Lower wage costs boost profitability of 24/7 gyms

The increase in the number of 24/7 gyms has driven substantial growth in the number of facilities operating within the fitness industry, which is forecast to rise at 6.4% annualised over the five years through 2015/16.

While predicting that market saturation will play a major part in the slowdown in revenue growth over the next five years through 2020/21, a new report from market research company IBISWorld charts how the structure of the industry has changed over the current decade.

A key factor in IBISWorld’s Great shape: The lower wage costs of budget 24-hour gyms have boosted profitability, explains how the lower staff costs of budget 24/7 gyms is reflected in the form of cheaper membership prices for consumers.

Predicting industry revenue growing at a compound annual rate of 3.5% over the five years through 2015/16, to reach $1.4 billion, the report (IBISWorld Industry Report R9111 Gyms and Fitness Centres in Australia) highlighs that “health consciousness has grown over the past five years, with consumers becoming more aware of the benefits of physical activity (and) this has benefitted the industry.

“Further industry growth has occurred through the expansion of more affordable gyms, which offset the effect of declining discretionary spending during the economic downturn.”

The report’s executive summary explains that “increasing market saturation and the continuing shift in consumer preferences towards cheaper 24-hour gym memberships are projected to result in more subdued revenue growth in 2015/16, at a forecast 2.1%.”

The report explains that the emergence of budget 24-hour gym chains has stimulated the majority of industry growth over the past five years, stating “franchises like Anytime Fitness and Jetts Fitness have grown exponentially over the past five years, attracting customers with their affordability and accessibility.

“Rising health awareness and high obesity levels have triggered further growth in gym memberships, although consumers are substituting their expensive full-service gym memberships for more affordable 24-hour gym memberships, which has restricted growth.”

In tandem with market saturation, IBISWorld expects revenue growth to also slow down over the five years through to 2020/21, suggesting “gym memberships are expected to grow at a slower rate as most consumer markets have already been tapped by niche gyms catering to all segments of the population.

“These include full-service gyms, women-only gyms and budget 24-hour gyms.

“Further consumer shifts from full-service gyms to cheaper 24-hour gyms are also projected to slow revenue growth, although this will be partially offset as the ageing population becomes more familiar with gyms and drives demand for full-service gyms.

“Single-visit programs like Medibank’s GymBetter also have the potential to slow revenue growth as infrequent users scale back their gym costs to pay smaller per-visit fees.”

Overall, IBISWorld forecast that industry revenue will grow at a compound annual rate of 1.5% over the five years through 2020/21, to reach $1.5 billion.

Click here for more information on the Great shape: The lower wage costs of budget 24-hour gyms have boosted profitability report (IBISWorld Industry Report R9111 Gyms and Fitness Centres in Australia).

Lower image courtesy of Jetts.

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