‘Affordable’ new gyms flex their muscles
NEW competitors are entering the gym industry — long dominated by Virgin Active and Planet Fitness — with plans to cash in on the seemingly big money that can be made.
Brait’s recent buyout of 80% of Virgin Active from UK entrepreneur Richard Branson and CVC Capital Partners for R12billion is an example.
Justin Williamson, chairman of new gym group Go Health, said the deal pointed to the massive profits — estimated to be about R1-billion in South Africa alone.
“At these levels, there is a compelling commercial opportunity to bring down the cost of health-club membership to affordable levels,” he said.
And that is what Go Health and competitors Viva and SWEAT 1 000, among others, are aiming to do to get a slice of this lucrative market.
SWEAT 1 000 was launched in 2010 and has five gyms. MD Andrew Rothschild said there were plans to expand nationally and internationally. The fee is R180 per class, which falls as low as R75 a class when bought in packages.
Viva Gyms has sites in Port Elizabeth, and in Hillfox, Fourways and (by September) Rosebank in Johannesburg. There are no contracts, and monthly membership starts at R219.
Williamson said Go Health was aiming for 20% of the local gym market and to get there it was setting up “low-cost”, hi- tech gyms near existing successful gyms to gain market share.
He said that one of the main reasons the Go Health model would work for investors (which included Grindrod Financial Services with a 49% stake) and customers was that it had no swimming pool.
A pool uses about 30% of the gym area and needs extensive chemicals and a lot of electricity to keep it warm, but only 5% of members use it. SWEAT 1 000 also had no pool, and VIVA had also dropped the sauna, steam room and towels to cut costs.
“From an investor perspective, the set-up and monthly running costs are reduced enormously, so very good returns can be generated from lower price points.”
The top team all come from Virgin Active, and their plan is to open 40 health clubs by 2019. The first is in Northwold, in Gauteng, and monthly fees are R259. MD Rory Sweetlove was previously chief operations officer of Virgin Active and MD of Planet Fitness.
Williamson, the former CEO of Foodcorp, said health clubs had become extremely expensive for most people due to limited choice. At existing club pricing “there is a significant market of people who cannot afford a family gym membership”.
The target market for Go Health is existing health-club members who do not have a subsidised membership, and those consumers who cannot afford high prices.
“As a result of our price point, we will increase the size of the health-club market.” Membership for two adults and two kids would cost about R600.
Breaking even would be at about 2 000 members a club. “We hope to have 6 000 members per club,” said Williamson.
Once the gym achieves a footprint of five to 10 clubs, it is expected to be on the radar of some medical-scheme funders that subsidise gym fees.
Planet Fitness and Virgin Active are also trying to attract customers by offering packages to suit different budgets.
Planet Fitness’s new Just Gym brand has a lowest unsubsidised rate of R169 a month, rising to R249 a month. Subsidised pricing through medical aids starts from R49 a month.
Planet Fitness is offering membership for R199 a month based on a 24-month membership, if six or 12 months are paid upfront. For the remainder of the contract, the price per month is the normal rate paid at that particular club.
Ross Faragher-Thomas, MD of Virgin Active SA, the biggest gym chain in the country, said the group could offer membership “anywhere between our premium Classic Club collection from R1 700 a month to our Vir- gin Active RED launched in 2014”, from R200 a month.
The fourth RED club opened this week, and the fifth will open in Jabulani, Soweto, next month. There is a pipeline of eight to 10 RED clubs a year and up to 10 full-format health clubs over the next few years.
Membership of a RED club could cost consumers less than R50 a month if linked with a wellness programme.