We have a compelling proposition in a robust and growing market for high value, low cost fitness, which can be scaled efficiently and sustainably. We take a data-driven approach, utilising technology and economies of scale to provide a demonstrably great value member experience, whilst also delivering strong financial returns.
What we do
- Market-leading low cost gym experience drives growth in membership base
- Significant advantages from scale-efficient model: operations, technology, brand and marketing
- With scale we can achieve strong financial returns which enable reinvestment to drive further growth
Our business model
Our strategy
The framework of our Next Chapter growth plan for the next stage of The Gym Group’s development is to ‘Strengthen the core’ of our business to increase returns from the existing estate, funding ‘Accelerate rollout of quality sites’, in turn creating optionality to ‘Broaden our growth’ as we develop our proposition into new channels, new adjacencies and/or new markets.
We have built the solid foundations of many high-performing gyms and have identified the growth drivers that will deliver increased returns in our existing estate, as well as underpin the attractive returns we will drive from our new sites.
The first initiative for this plan is yield and revenue management. Taking analysis from Simon-Kucher (quantitative pricing experts) we see that our members and the members of other low cost gyms ascribe a higher value to their gym membership than they currently pay. We remain on average around £2 per month cheaper than our closest competitors and we aim to continue to narrow that pricing gap, whilst remaining great value, as well as improving yield. We will do this by focusing on more profitable promotions and increasing the penetration of our premium Ultimate membership.
Secondly, we want to maximise returns from member acquisition. The primary choice factor for joining a gym is convenience, and 80% of our membership base lives within three miles of their gym. Within the catchment area of our existing estate, there remains a potential additional circa 5 million people in our target age range who are not currently a member of one of our gyms. We will therefore geo-target our marketing activity to focus on the places where our sites are, and focus messaging on the key drivers of choice – convenient location, great equipment and affordable price. We’ll harness advertising technology and data science to optimise returns on this marketing investment and strategy.
Thirdly we have an organisational focus on retention. Whilst our flexible no-contract model remains an important factor of the attractiveness of our proposition, by improving retention we will drive both yield and membership volume. Focusing on the ‘early life’ of a new member and starting with the way they are acquired; we will use data analytics to determine which promotional offers have the best retention rates. We are then focused on helping members to build lasting habits, whether that’s via our expert teams in the gyms or through digital channels like our App, which we will continue to invest in as channel for engagement, information, encouragement and ultimately retention.
Across these and other related initiatives, we will drive like-for- like growth through our existing estate, which will help to improve returns and generate more cash to reinvest in expansion.
Disciplined rollout of high quality and high-returning sites will deliver attractive returns and create significant value for shareholders. There is analysis from PwC that shows that the UK potential opportunity is for between 600 and 850 additional sites in the low cost gym segment over the next 10-15 years. We have worked to clearly identify the key characteristics of high-returning sites and Greater London and urban residential gym locations deliver the best returns for the Group. We are targeting 30% Return on Invested Capital (‘ROIC’) for the Group’s new site pipeline, with an ambition to open circa 50 new sites over the next three years.
The successful execution of the first two components of the Next Chapter plan will create further options to ‘Broaden our growth’ for the mid and long term. We will continue to make a strategic assessment of these options which may include further developments to our existing proposition; format innovation; investigating new channels to market; and introducing new adjacent revenue streams to complement our existing business.
