Fit as a fiddle

Keeping Australia fit is a big job. In fact in 2011-12 it will be a $2.87 billion job. This is not a surprise given Australia's position as one of the most overweight nations in the world.

Despite Australia's ever growing waistlines, revenue to providers of fitness activities and equipment has grown by just 1.4% per annum over the five years to 2011-12. However, the timid growth reflects declines in 2008-09 and 2009-10 as cautious Australian consumers opted for cheaper health and fitness alternatives.

Prior to the downturn, the industry had grown strongly, and aside from the interruption of the financial crisis and economic downturn, the story of the past five years is one of strong growth. The growth has been driven by the mainstreaming of fitness services as health awareness increases. The industry's performance has gained additional assistance from The Biggest Loser effect with the reality TV weight-loss contest having effectively served as an advertisement for fitness services. The household outsourcing trend has also played a part in industry growth, with the do-it-for-me mindset carrying over to fitness regarding advice, instruction and motivation.

The coming five years will see the industry approaching maturity, with revenue growing steadily. Revenue will increase at 3.6% per annum to total $3.43 billion in 2016-17. Customers in older age groups will continue to be key drivers of growth as awareness of the benefits physical activity can have on health and quality of life in later years becomes more widespread. The ageing population will also see greater numbers of people entering this age group. The industry will continue to trial new products, programs and delivery methods. Although some new methods and programs will fade away other are likely to be very successful as Australia's willingness to spend on their health increases.

Industry outlook

The coming five years will see the Fitness industry return to its growth trajectory after the dip that occurred during the worst of the economic downturn. Revenue will expand at a rate of 3.6% per annum, reaching $3.43 billion in 2016-17. The industry's profit margin will be quite stagnant as competition between operators increases.

Fit for purpose

The performance of the fitness centres segment will continue to be the primary determinant of overall industry performance, given that it accounts for close to 40% of industry revenue, but the personal training segment has been growing in importance and will continue to do so over the next five years. As disposable incomes and time pressures have simultaneously increased, demand for convenient and flexible exercise options has seen the popularity of personal training services rise. Many consumers see personalised services as a way to ensure they get the maximum fitness benefit for their training efforts, and to tie a personal commitment to exercise as a form of motivation.

In searching for growth in a more competitive market, operators will continue to look to innovative products and services to attract consumers who are yet to participate in fitness spending and to increase spending by existing customers. There have been numerous examples of creative initiatives that have become fitness programs over the past five years or so, such as spin classes and, more recently, the dance-exercise fusion Zumba.

With a seemingly endless supply of new programs, it will be the demand side rather than the supply side that pushes the industry toward maturity. Alternative group fitness will continue to grow in popularity as consumers look for new and interesting methods to keep fit. This will include growth in high intensity martial arts or fighting fitness along with programs such as Crossfit. While those seeking less intense pursuits will embrace programs including yoga, Pilates and tai chi as the systems become more common and mainstream. Other potential markets for operators include specialist programs for older clients and children, which will also increase the market.

A fatter Australia

The sale of footwear will also increase as more Australians take up physical activity in the fit against the bulge. By 2016 more than 27% of adults in Australia will be obese. Although providers will be able to attract some of these Australians to classes or gyms many will choose simply to put on a pair of runners and go for a jog or walk around the local park after work. An increase in general activity whether it be organised sport, incidental exercise or fitness training will result in a substantial increase in demand for fitness equipment and footwear especially. This will also be boosted by governments increasing marketing and educational activity designed to encourage more Australians to turn off the TV and be more active.

Growing waistlines are not just a problem for adults, but are increasingly a problem for Australian children. As such, government, community groups and schools have been promoting healthy living. Traditionally children exercised through play and organised sport, thus the fitness industry has not targeted the market. However, with smaller backyards and with parents struggling to drive multiple children to multiple locations for sporting activities some gyms and fitness centres have been developing programs, such as Jungle Gym, which specifically target children. Although in its infancy there is significant opportunity for growth in the children's market over the next five years.

Fitter, stronger, older

Customers in the older age groups will continue to be key drivers of growth as awareness of the benefits that physical activity can have on health and quality of life in later years becomes more widespread. Consumers over the age of 45 years currently account for 27% of industry revenue, with this set to head toward 30% over the next five years as a rapidly ageing population means a greater number of people will be moving into this age group.

Although entering this age group tends to see participation in structured fitness activity give way to less strenuous, more leisure-based fitness activity. Thus the trend will become less pronounced and operators in the Fitness industry will tailor services to this market. Added to this is the fact that customers moving into the over 45 years bracket will be more accustomed to spending on fitness services than any previous generation, meaning more customers over the age of 45 will merely need to be retained rather than acquired.

Key success factors

• Easy access for clients: Locating fitness centres and personal training sessions close to target markets is important in attracting time-poor customers.
• Development of new products: The Fitness industry tends to go through cycles of fads. Implementation of new trends and products by fitness centres and personal trainers and stocking the latest equipment by retailers are therefore important.
• Having a good reputation: Word-of-mouth promotion is particularly important in the personal trainer segment of the industry as clients often refer friends and family members.
• Sound knowledge of fitness principles: Education in fitness principles is beneficial for fitness centre staff, exercise equipment retail staff and personal trainers in particular.