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Thursday
Aug172017

The Future of the German Discount Fitness Market

This post is an IHRSA European Congress preview.

Discount fitness continues to be the fastest growing market segment in Germany; however, the first signs of a slowdown are appearing. New competitors with new concepts are being introduced. Discount fitness initially increased penetration rates, but further growth needs to come through new gym members.

Are there more opportunities at the other end with the premium market?

To answer that question, we have to go back to the beginning. 

The Birth of the German Discount Fitness Market

The discount fitness market arrived in Germany in the late 1990s when McFit opened in Würzburg. Its president and CEO Rainer Schaller’s background in the retail industry shaped his view of the discount market. 

“Since Mr. Schaller was a fitness business outsider and never attended any fitness-related events nor distributed any further information, he could develop his business without [much] notice,” says Henrik Gockel, founder, managing director, and co-owner, PRIME TIME fitness (PTF) in Germany. “All managers in the industry, even consultants including myself, did not realize what kind of market disruption Mr. Schaller was about to initiate.”

It was the time of the dot-com bubble and McFit’s competitors didn’t understand why the club was lowering pricing. But when a recession hit Germany in 2003 it all became clear. 

“That certainly helped McFit and other local discount pioneers to grow their market share,” Gockel says. “The market in general much later realized how price elastic the fitness market is.” 

From 2005 on, more discounters—most local—appeared in the German fitness market. Since then, Gockel says the market segmented into four price categories:

  1. Discount: 20 EUR/month
  2. Premium discount: 39 EUR/month
  3. Health-related: 60 EUR/month
  4. Premium: >60 EUR/month

Enter Prime Time fitness

When PRIME TIME fitness opened in 2010, its 34 EUR membership fee placed it firmly in the “premium discount” category. Gockel says the company is modeled after the Anytime Fitness concept, focusing on cardio and strength training in a boutique format. 

The 34 EUR price was key to the company’s urban penetration strategy in the Frankfurt area. In the following years, large discount changings such as McFit, Clever Fit, and Fit Star moved into the Frankfurt city center as well.

“In reaction to that, PTF moved towards the premium market, adding a competitive personal training product and differentiating with boutique elements, like heart monitored training circuit training similar to the Orangetheory clubs,” Gockel says.

The strategy worked. Today, the company boasts six locations in and around Frankfurt—including Europe’s highest club—and one in Munich.

Opportunities for Growth

More than 10 million members belong to German health clubs, according to the 2017 IHRSA Global Report. (Click to enlarge)

Ultimately, Gockel believes there are still opportunities for growth. The German fitness market grows by 6-7% each year, he says, and in Frankfurt the supply side has grown by at least 20% in the last three years—the highest penetration rate in Germany.

Gockel will share more of his thoughts on this topic during his IHRSA European Congress session, “The Future of the Discount Market: Saturation or Growth?” 

Learn more about the IHRSA European Congress, 23-26 October in London.