The biggest opportunities and threats for the fitness sector in 2021 and beyond - Part 1: Operators
by Herman Rutgers
As Covid-19 vaccination is progressing and we are out of the lockdown in most of the western world it is good to realize what impact this period has had on the ecosystem of our sector and how we can recover faster and see our sector boom again.
I have written 2 articles to cover what I believe are the biggest opportunities and threats, one to cover fitness “suppliers” in the broadest sense and one to cover the “operators”.
In this episode I will address the operator perspective. Let’s start with the positives;
Home fitness as a business model
The enormous success of home connected fitness (e.g. Peloton, Mirror, VAHA, etc.) which was accelerated because of COVID-19 induced club closures has not gone unnoticed of course by leading operators. It is therefore no surprise that SATS announced early May that they are taking the concept of hybrid gyms to another level, with the launch of interactive home fitness equipment to go with digital memberships. The group of 253 clubs across the four Nordic countries announced “Mentra by SATS” and will be launched in Norway and Sweden in the third quarter of 2021. It consists of connected home training with an interactive mirror and subscription-based digital contents. Connected treadmills and bikes should be added next year. The Mentra content subscription will be marketed as a standalone product for users without a SATS club membership, as a cheaper add-on or in bundles for SATS members. Another example of a similar move is the Retro Fitness, budget club operator in the USA who have announced to start selling by end 2021 a connected home bike.
Digitalization ( Hybrid/Omnichannel)
During the closed period of the clubs all operators had to offer a digital solution for their members so they could exercise at home with the help of their mobile, Ipad or TV.
Some clubs were already prepared for this, like McFit ( Cyberobics ) and Basic-Fit (GXR) who had their own studios and produced content that could be live-streamed or offered VOD ( Video On Demand).
Other operators who could not afford to produce their own material used third party providers of this service like Wexer.
It is clear that when clubs are open again the use of virtual offerings drops but it remains an essential part of the multichannel offering. Part of this is also the offering of outdoor fitness which was developed during the pandemic and this is definitely going to stay as part of the broader fitness ecosystem with clear consumer benefits.
Fitness = Health
During the pandemic it became very clear that the image of our sector was not what it should be. In the early lockdowns in many countries, fitness was categorized in priority with bars, discotheques, saunas and sex clubs. Very quickly national associations with the (financial) support from key operators started to lobby for the sector. Better public policy based on scientific research to prove the positive health effects of fitness is now seen as essential. The notion that “Health is Wealth” and that our sector can play a crucial role needs to be promoted broadly. In this context it is important to state the 4 lenses through which our sector can be seen as more holistic; Physical fitness, Mental and behavioral fitness, nutrition and sleep.
In comparison with e.g. the leisure sector our overall quality of service can be much improved and can also do better in our customer engagement / experience . These are a big opportunity. Part of finding solutions in this quest are the smart ways to gather and use the enormous amount of data on consumers that health club chains have. Artificial Intelligence can help in predicting behavior.
New target groups
Too often our sector promotes to the “young and fit” as potential customers….But we are lacking to make our services attractive for other very interesting target groups, like seniors/older adults, children, people with medical conditions, performance sports people, etc. If we do this successfully we should be able to grow the penetration of fitness by 5-10% of the population in the coming decade.
More cooperation between stakeholders ( associations, suppliers and operators) has proven to be essential during the pandemic. Together we were stronger and able to conduct the research and the lobbying needed to get our sector reopened. Equipment suppliers helped operators with extended payment terms and landlords waived rent. This should be repeated in the future on a need be basis. It was good to see that during the pandemic national associations and key operators shared best practices with each other and were constructive in conducting research.
Market data and operating figures
Every professional and well developed industry has good national and European / global data to track developments in the sector.
Of course there are reliable annual data on some key markets like the USA, Germany and the UK but many other countries are not yet doing this. FIBO is sponsor of the European market report by EuropeActive and Deloitte. It would be a big help for the further promotion of the sector to have good reliable data on each key market to support a strong overall European trend report. It is good to mention in this respect that EuropeActive is developing a big market study project called DataHub which should deliver first results in 2022. Part of this would be to offer not only top-line market information but also operational data which could help to improve operations.
Sustainable development goals
Thinking of the United Nations SDG’s (sustainable development goals) we have a big opportunity as a sector to make more serious steps to achieve a more environmentally, social conscious and responsible world. Yes, the fitness sector can do it’s fair share as it is almost written in the DNA of our industry; UN goal nr 3 is about Healthy People, nr 4 about Healthy Community and nr 12 Healthy Planet. Many clubs could – also in cooperation with their suppliers - save energy, reduce CO2 output, use less water, plastic and chemicals , etc…
In regards to our people, we should improve the diversity of management (how many female CEO’s does the sector have?) and workforce ( male/female split and cultural diversity) and we definitely should spend more on development and education of staff, thinking of the EU’s “Education Permanente” goals.
Following the above listed 8 opportunities, let’s have a look at the negatives that I see for the future of clubs…these could be dark clouds against a bright blue future sky…
What is a threat for studio operators
Slower return of members after 2nd lockdown
At the moment of writing this article, only a few countries have reopened fitness clubs after the second or third lockdown and many are still in lockdown. But based on the experience in these open markets, as a well as the experiences from the earlier re-openings, we can be optimistic. It is obvious that people are looking forward to have social interaction again with their trainers and other members and look forward to use the variety of equipment in the clubs. But it could take longer for certain types of more prudent members to come back and this would mean a slower return to full revenue streams and higher level of cancellations than planned.
Lack of innovationen
Because cash or capital is hard to come by, not enough investment in innovation could be detrimental as we see around us in other industries, constant innovation in many ways, in product, in service, in payment methods, marketing, selling, service, etc…is crucial for continued growth.
Attrition has always been a big risk factor in our industry, but because of the prolonged lockdowns and customer hesitance this could be a much bigger issue than normal, so operators should be very active in engaging members and facilitate coming back of previous members.
In many countries governments have given subsidies to operators to help paying wages and cover fixed costs, but many operators have seen their revenues and profits drop dramatically. Many also had to take loans in order to keep afloat, but these loans have to be paid back of course. And the financial help will be stopped and will have to be paid back. This might result in operators not having enough money to invest in equipment, staff education and qualification.
During the prolonged lockdowns, and in light of the uncertainties around the opening dates, many staff members - both part timers and full timers - will have looked for other employment outside of our sector, so we need to be aware of this and step up the efforts to keep good staff and to recruit new ones where needed.
Another pandemic wave with renewed Lockdowns and economic crisis
We don’t want to think about it of course but in any future scenario we need to take into consideration this possibility and have emergency plans ready, just in case…
That’s it for now, see next edition of FIBO news for the Opportunities and Threats from the suppliers perspective!