The founder and CEO of The Gym Group believes that the UK’s budget gym sector still holds significant growth potential, despite a boom in new openings over the past five years.

John Treharne – whose chain has been a preeminent player in the low cost market along with Pure Gym – says there are an estimated 350 budget gyms currently operating in the UK, and independent research commissioned suggests there is capacity for three times that figure.

“All the research we’ve done on the low cost market indicates that there’s room for around 1,000 low cost gyms,” Treharne told Health Club Management.

“Like their airline counterparts, low cost gyms serve to widen the market by opening up fitness memberships to more people. So given that the market is constantly expanding – around one third of our members have never joined a gym before – there’s lots more potential in the low cost market.”

Budget gyms have been the health club sector’s standout success story since the recession hit in 2008, with the leading operators frequently cited among the UK’s fastest growing businesses. Having came close to a merger with its rival Pure Gym in 2014, The Gym Group went public in November 2015 on a valuation of around £250m, while Pure Gym is understood to be considering its own IPO.

The Gym Group’s listing was the first by a UK gym operator in more than 15 years and Treharne says the lessons learned from the health club industry’s bruising brush with the stock market in the 90s – when several big chains quickly delisted – have informed his company’s strategy. The Gym Group expects to add 15-20 gyms to its 74-strong portfolio during 2016, with the chain focused solely on quality over quantity in terms of its site openings.

“The gym sector has got it wrong in the past and has often focused on growth for growth’s sake, rather than successful growth, meaning big chains have been dragged down by their tail (loss-making clubs),” added Treharne.

“There are lots of opportunities in the market, but our priority for any new club is that it has to make commercial sense – there are thousands that we’ve rejected due to local demographics, building visibility, parking issues or size.

“We’re very meticulous about locations and there are plenty of opportunities and offers for sites. Part of the reason that listing was attractive was to pay down part of the company's debt structure, strengthen the balance sheet and significantly improve the company's covenant strength, which is very important to potential landlords.”

The company is regularly linked with high profile deals and Treharne said The Gym Group remains open to a number of possibilities. He said the firm wouldn’t rule out M&A activity and even opportunities in Europe where a deal makes commercial sense, but reiterated that the potential in the UK market means it will remain the The Gym Group’s main focus for the foreseeable future.