revenue to gyms have also tapped into the market by Fernwood’s National Marketing Fund. opening women-only areas within their gyms. Consequently, Fernwood has lost Financial performance market share over the five years through Over the past five years, Fernwood’s 2013-14, with company and franchise position as a rising gym franchise has revenue only growing by an estimated been fading. While the global financial compound annual rate of 0.4%. Player Performance Genesis Fitness was established in 1997 in Ringwood, VIC. As a growing GHF Pty Ltd – franchise financial competitor to Fitness First, Genesis GHF Pty Ltd Fitness has taken the opposite approach performance* Market share: 5.6% to growing low-budget rivals Anytime Revenue Industry Brand Names Fitness and Jetts, by focusing on Year ($ million) (% change) Genesis Fitness providing a higher quality gym and 2008-09 31.5 29.6 fitness centre experience. Genesis aims to 2009-10 48.6 54.3 achieve this through providing more 2010-11 62.1 27.8 extensive customer service, flexible memberships and extra services such as 2011-12 68.2 9.8 child minding. There are now 46 Genesis 2012-13 71.9 5.4 Fitness gyms across Australia. 2013-14 73.2 1.8 Financial performance *Estimate Over the past five years, the franchise SOURCE: IBISWORLD has been progressively increasing its
WWW.IBISWORLD.COM.AU Gyms and Fitness Centres in Australia January 2014 25 Major Companies Player Performance revenue through its customer-centric South Australia. It has also entered the continued approach. Establishment numbers have Northern Territory. Growth in increased from 34 in 2008-09 to 46 in establishment numbers has resulted in 2013-14. While Genesis has downsized in company and franchise revenue its home state of Victoria, it has increasing by an estimated 18.4% expanded in New South Wales, annualised over the past five years, Queensland, Western Australia and driving market share growth. Other Companies The rest of the industry is made up of option. Subsequently, its market share smaller franchises, facilities owned by has declined over the past five years. local councils and independent gyms. Independent gyms generally attempt to Snap Fitness foster a community presence. Growing Estimated market share: 2.8% franchises aiming to penetrate different Snap Fitness is a US-based privately markets include Curves in the women- owned company founded in 2003 and only gym segment, Virgin Active in the headquartered in Chanhassen, full-service gym segment and Snap Fitness Minnesota. The company operates in in the 24-hour budget gym segment. countries across North America, Australasia, Europe and Asia. The Curves company entered Australia in 2009 and Estimated market share: 3.0% has since grown to about 144 franchises A privately owned women-only gym that span all states and territories, with a franchise, Curves was founded as a small focus in Queensland. business in the United States in 1992 before growing at a record rate, opening Virgin Active 7,000 locations in less than a decade. Estimated market share: Less than 1.0% Curves now has about 10,000 locations Falling under the Virgin brand owned by in more than 85 countries. This includes Richard Branson, Virgin Active health over 300 locations across Australia. The clubs target the higher end of the market number of locations that it holds makes it as they aim to provide premium service one of the largest players in the industry for premium prices. Virgin Active targets by establishment numbers. the professional workforce, with gyms Like new entrants Jetts and Anytime, located in the CBDs of Sydney and Curves has focused on keeping its Melbourne and two further gyms located facilities simple. Rather than a full- in Baulkham Hills and Frenchs Forest in service offering, the franchise provides New South Wales. The company aims to serviced circuit training, reducing the provide a service where no member has equipment required. However, as the to queue up to use equipment, while franchise is still centred on service providing additional facilities such as provision, wage costs are restricting its rock-climbing walls, sleep zones and flexibility in marketing itself as a low-cost swimming pools.
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