Perspective features the opinions of prominent figures in the fitness industry. Here, CEO of Goodlife Health Clubs, Greg Oliver, casts an experienced eye over the current state of the fitness market in Australia, paying particular attention to the potential opportunities for all clubs afforded by the growth of the low-cost model.
About 35 years ago I embarked on my first of many roles in the fitness industry, that of gym instructor, before proceeding to work in sales, as a club manager and, eventually, becoming owner of multiple clubs around Melbourne. Later in my career I worked with RTOs, was the founding managing director of Debit Success in Australia, and became the CEO of Genesis Fitness Clubs, before being approached two and a half years ago by Ardent Leisure (formerly Macquarie Leisure) to take on the role of Goodlife CEO. I’ve seen a lot of change in our industry over the past four decades, but I believe that current market conditions are unlike any we have previously experienced. That’s to say, competition has never been fiercer.
One of the main contributors to this competition is the low-cost club model. While some people have greeted this development with scepticism or dismissed it as a fad, I believe that it is sustainable, and even beneficial to the whole industry. For the first time I think we actually have a clear delineation between product offerings – between low-cost, low-service and higher cost, full service.
Goodlife has found that some regions have been more challenged than others with regards losing members to low-cost clubs, which may be due partly to demographics and partly to members who don’t utilise the full services we offer looking for a lower service, cheaper option. But we’re also seeing a lot of people coming back – people who have left for price reasons, but return to us because they are not finding the clubs to be as convenient as they expected. Although low-cost clubs are often open 24-hours, most people still want to use them at ‘normal’ hours, so when they reach the critical 2 members per square metre benchmark, the small facilities can get very overcrowded at peak times.
For this reason, I would not expect every low-cost player to survive, and I suspect we may see some consolidation, but I think the model is here to stay and will help us all to grow by providing another point of entry into the fitness industry for people who might not have previously joined full service clubs. Some people might join the low-costs and then decide they want something more, so it can provide an opportunity. The competition can also encourage full service clubs to assess their strengths and weaknesses and hone the fitness programs they deliver.
There is no doubt, for example, that group exercise is a strength of full service clubs, and it’s important that we continue to evolve and progress it. Small group training is another strong feature, as is the 12-week challenge that Goodlife has become so well-known for. These programs assist us in member retention and we believe they give us some protection against low-service competitors. Some of our clubs have actually cracked 40 per cent in group exercise attendance, well above industry average.
By playing to our strengths in this crowded marketplace, Goodlife has continued to perform very strongly, with our mature clubs achieving like-for-like growth of 12 per cent over the past two years. It has been our ability to outperform the market in terms of both membership and profitability during this period of unprecedented supply growth that has given us the opportunity to recently acquire 11 Fenix Fitness clubs and eight Fitness First clubs, making Goodlife the second largest full service player in Australia behind Fitness First. In normal course of business it would be unusual to take on so many new clubs in such a short time, but a rare opportunity presented itself and we took full advantage of it. In green-lighting this expansion, Ardent Leisure, the global investment company that owns Goodlife, has expressed its confidence in Goodlife, and the fitness industry, as a sound investment. I think the fact that Goodlife’s results are public has also gone some way to educating the financial institutions that the fitness industry is still a worthwhile industry with strong margins, returns and growth opportunities.
The fitness industry today has more diversity and more competition than ever before. I believe that there is a market for all different types of clubs and businesses. Low-cost will not replace full service, but neither will it disappear as a club model. Both models can survive – but only the best businesses within each sector will prosper.
Greg joined Goodlife Health Clubs in June 2010. He has had an extensive professional career in the fitness industry, having successfully owned and operated a number of clubs, created Debit Success, Australia’s leading fitness direct debit and membership software provider, and successfully operated one of Australia’s largest fitness training organisations.