Gyms and Fitness Centres in Australia

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 | info@ibisworld.com
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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
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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
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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.
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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
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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
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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
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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.
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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
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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.
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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
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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
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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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