The Gym Group proves that no-frills, pay-as-you-go gyms work out well

When his group launched on the stock market yesterday, John Treharne netted £3m. Simon Neville assesses the pull of the pay-as-you-go option in a market that’s taking its cue from low-cost supermarkets and airlines – and winning

The model of sky-high membership costs, long-term fixed contracts and fluffy towels has been replaced by rooms filled with gym equipment, sometimes in former office blocks, and not much else

The citadels of the established airlines long ago succumbed to the disruptive forces of budget operators Ryanair and EasyJet. The big supermarket groups have also been successfully challenged by the likes of Lidl and Aldi, with the recession helping to transform middle-class attitudes to such low-cost options. The budget option is also transforming the hotel sector, with Premier Inn charging less than £100 for a night’s stay. But for a long time it looked as if the gym industry was immune. The model of sky-high membership costs, long-term fixed contracts and fluffy towels refused to budge an inch. But no longer.

A new line of no-frills gyms is now disrupting the status quo and emulating the budget model that has shaken up so many other sectors.

The most recent success story in the UK, The Gym Group, joined the stock market yesterday, netting its founder, John Treharne, a cool £3m and leaving him with a £9m stake.

Mr Treharne, who set up seven years ago on a single site in west London, explained that the success of the model comes from the flexibility of “pay as you go” contracts, where users are not tied down to 12-month deals costing thousands.

“I was recently at one of our branches, talking to a guy and he said: ‘I’m a member throughout the autumn and winter, but in the spring and summer I want to exercise outside.’ Because they’re not penalised for that, they continue to come back.”

It means a third of the people signing up to the gyms are return customers re-joining, and creating a more loyal fanbase than traditional gyms. The average length a member stays with one of Mr Treharne’s gyms is 26 months versus an industry average of 17 months.

He also explained that the benefit of offering 24/7 opening times has also helped, as users can enjoy the flexibility of benchpressing at 3am in a world where shift patterns, and irregular working hours, are becoming the norm.

“Because of the 24/7 operation, we attract a lot of shift- workers, from doctors to nurses, to bus drivers, to someone who works behind a bar. It is right across the social spectrum. The whole point of our environment is you can be running next to someone on benefits or a millionaire – it doesn’t matter – and there’s no social status,” Mr Treharne said.

Low prices come from using cheaper sites, such as former office buildings, basements and old shops, with luxuries such as swimming pools, food and drink, spas and saunas all removed. Instead, customers sign up online and are treated to a room packed full of exercise machines.

The stigma attached to no-thrills gyms has also started to lift – as it did for Aldi and Lidl since the recession, with affluent shoppers keen to show off the great bargains they bagged – as dinner parties are littered with anecdotes about how no-frills gyms are better and cheaper than their more expensive brethren.

A recent report by the research group Mintel suggested the recession was the catalyst for a polarisation within the fitness industry, which experienced an explosion in budget gyms. It said: “Nearly four-fifths of UK adults have set themselves at least one health or fitness goal, yet only 12 per cent currently use a gym.

“However, the indications for the private health and fitness club sector remain promising, with the continued rise of budget gyms helping to break down the barriers associated with more established clubs – namely cost, location and the commitment of entering long-term contracts.”

At the top end, Virgin Active – membership can cost almost £200 a month – has implemented a massive upgrade to its facilities to attract high-end customers, and Fitness First has also sold off several gyms and is pumping £225m into its remaining sites to become a premium provider.

And at the bottom end, The Gym Group has been joined by Sports Direct mogul Mike Ashley, with his Sports Direct Fitness, Sir Stelios Haji-Ioannou with his EasyGym and – the biggest player of the lot – Pure Gym, which is already the biggest UK chain.

One key catalyst for the growth was the demise of LA Fitness, which became squeezed out and eventually collapsed. Its closure left dozens of empty sites, which were snapped up by the no-frills brigade.

The bulk of the sites were bought by Pure Gym, which took 43 facilities; a further 30 were bought by Sports Direct, where customers can buy a new pair of shorts from the company’s shop next door before heading for a session.

But the sector looks set to continue to grow at a rapid pace, with The Gym Group planning another 15 to 20 gyms a year and Pure Gym wants 300 within the next five years.

With just 12 per cent of the British population a gym member, the new players on the block think there is huge potential for growth.

A nation that is battling diabetes and obesity at one end and desiring a finely honed and sculpted body at the other should provide a conveyor belt of new customers.

In London just 10 per cent of the population are members of budget gyms, while in Frankfurt around half the city has signed up to local no-thrills sites.

And with investors keen to sink their funds into new, growing sectors, it looks as if the no-frills bandwagon has found its next pitch.