Having spent 50 years working in the fitness industry, holding every role from cleaner to chief executive of a major international fitness firm, Phillip Mills is a man worth listening to.
So when the Les Mills International MD recently took to the stage for a group fitness management masterclass, it was little surprise to see a large crowd gather to hear Phillip’s unique insights on fitness market trends and how to manage them.
In an hour-long address, he said today’s fitness market is tougher for club operators than ever before, with disruption fragmenting market and posing significant challenges to the traditional club model.
But despite intense competition, operators at all ends of the market have cause for optimism. Whether looking to bring boutique into your club, invest in virtual studios, innovate with Immersive Fitness, or embrace the power of strength, Phillip said there are still huge opportunities to cost-effectively set your club apart from the competition.
Here are five key trends Phillip tipped to shape the future of the fitness market.
1. Millennials and Gen Z are the key battleground
Despite lots of focus on ageing populations and the silver dollar, young people remain the most important area of focus for operators. The much talked about Millennials and the lesser known Gen Z – who will reach 24 years of age this year – represent a huge opportunity. Les Mills research shows this demographic comprises over 60 per cent of the market when measured by asking a large sample of people if they go to gyms of some description, as opposed to asking a small selection of traditional clubs the average age of their members.
Phillip’s own battle to modernise Les Mills has convinced him of the need to aim young rather than old.
“We thought we were doing good a few years ago, but my son Les opened my eyes to the fact that actually traditional offerings aren’t cool anymore and don’t appeal to young people,” he said.
“That’s made us rip up the rulebook and innovate to attract a younger audience – under 35s have always been the biggest joining market for clubs and that remains the case today.
“Basing our thinking around baby boomers as a target market is flawed. We’ve created a lot of products for this age group and found it tough to make them a success.”
2. Budget sector shifts upmarket
With young people set to drive market dynamics, this means budget clubs are well-placed for continued uplift. Having come of age during the Great Financial Crisis (GFC), many under 35s are minded to count their pennies and this makes budget gyms an attractive proposition. The budget model requires a lot of members to make it profitable – 8,000 in some cases – but the success of fast-growing global players like McFit and Planet Fitness shows that it can be hugely effective.
“We know the budget sector is growing, but what’s interesting now is that as cannibalisation occurs and they start to compete for the same members, many of the bigger chains are moving upmarket,” added Phillip.
“We’re seeing more and more budget chains accept the importance of group exercise – bringing both live and virtual classes into their clubs – as well as offering more premium membership add-ons.
“Budget clubs first went big in the 80s and the resultant race to the bottom on price saw thousands of clubs go under. The current generation of operators are avoiding that mistake and heading in increasing numbers towards the vacant mid-market space that they’ve hollowed out.”
3. Traditional clubs learn from the best boutiques
While many young people are being drawn by budget clubs, at the other end of the market boutiques are also proving a hit among large numbers of Millennials and Gen Z.
As traditional clubs increasingly feel the pain of their most passionate group exercise members being tempted away by experiential spaces, cool brands and a new breed of well-paid instructors, this will be the year when many start fighting back.
So how does a traditional club compete for this market? By bringing elements of the boutique experience inside its doors. This means learning from the boutiques’ resolute focus on group exercise (clearly they’re onto something here!), their branding and the overall customer experience they offer.
Enlisting the services of a cool young advertising agency and architect can be a great way to inject some vibrancy. 24 Hour Fitness has made a big impact with its “Boutique classes without the boutique prices” campaign, which taps into the trend while leveraging its advantage around pricing and economies of scale.
“Traditional clubs can learn lots from the boutiques, but there are many areas where they still have the edge,” Phillip told the IHRSA audience. “They have equipment spaces that boutiques can’t match – you can put more modern, functional equipment into them and jazz your cardio areas up with multi-screen mosaics playing music video and adventure sports.”
“2018 will be a defining year for many boutiques, whether this means success or failure. They can be very cheap to set up and offer huge returns, but it’s a tough space to be in as every class, instructor and experience must be great, or you’ll quickly lose customers.
“US Analysts I’ve spoken to indicate over 30 per cent of boutique clubs are currently losing money, so for every Barry’s or SoulCycle you’re going to see some casualties as well.”
4. Studios go supersize
One of the biggest untapped assets for traditional clubs is their space to embrace a jumbo group exercise studio. Research shows that the studio is the most profitable area of the club per sq ft when built at the right scale, but too many clubs remain scared to dream big.
“At our Les Mills clubs in New Zealand we put group exercise front and centre by building large studios of up to 8,000sq ft which can accommodate 200 people per class,” said Phillip.
“This unlocks the economies of scale which mean top instructors can be properly paid and incentivised based on class attendance, thus negating the threat of them being poached by boutiques.
“If you’ve got the space already or are building a new club, make sure you include a big studio – even 3 to 4,000sq ft will work. You’ll build a bigger buzz, be able to afford a team of rockstar instructors, and a Group Fitness Manager who can take responsibility for making the studio an incredible destination.
5. Get ready for the Virtual revolution
Where once Virtual Fitness was a tedious experience featuring sub-standard content and washed out projector screens, now it’s a vital club offering that members increasingly expect as standard.
“Being able to come in at off-peak times of day and work-out with the world’s best instructors on a nine-screen mosaic or beautiful LED screen is creating a revolution in member experience,” Phillip added.
“In New Zealand, our state-of-the-art Virtual set-up at the Les Mills Newmarket club is dramatically outperforming our older installations, accounting for 23 per cent of total club attendance. This is a club measuring 1,700sq m (18,000sq ft), with 4,800 members paying US$75 a month in a high-competition location.”
At Newmarket, Virtual is acting as a gateway to live attendance, with 50 per cent of members also attending live classes. But a word of warning: don’t use Virtual classes as an excuse to ignore the importance of live instructors. The relationships they form with members are a crucial part of the success of traditional clubs and one great instructor can bring in hundreds of members to your club each week
Now may be the most competitive and turbulent period in the brief history of the club market, but the core principles still apply. If the rise of boutique clubs shows us anything, it’s that people still see value in exercise and are willing to pay up to US$40 per class for a great experience.
Also important to remember is that despite the vast array of fancy new fitness offerings, ours remains first and foremost a motivation business. People can exercise anywhere, but they come to us for motivation. Our clubs need to reflect this and offer a compelling experience that gives great results and keeps members coming back for more.