20 December 2021, by Herman Rutgers

The fitness industry in 2022: Some bold and some not so bold predictions

Two Corona years are behind us. What will the future hold for the industry? Which market segments have good chances and what studio operators should look out for. 10 predictions for the new year.

 © Shutterstock

Corona has accelerated the evolution of the fitness industry. Digitalization is one big example, the rise of vertical fitness markets another. What matters now and where the best market opportunities are, a commentary by Herman Rutgers.

 

1.      Club Offering- changes in service  

The Corona lockdown period has shown club owners that they are (financially) too dependent on the membership fee model, based on visits to brick and mortar facilities.  From the traditional membership “equipment rental”-model to provide a facility with equipment for use at a fixed monthly fee, clubs are looking for new revenue streams beyond monthly dues through online  streaming (Video On Demand) services, in-club advertising, online sales of nutrition, equipment and accessories. Also a  more holistic approach will help broaden the revenue stream with offerings in wellness, spa, stress management, (online) coaching, relaxation, nutrition, beauty, fun and meeting people, etc.   Fitness clubs have the opportunity to become a real “health hub” for consumers in the broadest sense.

 

2.      Improved Gym Journey      

Clubs need to listen better to what members and potential members want. They will have to do a better job at segmenting and differentiating their offering. Know what the customer wants at the start and delivering exactly that and this will positively impact the retention. Customer experience  and satisfaction will be key.                   

 

3.      Opportunities for Premium Clubs

It is interesting to see that the RSG Group is moving upmarket in offering; they are growing the mid-priced John Reed brand and launching the high end “Heimat” concept in Los Angeles. David Lloyd is doing well with their premium and “family” full service offering and have announced 40 new club openings in the coming 18 months.

One comment on the segmentation of the market by Premium, Mid and Low cost.

Many people suggest that the mid-market is not where you want to be, but it is still the largest segment in value, in members and number of clubs. In the coming years it is expected that the biggest volume growth will be in the Low Cost segment (HVLP) but in revenues the mid-market will still be the largest

 

4.      Future of boutiques

Boutiques, particularly those in big urban centers like London and Paris are suffering at the moment because of the lack of traffic in the city. Also they were hurt more because of lockdowns with their “play & pay” business model.                   Many people are still working from home and do not go to the offices downtown, where many of the boutiques are located (ThirdSpace, Frame, 1Rebel, etc.). However, this will change when Covid measures will be lifted.  The boutique segment is here to stay, however not all concepts/brands will survive.   Opportunities for better deals on lower rent and good locations in former retail spaces will be presented in cities. Concepts with small space requirements and low capital investment (like Bodystreet, Yoga, Pilates and Fit20) can do well.

 

5.      Changes in Top Club rankings

 In chapter 16 the EHFF 2020 book “Horizon 2030” ,  I have  listed an overview of the top 10 clubs in 2018 versus 2008; in ten years, 5 brands disappeared from the top10,  8 are totally new, a dramatic change.

So to predict the winners and losers on the club operator front is not an easy task! Many do not publish numbers or growth plans and it is still a very fragmented sector.

Of the top only Basic-Fit, The Gym Group, Pure Gym Group, SATS, ACTIC and Benefit Systems publish regularly information on results and growth plans.

There are no real global or “pan-european” players on the “wholly owned” club side. Most operators are ”local”. Exception is franchise…for example Golds Gym is a “global” recognized brand (but so far weak in Europe- and German owner RSG wants to change that!). Also Anytime Fitness can be considered a global brand, based on their presence on 5 continents.

 

6.      Improved and expanded digital offerings

The digital ecosystem is wide and growing, here is a summary of the biggest investments made in the following categories and brands:

 

  • Fitness marketplaces/intermediairies (Classpass, Gympass, USC, Hussle, Mindbody, Playbook)
  • Connected (home) Fitness (Peloton, Mirror, Hydrow, Tempo, Icon, Wattbike, Tonal,Technogym)
  • Fitness streaming services/VOD (Apple Fitness+, Cyberobics, Fiit, Fortë, GXR, NEOU, Technogym, Zwift)
  • Fitness workout communities (Freeletics, Sweat, Nike NTC, Adidas, Centr)
  • “Manage your own health data, meditation and recovery” (Strava, Fitbit, Whoop, Amazon Halo, Apple Watch, Hyperice, Calm, Headspace, Whoop, Sleepscore, etc.)

 

Given the amounts of investments that are available for these big tech companies, it is very difficult for even the largest fitness operator to compete on every level and in every area.

 

EuropeActive launched in the 2020 EHFF book the concept of fitness anywhere anytime was labelled “ODAVAD; On Demand Anywhere Virtual Anytime  Digital”…. Clubs will have to be able to offer a hybrid ( also called “phygital” – physical & digital) solution for their members.

Larger operator chains like Basic-Fit, FitX and RSG have developed inhouse their Apps and digital content ( own studios). Pure Gym and Goodlife use supplier Funxtion for their content and The Gym Group offers Fiit.  

Recently launched Apple Fitness+ with group exercise is raising the bar on quality and customer friendliness…it also helps to show consumers you need to pay for these services…and now Apple Fitness+ is expanding further in Europe, with subtitled videos in German, French, Italian and Spanish…

Also, digitalization will help clubs to become better in front- and back office activities. One of them being “dynamic pricing” which will enable club operators to optimize their pricing (e.g. Pure Gym and TGG have already implemented) as well as through AI perform predictive modelling on attrition.

 

7.      More focus on Sustainability

Particularly for the bigger and stock market listed operators, reporting on what they do to help the environment and sustainability goals; things like lower use of energy, self-powered machines, recycling of used equipment etc. will become more and more important in the next years.

The EU requires listed companies from 2023 to issue “integrated reporting” which means they have to declare the effects of their activities on the environment and society, both for themselves as well as their suppliers.

 

8.      “Vertical Markets” – Interesting opportunity

The recent announcement of Peloton to create a “commercial division”, selling Peloton and Precor cardio and strength equipment to hotels shows the great opportunity that exists outside of the club market…The whole spectrum of hospitals, physiotherapists, police, fire brigades, military, corporate, athletics, universities/schools, etc. is huge and a growing opportunity.

 

9.      Connected Home -further growth opportunities

This category will further evolve and will see operators offer home equipment- with or without a bundled membership and payment options, as we have already seen with SATS ( Nordics) and Retro Fitness (US).

 

10.     Consolidation to be continued

It is to be expected that the Corona crisis will accelerate the consolidation on the club side. A number of larger chains have strengthened their balance sheet and have the cash or access to financing to acquire some smaller or larger competitors… also some independents unfortunately will not be able to overcome the damages caused by the lockdowns and loss of income and may have to close their doors permanently….

 

All in all, as they say “never a dull moment”. For sure 2022 will be another challenging and exciting year for our industry!

 

 

Herman Rutgers, December 2021