Edexcel A Level BusinessPaper 3 Research Context

The health and fitness industry and the private businesses operating in this market in the UK and internationally

InthisdocumentwehavesummarisedthemostimportantinformationthatyouneedtobeawareofasyouprepareforEdexcelPaper3.YoudonotneedtobecomeanexpertontheUK&InternationalHealth&FitnessIndustry.However,itwillbereallyusefulifyouexploretheresearchlinksprovidedandbuildyourawarenessofthekeydataandissuesfacingbusinessesinthisindustry.

SAM

PLE

RESOURCE

ResearchRequirementsPaper3June2017

Trends in the number and size of health and fitness clubs in the UK over the last 10 years, including organic business growth and takeovers

Influences on the market for health and fitness clubs and gyms, such as social trends, changing costs and membership prices

Facilities and services provided by private health and fitness clubs, such as swimming pools, aerobic classes, racquet courts, saunas and therapy

Range of private health and fitness clubs that operate in the market, in the UK and internationally

Human resource management in the UK health and fitness industry

SAM

PLE

RESOURCE

ResearchToolkitMainSourcesUsedforthisDocument

This document represents a summary of the research carried out by a team of Edexcel Business teachers and examiners. They have drawn their findings from a wide variety of sources, the most important of which are:

Health Club Management Magazine (2015-2017)The Gym Group plc – Investor Prospectus 2015 & Investor PresentationsNewspapers – FT, Guardian, TelegraphLeisure Database Group: State of the UK Fitness Industry 2016European Health & Fitness Market Report 2016 (Deloitte)Passion for leisure - A view of the UK leisure consumer 2016 (Deloitte)UKActive Reports (2015-2017)Register of Exercise ProfessionalsThe 2016 IHRSA Global Report: The State of the Health Club IndustryWorking in Fitness 2015: An analysis of the Fitness Industry in the UKMintel Group Limited Health and Fitness Clubs UK July 2015

SAM

PLE

RESOURCE

Trends in the number and size of health and fitness clubs in the UK over the last 10 years, including organic business growth and takeovers

SECTIONONE

SAM

PLE

RESOURCE

SECTIONONEKEYPOINTSTOREMEMBERFORTHEEXAM(1)

• There are almost 200,000 fitness & health clubs worldwide and the global market is growing strongly

• The US is the world’s biggest fitness club market with over 55 million members.

• The UK is the world’s 3rd largest market for fitness club membership, with around 9 million members. The market is growing at about 5% per year (membership)

• The UK fitness and wellbeing market is estimated by PwC to be worth around £22bn (2015) in terms of sales revenue. Of this, around £10bn is spent on fitness alone

SAM

PLE

RESOURCE

SECTIONONEKEYPOINTSTOREMEMBERFORTHEEXAM(2)

• There are currently over 6,500 health & fitness clubs in the UK up from 6,312 in 2015

• Total industry membership in 2016 rose 5.3% to 9.2 million

• Total market value is estimated at £4.6 billion and this has been growing at between 3-4% per year in recent years

• A relatively law proportion of UK adults are now members of fitness & health clubs. The UK “penetration rate” (% of adults who are members) has risen to 14.3%

• The budget / low-cost gym chains such as Pure Gym, The Gym and Exercise4Less have driven most of the growth in the market

SAM

PLE

RESOURCE

SECTIONONEKEYPOINTSTOREMEMBERFORTHEEXAM(3)

• The rapid growth in the overall number of health & fitness clubs in the UK has mainly been due to organic growth strategies pursued by the leading chains and new entrants to the market

• Budget / low-cost chains in particular have been able to invest in a rapid roll-out of new locations, taking advantage of their more flexible space requirements. Former office blocks and warehouses are just two of the kinds of space that have been converted into gyms

• There have been several large takeovers of fitness clubs in the UK in recent years. Venture capital firms have also shown their enthusiasm for investing in the sector due to its strong market growth and profits

• Overall, the average size of health & fitness clubs has fallen (both in terms of space and average membership). However this mainly reflects the increasing number of small budget gyms

SAM

PLE

RESOURCE

TheLargestPrivateHealth&FitnessClubGroupsintheUK*IndicatesLow-Cost/BudgetOperator#IndicatesFranchiseModel

Source:tutor2uAnalysis;TheGymGroupAnnualReport

FitnessGroup NumberofClubsinUKPureGym* 140AnytimeFitness*# 113NuffieldHealth 112TheGymGroup* 101David LloydLeisure 86DWFitness 79Bannatyne HealthClubs 67VirginActive 60Fit4Less* 47Exercise4Less* 35EasyGym* 16

SAM

PLE

RESOURCE

Source:tutor2uanalysis

GROWTHINTHELOW-COST/BUDGETGYMMARKETAnalysisoftheGrowthinClubs&RevenueoftheLow-CostSector

NumberofGyms

SalesRevenues£m

Sales RevenueperGym(£)

2011 58 37 637.9k

2012 101 72 712.9k

2013 196 150 765.3k

2014 257 203 789.9k

2015 319 290 909.1k

SAM

PLE

RESOURCE

Estimated market size of the UK Wellness & Fitness Market From 2010 to 2020 (in billion GBP)

17.3 17.7 18.2 18.5 19.1 19.6 20.1 20.7 21.4 22.1 22.8

0

5

10

15

20

25

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Marketsize

inbillionGB

P

Source:PwCIndustryAnalysis2015

SAM

PLE

RESOURCE

EstimatedMarketSize(Spend)onWellnessandFitnessintheUKFrom2015to2020(inbillionGBP)

Source:PwCIndustryAnalysis2015

10.39.2

12.4

10.4

0

2

4

6

8

10

12

14

Wellness Fitness

Estim

ated

spe

nd in

bill

ion

GB

P

2015 2020

SAM

PLE

RESOURCE

Health&FitnessClubGroupsintheUKRecentNumbersofClubsbyMarketSegment

Source:tutor2uAnalysis;TheGymGroupInterimReport

SAM

PLE

RESOURCE

6

5

4

3

2

1

02011 2012 2013 2014 2015 2016

Budget/Low-CostClubs

TraditionalHealth&FitnessClubs

Source:LDB/FT;tutor2uanalysis

Num

bersofC

lubs(’000s)

GROWTHINFITNESSCLUBSINUKNumberofClubsSplitBetweenBudget/Low-CostandTraditional

SAM

PLE

RESOURCE

ResearchArticlestoReadPureGym’sGrowthStrategyintheUK

Source:Various

http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/11337645/Pure-Gym-founder-on-how-he-built-Britains-biggest-gym-chain.html

http://www.tutor2u.net/business/blog/organic-growth-strategies-for-success-low-cost-focus-pays-for-pure-gym

PureGymisthebestexampletoresearchintermsofhowitshasbecometheUKmarketleaderthroughacombinationoforganicandexternalgrowth

SAM

PLE

RESOURCE

ResearchArticlestoReadPureGymExpandswithaTakeoverofLAFitnessintheUK

Source:Various

Thissignificanttakeoverinvolvedabudgetchain(PureGym)acquiringalong-establishedandstruggling“mid-market”chain(LAFitness).ThestrategyistoconverteachlocationfromtheLAFitnesstoPureGymbytakingawaysaunas,poolsetc.andaddingmachines!

https://www.theguardian.com/business/2015/may/29/pure-gym-takeover-la-fitness https://www.ft.com/content/aa0b2cf8-0908-11e5-

881f-00144feabdc0

SAM

PLE

RESOURCE

ResearchArticlestoReadTheGymGroupStockMarketFlotationin2015

Source:Various

https://www.thegymgroup.com/blog/article/the-gym-completes-successful-ipo-7143/

TheGymGroup,whichisnowtheUK’ssecondlargestfitnessclubgroup,floatedontheLondonStockMarketin2015raising£125minnewequityfinance.BeforetheIPOthebusinesshadexploredapotentialmergerwithPureGymGroup– theUKmarketleader.

https://www.theguardian.com/business/2015/nov/09/the-gym-to-float-on-stock-market-with-valuation-of-250m

SAM

PLE

RESOURCE

TheGymGroupProfileofOrganicGrowth

Source:TheGymGroupAnnualReports&Prospectus#Consensusforecastfor2016

ThetablebelowshowshowTheGymGrouphasgrownsalesrevenuethroughanentirelyorganicgrowthstrategybyopeningnewlocationseachyear

2012 2013 2014 2015 2016

NumberofGyms 32 40 55 74 101

Membership 166,000 225,000 293,000 376,000 420,000

SalesRevenue £22.3m £37.5m £45.5m £60.0m £76.9m#

MembersperGym 5,187 5,625 5,327 5,081 5,250

SalesRevenue:

PerGym £697k £937k £827k £811k £761

PerMember £134 £155 £173 £160 £182

SAM

PLE

RESOURCE

ResearchArticlestoReadDWSportsTakeoverofFitnessFirstclubsintheUK

Source:Various

In2016DWSportsgroup,whichruns78clubsundertheDWFitnessbrand,acquired62FitnessFirstclubs,mainlyinLondonandthesoutheast,togetherwiththeFitnessFirstbrand.Thetakeoverwasforanestimatedpriceof£70m

https://www.insidermedia.com/insider/southwest/fitness-first-uk-bought-by-gym-chain

http://www.healthclubmanagement.co.uk/detail.cfm?pagetype=detail&subject=news&codeID=326633

SAM

PLE

RESOURCE

ResearchArticlestoReadVirginActiveSells35UKClubstoNuffieldHealth(2016)

Source:Various

Areallyinterestingexampleofarecenttakeover.NuffieldHealthisa“not-forprofit”organisationwithextensiveotherbusinessactivitiesinhealthcareandwellbeing,notjustfitness.VirginActiveisstayingintheUKwithasmallerportfolioandwantstoinvestininternationalfitness&healthclubmarkets.

http://www.telegraph.co.uk/business/2016/06/14/virgin-active-eyes-revamp-after-selling-off-one-third-of-its-clu/

http://www.prnewswire.co.uk/news-releases/nuffield-health-announces-acquisition-of-35-virgin-active-gyms-582890941.html

SAM

PLE

RESOURCE

ResearchArticlestoReadVentureCapitalistBuysDavidLloydLeisurefor£750m(2013)

Source:Various

Venturecapitalfirmshaveinvestedheavilyinfitnessandhealthclubsinrecentyears.OneofthelargestinvestmentswasbyTDRCapitalwhotookcontrolofDavidLloydLeisure– oneofthefirstandlargestchainsoffull-featurefitness&healthclubs

https://www.ft.com/content/bf11b102-1617-11e3-856f-00144feabdc0

https://www.theguardian.com/business/2013/sep/05/david-lloyd-deal-tdr-capital

SAM

PLE

RESOURCE