Pure Gym just bought LA Fitness. That may seem like a normal industry acquisition, but there's something more interesting going on here. Upmarket and mid-market gyms in the UK such as LA Fitness (which is not related to the American chain of the same name) are being destroyed by budget rivals.
In the same way budget airlines revolutionised air travel 20 years ago, budget gyms have changed the fitness market in the UK since the recession. New players like Pure, PayasUgym, and TheGym have flipped the traditional business model on its head, forcing the incumbent players to fight their corner.
UK operators such as Fitness First, David Lloyd, LA Fitness, and Virgin Active typically lock you in to a long-term contract at a pretty high monthly rate—about £40 ($61) as a basic—but promise premium service in return. There are pools and saunas, as well as top-of-the-line equipment and plenty of TV screens.
On the other hand, the new breed of gym lets you cancel your contract at any time and offers membership typically costing about £20 ($30) a month. The gyms keep small staffs and include only basic equipment.
Full disclosure, I'm a member of the Pure Gym near my house. It's in a warehouse that looks like an air hanger and is about as no-frills as you could get—I feel lucky there's a shower. But it's just so cheap. I would never have signed up to a deal amounting to £40 ($61) a month, but at this price point I think why not.
Pure Gym and its rivals are having huge success pitching to consumers like me whose needs had been unmet. Most started life around the time of the 2008 recession, when money was tight. The first Pure Gym opened in 2009, but the brand is already the UK's biggest gym operator, with 130 outlets across the country.
By contrast LA Fitness, which has been around since 1990, has only 43 clubs and at its height had about 80 gyms. Pure Gym says it plans to open another 30 gyms next year—nearly reaching LA Fitness' entire footprint in just one year.
These budget gyms are cheap to set up and cheap to run. Pure's founder, Peter Roberts, told The Telegraph in January that each gym typically employed just two full-time staff members, with self-employed personal trainers also on site. Most of the administrative work is done online and automated.
The popularity of budget gyms shows no signs of slowing. Pure Gym CEO Humphrey Cobbold said Friday in a statement: "Overall demand for affordable, high-quality, and no-contract fitness centres is continuing to grow, served by a range of providers in a highly competitive marketplace."
LA Fitness and gyms like it, meanwhile, look to be on the way out. The company was valued at £90.3 million ($138.22 million) in a private-equity deal in 2005, but last year its lenders took control of the loss-making chain and had to pull off a major restructure. At the time it blamed competition from the likes of Pure Gym. Terms of Friday's sale were not disclosed.
Pure is set to turn all LA Fitness branches into its own brand budget offering as part of plans to expand in London and the South East. That makes one upmarket gym chain that has fallen at the sword of its budget rival. Others could follow.
See also: Your Gym Is Ripping You Off