That might seem like a normal industry acquisition but there’s something more interesting going on here. Upmarket and mid-market gyms like LA Fitness are being destroyed by budget rivals.
In the same way that budget airlines revolutionised air travel 20 years ago, budget gyms have totally changed the fitness market in the UK since the the recession.
New players like Pure, PayAsYouGym, and TheGym have flipped the traditional business model on its head and in the process forced the incumbent players to fight their corner.
UK operators like Fitness First, David Lloyd, LA Fitness, and Virgin Active typically lock you into a long-term contract at a pretty high monthly rate — around £40 ($US61) as a basic — but promise premium service in return. There are pools and saunas, as well as top of the range equipment and plenty of TV screens.
On the other hand the new breed of gyms let you cancel your contract at any time and offer membership typically around £20 ($US30) a month. The gyms are low on staff and just include basic equipment.
Full disclosure, I’m a member of the Pure Gym near my house. It’s in a warehouse that looks like an air hanger and is about as no-frills as you could get — I feel lucky there’s a shower. But it’s just so cheap. I would never have signed up to a £40 ($US61) a month deal, but at this price point I think why not.
Pure Gym and its rivals are having huge success pitching to consumers like me who were up until now not catered for. Most started life around the time of the 2008 recession, when money was tight. The first Pure Gym opened in 2009 but it’s already the UK’s biggest gym operator, with 130 outlets across the country.
By contrast LA Fitness, which has been around since 1990, only has 43 clubs and at its height had around 80 gyms. Pure Gym says it plans to open another 30 gyms next year — almost LA Fitness’ entire footprint in just one year.
These budget gyms are cheap to set up and cheap to run. Pure’s founder Peter Roberts told the Telegraph in January that each gym typically only employs two full-time staff members, with self-employed personal trainers also on site. Most of the admin is done online and automated.
The popularity of budget gyms shows no signs of slowing. Pure Gym CEO Humphrey Cobbold said today: “Overall demand for affordable, high quality, and no-contract fitness centres is continuing to grow, served by a range of providers in a highly competitive market-place.”
LA Fitness and gyms like it, meanwhile, look to be on the way out. The company was valued at £90.3 million ($US138.22 million) in a private equity deal in 2005, but last year its lenders took control of the loss-making chain and had to pull off a major restructure. At the time it blamed competition from the likes of Pure Gym. Terms of today’s sale were not disclosed.
Pure is set to turn all the LA Fitness branches into its own brand budget offering as part of plans to expand in London and the South East. That’s one upmarket gym chain that has fallen at the sword of its budget rival. Others could follow.