The IHRSA Global 25: How the Best Health Clubs Get Better

When you’re a segment leader and you’re really big, finding new ways to grow is a serious challenge … but exploring new paths, identifying new opportunities, is what keeps you ahead of the competition—year, after year, after year.

A careful review of “The IHRSA Global 25,” which details the annual progress of the world’s largest and/or fastest-growing club companies, confirms that the preeminent performers retain their hold on the top of the lists by developing strategies to unlock growth.

The following profiles describe the different approaches three of the current frontrunners took to improve their operations and drive revenues in 2018. Each found a way, or ways, to enhance their fortunes—by entering new markets, tweaking business models, streamlining functions, targeting new demographics, and more.

In doing so they made fitness services attractive and more available to a growing number of people.

When Growth Is a Given
Basic-Fit | Hoofddorp, The Netherlands

There’s no more enviable position to be in than being able to grow without having to do anything at all, especially when you’re already an acknowledged market leader.

In 2018—and since then—Basic-Fit has been able to do just that. Consider this explanation in its annual report:

“Once we open a club, it generally takes an average of 24 months for a club to mature. In this period, the club ramps up its membership to an average of around 3,300 members, after which, growth levels remain relatively stable. This means that, even if we were not to open any new clubs, Basic-Fit would still see considerable revenue and profit growth over the next 24 months. So, based on the number of clubs at the end of 2018, our club EBITDA could increase by an additional €68 million ($76 million) to €245 million ($273.5 million), without us opening a
single new club.”

Basic-Fit has definitely grown.

In 2018, revenue and adjusted EBITDA increased by 23% and 24% respectively, which continued the company’s strong showing in recent years, says René M. Moos, the CEO and chairman of the board. “Our 629 clubs, coupled with our revenue and member numbers (319,000-plus), made Basic-Fit the fastest-growing fitness chain in Europe,” he says.

The European Health & Fitness Market Report 2019 pegs Basic-Fit as the No. 1 European fitness operator by number of units, and second-largest by number of members.

A Focus Within Keeps Basic-Fit at Top

Although it might not have needed to open “a single new club” in order to grow, the company clearly did so in 2018, concentrating on organic growth, while abstaining from acquisitions.

“We’re focusing our expansion strategy on France, where we opened 92 clubs last year,” says Moos. “We see a lot of white space in the market, where there’s little or no availability of value-for-money fitness.”

The allusion to “white space” refers to the fact that the market for Basic-Fit’s model is both expanding and proving particularly popular with first-time users. “More than half of the new members at our new French clubs are new to fitness,” says Moos. “In that sense, Basic-Fit is the disruptive player. We’re making fitness available to more people and helping a wider and more diverse group of people to lead an active and healthy life.”

Moos believes similar opportunities exist in the Netherlands, Belgium, and Spain. This year, the company plans to accelerate the pace of openings, reaching 125 units in those markets.

By 2021, it intends to have more than 1,000 clubs in all.

In addition to expanding its footprint, Basic-Fit made several key changes in 2018. It tweaked its membership categories, giving people a choice between its Comfort level, for $21 per month, and Premium level, for $32 per month. Both options allow members to work out in any of the chain’s more than 600 European facilities; enjoy free virtual GXR group classes; utilize free Wi-Fi; and, for an extra $5.50 per month, obtain a Live Group Class or a Sports Water subscription.

“We also made the Basic-Fit app, which had been a $5.50 add-on, part of the subscriptions for free,” says Moos. It also affords access to Basic-Fit’s GXR platform, which screens best-in-class virtual group classes.

“By 2025, we expect to reach more than five million people with our product and services,” says Moos.

Mastering the Market
Renaissance, Inc. | Tokyo, Japan

If you listen to the market carefully, it will often lead you to the path of least resistance, as well as the source of the greatest rewards. And, in Japan, the loudest voice in the crowd may well be that of its senior population.

According to Japan’s Ministry of Internal Affairs and Communications, the country’s population of 127 million is expected to shrink by about one-third by 2065. Over the same period, the 64-plus cohort, which currently comprises about 25% of the populace, is expected to reach 38%.

Renaissance, Inc., has heard and responded. Executive President Masaaki Yoshida notes that the company “is striving to tackle various social challenges, with the aim of ‘extending the healthy life expectancy’—one of the strategies put forward by the government. In addition to its sports club business, Renaissance supports local government bodies and companies in their health promotion activities and runs nursing care, rehabilitation, and other healthcare businesses.”

Yoshida also is the firm’s head of strategy, chief health officer, and representative director.

Renaissance’s endorsement and support of the government’s initiative is, to some degree, now driving its fortunes.

Strategy Based on Need

Between 2017 and 2018, it recorded increases of 2.1% in memberships, 3% in sales, and 5% in net income. However, Yoshida is quick to point out, its greatest growth came from its newest brand, Genki Gym. Introduced in 2016, this brand targets people 65 and over who, in the eyes of the government, require nursing care.

“There’s no question that the growth of new business contributed to our results in 2018,” observes Yoshida. “In particular, our support for nursing care and rehabilitation helped the number of Genki Gym facilities grow by 150% during the past year.”

The facilities feature slow-moving, trainer-led, rehabilitation exercises, but, in addition to physical fitness, they also promote mental health. One of their core offerings is Synapsology, a proprietary brain activation program that’s designed to improve participants’ cognitive functions, while reducing anxiety and fatigue.

Synapsology has proven an unqualified success for Renaissance. The chain currently has license agreements with more than 250 organizations, representing some 440 facilities; among them are private nursing homes, elder daycare service centers, and local government preventive care programs.

Why has the Genki Gym concept proven so popular and profitable? In short, because people want what the company is putting on the table.

The figures not only show that the number of older individuals is growing, but also reveal that the members of Renaissance’s target market want to be fit.

A 2017 survey by the Japanese Ministry found that, on average, people in their 60s spend more on sport activity facilities than any other age group. Statistics also show that those 60 to 69 outspend any other group on fitness facilities; the second- and third-largest spend comes, respectively, from 50- to 59-year-olds and those over 70.

The nation’s changing demographics are having a major impact on the makeup of the company’s membership. According to a 2018 article in the Nikkei Asian Review, Renaissance has, over the past five years, seen the ratio of its 60-plus members climb from 26.9% to 32.5%.

Like any forward-thinking company, Renaissance is exploring other revenue streams, as well.

Yoshida points out, however, that the company intends to focus most intensely on its core market. “In our super-aging society, exercise support services for the senior generation have become increasingly important, and Renaissance will continue to meet those needs,” he says.

Executing an Existing Plan
The SATS Group | Oslo, Norway

Sometimes, a particular individual is a key component in a company’s growth strategy, which was the case with the SATS Group.

Last October, the company—the largest fitness operator in the Nordic countries, and the fifth in Europe overall—appointed Sondre Gravir as its new CEO. Gravir, who will speak at the 2019 IHRSA European Congress, was hired as the company was formulating aggressive growth plans, and every indication is that he’s the right person to help it execute them.

Gravir formerly was the CEO of Schibstead Marketplaces, a global online marketplace that serves millions of customers in 23 countries.

Both he and SATS seem well positioned to succeed in achieving the chain’s goals.

According to the European Health & Fitness Market Report 2019, the country with the highest membership penetration rate is Sweden, at 21.6%. Next are Norway (21.4%); Denmark (18.6%); the Netherlands (17.1%); and Finland (17%). All but the Netherlands fall within SATS’ operating footprint.

Last year’s metrics seemed to presage ongoing progress.

“Our membership, personal training, and retail revenues grew throughout all the countries in which we operate,” says Gravir.

Total revenues for 2018 were $378 million throughout its network of 203 clubs, which doesn’t reflect the results of its June 2018 acquisition of 41 Fitness.dk clubs in Denmark, a market the company had left in 2014. Those clubs have been rebranded as SATS, and their sales will be recognized in 2019.

Initiatives that Set a Foundation for Success

As of January, SATS served approximately 700,000 members with 2,000 full-time employees.

Among SATS’ strategic 2018 initiatives was simplifying its holdings, Gravir explained in an interview in the Market Report. “We used to have a portfolio with several brands, such as SATS, SATS Elixia, SATS Base, and Fresh Fitness, which I think was a little too complex,” he said.

To streamline its offerings, the group shut down its Elixia brand in Norway, while leaving it in place in Finland, and did away with the SATS Base concept. All of its facilities in Sweden, Norway, and Denmark have been consolidated under the SATS banner. The company will keep its hand in the low-cost segment by continuing to operate its Fresh Fitness facilities in Norway.

“As part of the shift, we made several organizational adjustments and hired a new country manager for SATS Norway,” says Gravir. “We also launched several new physical and digital training products.”

The profile also reported on a planned SATS Group IPO on the Oslo Stock Exchange. In it, Gravir suggests that the IPO might happen during the third quarter of 2019, with the group’s current owners—the TryghedsGruppen insurance trust (49%) and Altor Equity Partners (51%)—remaining as significant shareholders.

“Going forward, we expect our growth to continue and accelerate. We’ll continue to develop our product offering, both inside and outside our clubs,” Gravir says. “We’ll strengthen our position in existing countries, both organically and through M&A, as we’ve already done in 2019. Looking ahead, we might also expand into new markets, building on our strong home market in Scandinavia.”

These three companies are just a snapshot of the industry’s impact in the global market. Read about how innovation and acquisitions drove growth in the U.S. and abroad.