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JP Lennard
JP Lennard
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UNITING THE WORLD OF FITNESS
Health Club Management

Health Club Management

features

Stats: Future gazing

Deloitte has produced a report in partnership with EuropeActive, analysing the impact of COVID-19 on the European health and fitness market, as Karsten Hollasch reports

Published in Health Club Management 2020 issue 9
Operators with rolling one year contracts fared the best / Shutterstock / Jacob Lund
Operators with rolling one year contracts fared the best / Shutterstock / Jacob Lund
Confidence in the future of the fitness market is reflected in the number of M&A and financing activities taking place

When the coronavirus hit the European health and fitness market in March and governments enforced the closure of gyms across Europe, there was no manual on how to handle the situation.

As it turned out, initial club closures lasted anywhere between eight and 18 weeks, depending on how severe the impact of the virus was in the country in question. Some regions suffered a second lockdown and some look likely to experience further disruption.

Although governments were quick to provide financial help, the financial damage for operators and other actors in the fitness industry is still massive. In fact, it’s still unclear how high the losses really are.

For this reason, Deloitte and EuropeActive launched a study to examine the business impact of the crisis on the sector, in both the short- and the longer-term.

The fieldwork took place in August and a total of 17 European key operators were interviewed, covering around 10 per cent of all members in the European health and fitness market.

Key findings
As of 31 March 2020, the surveyed operators experienced an average membership shortfall of around 3.5 per cent compared to their original budgets. By comparison, by 30 June 2020, these shortfalls reached their highest point, at 15.8 per cent, primarily through a combination of membership cancellations and the absence of new membership inflow during closures.

The average shortfalls compared to budget in respect of the number of clubs amounted to 2.5 per cent by 30 June 2020, as clubs reopened across Europe.

In the medium- and long-term, both average membership shortfalls and average club shortfalls are expected to decrease. As of December 2020 and December 2021, European operators said they expect average shortfalls in memberships to be 13.9 per cent and 9.9 per cent respectively. Looking at clubs, the average shortfalls compared to budget are expected to be 1.8 per cent by December 2020 and 0.6 per cent by December 2021.

Overall, the shortfall could be higher in the European fitness market, especially for single club operators, who could face greater financial difficulties than chain operators.

The pandemic-related closures in Q2 also impacted finances, primarily due to the absence of membership fees. European fitness operators experienced an average income shortfall of about 65 per cent compared to budget. Discrepancies in income shortfalls between operators in the study can be explained by different approaches to the handling of membership fees during the period of club closures.

While some operators continued to collect membership fees unless customer objections were received, there were also companies that stopped collecting membership fees altogether.

Operators were able to achieve cost savings of 43 per cent compared to budget in Q2, mainly due to paying less rent and fewer people and other reductions in operating costs.

Additional savings were realised when personnel costs were subsidised by local governments.

Income shortfalls vary considerably between regions. Operators with a UK focus expect the highest financial shortfalls when compared to the initial budget and the income shortfalls of UK-focused operators were especially high in Q2 2020 (-94 per cent).

This is in part attributable to UK operators’ heavy reliance on monthly cancellable contracts, in contrast to Germany and most of the other European markets, which mainly offer longer-term contracts.

Published H1 reports of listed European key operators also show the significant impact of COVID-19 on financial results. Due to an approximately 18-week lockdown in the UK, total revenues of UK operator The Gym Group decreased by around 50 per cent in H1 2020, compared to H1 2019. Similar results have been published by PureGym for its UK business (-49 per cent in H1 2020, compared to H1 2019). In comparison, Dutch operator Basic-Fit, which operates in various European countries, recorded an overall decrease in revenues of 24 per cent compared to H1 2019.

Measures taken
To counter the crisis, operators have undertaken a wide range of monetary and non-monetary measures. Among the monetary measures, short-time work, government grants and loan application were the most popular.

Other popular non-monetary measures introduced by operators include frequent scenario analyses – introduced by all operators surveyed – the creation of emergency plans and the introduction of early warning indicators.

The use of digital fitness offerings increased during the lockdown.

Survey results suggest that consumers’ interest in digital offerings is not a one-off, but rather that COVID-19 is serving as an accelerator for increasing demand for digital sports offerings (apps, videos, etc.).

By providing relevant content through digital channels and engaging with customers via their websites and apps, operators have been able to keep in touch with members during the crisis.

Basic-Fit, for example, actively increased member engagement through its already existing social media channels and mobile app, by offering additional services and contents.

The company-own mobile app was also temporarily made available to the general public.

According to Virtuagym’s COVID-19 impact study, the number of fitness app users more than trebled to reach its first peak in March, when COVID-19 started in Europe. However, the highest peak was reached in July, when clubs started reopening. This indicates that in-person club visits and use of digital offerings can coexist (and accelerate each other) rather than cannibalising each other.

Future outlook
As an overall result, major European club operators consider their existence only partially threatened, assuming no further forced club closures: None of the operators stated that their existence was or will be either severely or highly threatened in the future. However, single club operators, which represent the majority of fitness clubs in the European market, appear to be more threatened in their existence than larger operators, due to limited resources and refinancing possibilities.

The fact that fitness club operators are looking confidently into the future can be proven not only by the lower expected shortfalls, but also by further studies: more than 60 per cent of Spanish operators surveyed in the FNEID/Valgo COVID-19 impact report believe revenues will return to previously expected levels by the third quarter of 2021.

This could be supported by the fact that the behaviour of some consumers in the fitness market has barely changed. Eight-eight per cent of consumers in the ukactive/4Global COVID-19 impact report stated that after the reopening of public sector clubs in the UK they would visit the gym as often or even more often than before the pandemic.

Confidence in the future of the fitness market is reflected in the number of M&A and financing activities that have taken place in the last couple of months. For example, RSG Group expanded its investments by acquiring the US-operator Gold Gym for US$100 million, as well as 35 per cent of the shares of Gym80. Furthermore, other players such as PureGym, BASIC-FIT and The Gym Group were able to raise large sums of capital during this period.

Herman Rutgers, co-editor of the report noted: “It’s not possible at this stage to predict what the full impact of this crisis will ultimately be, due to the increasing number of cases and the uncertain future of policy decisions. However, the study shows the impact on membership and financial losses, and also that – assuming there are no further club closures – the industry can recover quickly and is still confident of achieving the long-term goals of 80 million members by the midpoint of the decade and 100 million by 2030.”

Get the report: www.HCMmag.com/Deloitte

Sign up here to get HCM's weekly ezine and every issue of HCM magazine free on digital.
Data indicates that in-person club visits and use of digital offerings can not only co-exist, but can also accelerate each other / Shutterstock / Jacob Lund
Data indicates that in-person club visits and use of digital offerings can not only co-exist, but can also accelerate each other / Shutterstock / Jacob Lund
https://www.leisureopportunities.co.uk/images/2020/731995_90245.jpg
A report by Deloitte for EuropeActive analyses the impact of COVID-19 on the European health and fitness market
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features

Stats: Future gazing

Deloitte has produced a report in partnership with EuropeActive, analysing the impact of COVID-19 on the European health and fitness market, as Karsten Hollasch reports

Published in Health Club Management 2020 issue 9
Operators with rolling one year contracts fared the best / Shutterstock / Jacob Lund
Operators with rolling one year contracts fared the best / Shutterstock / Jacob Lund
Confidence in the future of the fitness market is reflected in the number of M&A and financing activities taking place

When the coronavirus hit the European health and fitness market in March and governments enforced the closure of gyms across Europe, there was no manual on how to handle the situation.

As it turned out, initial club closures lasted anywhere between eight and 18 weeks, depending on how severe the impact of the virus was in the country in question. Some regions suffered a second lockdown and some look likely to experience further disruption.

Although governments were quick to provide financial help, the financial damage for operators and other actors in the fitness industry is still massive. In fact, it’s still unclear how high the losses really are.

For this reason, Deloitte and EuropeActive launched a study to examine the business impact of the crisis on the sector, in both the short- and the longer-term.

The fieldwork took place in August and a total of 17 European key operators were interviewed, covering around 10 per cent of all members in the European health and fitness market.

Key findings
As of 31 March 2020, the surveyed operators experienced an average membership shortfall of around 3.5 per cent compared to their original budgets. By comparison, by 30 June 2020, these shortfalls reached their highest point, at 15.8 per cent, primarily through a combination of membership cancellations and the absence of new membership inflow during closures.

The average shortfalls compared to budget in respect of the number of clubs amounted to 2.5 per cent by 30 June 2020, as clubs reopened across Europe.

In the medium- and long-term, both average membership shortfalls and average club shortfalls are expected to decrease. As of December 2020 and December 2021, European operators said they expect average shortfalls in memberships to be 13.9 per cent and 9.9 per cent respectively. Looking at clubs, the average shortfalls compared to budget are expected to be 1.8 per cent by December 2020 and 0.6 per cent by December 2021.

Overall, the shortfall could be higher in the European fitness market, especially for single club operators, who could face greater financial difficulties than chain operators.

The pandemic-related closures in Q2 also impacted finances, primarily due to the absence of membership fees. European fitness operators experienced an average income shortfall of about 65 per cent compared to budget. Discrepancies in income shortfalls between operators in the study can be explained by different approaches to the handling of membership fees during the period of club closures.

While some operators continued to collect membership fees unless customer objections were received, there were also companies that stopped collecting membership fees altogether.

Operators were able to achieve cost savings of 43 per cent compared to budget in Q2, mainly due to paying less rent and fewer people and other reductions in operating costs.

Additional savings were realised when personnel costs were subsidised by local governments.

Income shortfalls vary considerably between regions. Operators with a UK focus expect the highest financial shortfalls when compared to the initial budget and the income shortfalls of UK-focused operators were especially high in Q2 2020 (-94 per cent).

This is in part attributable to UK operators’ heavy reliance on monthly cancellable contracts, in contrast to Germany and most of the other European markets, which mainly offer longer-term contracts.

Published H1 reports of listed European key operators also show the significant impact of COVID-19 on financial results. Due to an approximately 18-week lockdown in the UK, total revenues of UK operator The Gym Group decreased by around 50 per cent in H1 2020, compared to H1 2019. Similar results have been published by PureGym for its UK business (-49 per cent in H1 2020, compared to H1 2019). In comparison, Dutch operator Basic-Fit, which operates in various European countries, recorded an overall decrease in revenues of 24 per cent compared to H1 2019.

Measures taken
To counter the crisis, operators have undertaken a wide range of monetary and non-monetary measures. Among the monetary measures, short-time work, government grants and loan application were the most popular.

Other popular non-monetary measures introduced by operators include frequent scenario analyses – introduced by all operators surveyed – the creation of emergency plans and the introduction of early warning indicators.

The use of digital fitness offerings increased during the lockdown.

Survey results suggest that consumers’ interest in digital offerings is not a one-off, but rather that COVID-19 is serving as an accelerator for increasing demand for digital sports offerings (apps, videos, etc.).

By providing relevant content through digital channels and engaging with customers via their websites and apps, operators have been able to keep in touch with members during the crisis.

Basic-Fit, for example, actively increased member engagement through its already existing social media channels and mobile app, by offering additional services and contents.

The company-own mobile app was also temporarily made available to the general public.

According to Virtuagym’s COVID-19 impact study, the number of fitness app users more than trebled to reach its first peak in March, when COVID-19 started in Europe. However, the highest peak was reached in July, when clubs started reopening. This indicates that in-person club visits and use of digital offerings can coexist (and accelerate each other) rather than cannibalising each other.

Future outlook
As an overall result, major European club operators consider their existence only partially threatened, assuming no further forced club closures: None of the operators stated that their existence was or will be either severely or highly threatened in the future. However, single club operators, which represent the majority of fitness clubs in the European market, appear to be more threatened in their existence than larger operators, due to limited resources and refinancing possibilities.

The fact that fitness club operators are looking confidently into the future can be proven not only by the lower expected shortfalls, but also by further studies: more than 60 per cent of Spanish operators surveyed in the FNEID/Valgo COVID-19 impact report believe revenues will return to previously expected levels by the third quarter of 2021.

This could be supported by the fact that the behaviour of some consumers in the fitness market has barely changed. Eight-eight per cent of consumers in the ukactive/4Global COVID-19 impact report stated that after the reopening of public sector clubs in the UK they would visit the gym as often or even more often than before the pandemic.

Confidence in the future of the fitness market is reflected in the number of M&A and financing activities that have taken place in the last couple of months. For example, RSG Group expanded its investments by acquiring the US-operator Gold Gym for US$100 million, as well as 35 per cent of the shares of Gym80. Furthermore, other players such as PureGym, BASIC-FIT and The Gym Group were able to raise large sums of capital during this period.

Herman Rutgers, co-editor of the report noted: “It’s not possible at this stage to predict what the full impact of this crisis will ultimately be, due to the increasing number of cases and the uncertain future of policy decisions. However, the study shows the impact on membership and financial losses, and also that – assuming there are no further club closures – the industry can recover quickly and is still confident of achieving the long-term goals of 80 million members by the midpoint of the decade and 100 million by 2030.”

Get the report: www.HCMmag.com/Deloitte

Sign up here to get HCM's weekly ezine and every issue of HCM magazine free on digital.
Data indicates that in-person club visits and use of digital offerings can not only co-exist, but can also accelerate each other / Shutterstock / Jacob Lund
Data indicates that in-person club visits and use of digital offerings can not only co-exist, but can also accelerate each other / Shutterstock / Jacob Lund
https://www.leisureopportunities.co.uk/images/2020/731995_90245.jpg
A report by Deloitte for EuropeActive analyses the impact of COVID-19 on the European health and fitness market
Deloitte, EuropeActive, covid-19, Karsten Hollasch,fitness,europe, fitness industry
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promotion
While much of the fitness industry has reopened its doors across the UK over the past weeks, many members are yet to return.
Opinion: Re-engaging your post-lockdown absent members
Featured supplier news
Featured supplier news: INEOS: The future of hand-sanitising
As gyms begin to reopen, cleanliness and hygiene remain an essential part of ensuring staff and members are confident to return.
Featured supplier news
Featured supplier news: Celebrating the return of group exercise – Les Mills to host free ‘Fastest Way Back’ livestream event for the industry
Last month (May) saw the welcomed return of group exercise classes. Group exercise is the heartbeat for so many clubs, with in-studio and instructor-led live experiences at the pinnacle.
Featured operators news
Featured operator news: Being active helps Parkwood Leisure customers save the NHS £16m
Parkwood Leisure, one of the UK’s leading public leisure facilities operators, helped prevent more than 7,000 cases of stroke, dementia, depression and type 2 diabetes in 2019, saving the NHS £16 million, a new social value report has shown.
Featured operators news
Featured operator news: Everyone Active generates £342m in social value
Award-winning leisure operator Everyone Active generated £342million in social value at its sites across the country in 2019/20.
Company profiles
Company profile: Pulse Fitness
With an award-winning portfolio of over 450 pieces of cutting-edge, premium fitness equipment, Pulse Fitness ...
Company profiles
Company profile: Xn Leisure Systems Ltd
Xn Leisure is a provider of cutting-edge health and fitness software, offering an exceptional service ...
Catalogue Gallery
Click on a catalogue to view it online
Directory
Architects/designers
Zynk Design Consultants: Architects/designers
Skincare
Sothys: Skincare
Wearable technology solutions
MyZone: Wearable technology solutions
Spa software
SpaBooker: Spa software
Independent service & maintenance
Servicesport UK Limited: Independent service & maintenance
Uniforms
Service Sport: Uniforms
Management software
Premier Software Solutions: Management software
Flooring
Total Vibration Solutions / TVS Sports Surfaces: Flooring
Hydrotherapy / spa fragrances
Kemitron GmbH: Hydrotherapy / spa fragrances
Salt therapy products
Saltability: Salt therapy products
Property & Tenders
Pendine Sands, Carmarthenshire
Carmarthenshire County Council
Property & Tenders
Diary dates
01-04 Jul 2021
Expo Centre & Riviera di Rimini, Italy
Diary dates
18-19 Sep 2021
Locations worldwide,
Diary dates
21-24 Sep 2021
Messe Stuttgart, Germany
Diary dates
28-29 Sep 2021
ExCeL London, London, United Kingdom
Diary dates
04-07 Nov 2021
Exhibition Centre , Cologne, Germany
Diary dates
01-03 Feb 2022
Coventry Building Society Arena, Coventry, United Kingdom
Diary dates
01-07 Dec 2022
tbc, Dunedin, New Zealand
Diary dates
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