IHRSA's new European director developing collaborative agenda
By Catherine Masterson McNeil
Industry veteran Herman Rutgers recently joined the IHRSA staff as the association's European director. Topping his agenda is connecting with club operators-large and small-as well as industry suppliers and federations to formulate common goals. Rutgers talked with CBE about what he has learned in these discussions so far and his-and IHRSA's-role in the future of the European fitness industry.
What are some of the macro trends that you are seeing?
Globalisation is a trend. By that I mean that operators are looking to other markets and countries to see what the trends are. And they're copying what's happening in these markets.
I think the big guys will get bigger. And small clubs will have a tough time unless they develop a niche-for instance, a women-only club.
There is more emphasis on wellness and overall health.
Pilates, for instance, has more of a physical therapy orientation in which the participant needs help from a qualified instructor. Offering weight management programmes in the club setting is another trend. This is attracting overweight people to the health club experience-people who would previously have felt out of place in a health club. Family fitness is another macro trend, as is franchising.
What is your perception of IHRSA's role in the worldwide fitness industry?
IHRSA is truly an international organisation, We need to make that clear to everybody! From my discussions with John McCarthy [IHRSA's executive director] and the IHRSA line staff, I know that they perceive IHRSA as a global organisation that wants to represent the industry on a global scale. The association's mission--to promote, protect and grow the industry--has global relevance. Over the past ten years, IHRSA has really developed that international presence, that worldwide role. The European Congress, for instance, is very important. It brings leaders together and when leaders come together, great things can happen. Inviting people to IHRSA's international convention [in San Francisco, 16-19 March 2005] will be another great opportunity to brainstorm how IHRSA can help grow the industry in Europe. There is no other organisation that has the breadth, the know-how, the expertise that IHRSA has to be able to bring people together both on the regional level and in Europe at large.
What role would you like IHRSA to play in Europe?
I really don't know yet! I want to use a collaborative process to develop IHRSA's role. I am spending a couple of months talking to club owners-not just the big ones, but the medium-sized and small ones as well, both IHRSA and non-IHRSA members. Also, I'll talk to some federations in the various countries, and suppliers-all the stakeholders in this business in order to hear how they would like to see IHRSA play a role in the future in Europe. They will help shape the agenda. I did have some opportunities at IHRSA's European Congress in Berlin to talk to a lot of people-both from the club side and the supplier side.
What emerged from those discussions as some of the top areas to focus on?
One thought was that IHRSA could play the role of the pan-European umbrella organisation where all of the local federations would be represented. Then we could go together to the European Union in Brussels and say, "We represent the industry in this part of the world-all 25 European Union countries-and we'd like to discuss with you some issues that we have on our plate regarding legislation, promotion of health, and fitness in the European Union."
Another thought, again a little bit on the lobbying and the public policy front, is to tackle the VAT issue. VAT on fitness ranges right now on the low scale around 5% to the higher scale of 21% and everything in between. In some countries, there is talk about raising it even higher. Germany, for instance, has VAT of 14% and there are discussions about raising it to 20%. And that at a time when public policy should be encouraging people to be fit and exercise in a public facility and they're making it more expensive. It doesn't make sense. The German federation is debating this with the government. Still, with some help from IHRSA, we could all be stronger, particularly on the VAT. That could be a major area to focus on.
You mentioned health promotion. What about industry promotion?
Yes, the overall promotion of the industry at large to governments, insurance companies, banks, and the investment world is very important. Fitness is not yet, in all countries, as well respected and as well represented as it is in the USA and UK. That's the European country with the best representation for the industry. The FIA does a great job. They have done some impresssive things in public policy towards the British government. They've also done some great things working with insurance companies, promoting health club membership and giving discounts on health club memberships. Following these examples, we should be able to establish similar, strong representation for the industry in other countries so that we can better promote the image of fitness and fitness companies in those countries as well as to the European Union.
What role should the industry's suppliers play?
A major one! Suppliers have the same interest that the clubs and IHRSA have: to grow the industry. We need them, obviously, to help fund some of the initiatives that will help grow the industry-research, image promotion, public policy and so on. In addition, though, they already do play a big role in upgrading the professionalism of the industry-particularly the larger fitness equipment companies. Companies like Technogym, Life Fitness, Cybex, Precor, Nautilus, and others have educational offerings on both the marketing and fitness side of the business. They play a big role in improving the image of the industry.
What opportunities are there for industry growth?
There are opportunties for growth in both the more developed and not so developed markets. We just expanded the European Union from 15 countries to 25, adding 10 countries, mostly on the eastern borders. With the expertise that we can bring to those countries, we can help establish and help grow the fitness industry in those markets.
If we look at European health club membership penetration in 2004, the scale goes from a low of, say, 2% to 11% in the country with the highest penetration (Norway). The average EU number might be no higher than 6 or 7%....If we compare that with the US figure of 14%, there is still lots of growth possible.
What unique challenges does the industry face in Europe relative to the US?
Europe is very fragmented with major cultural differences. For instance, the differences between southern Italy and Sweden are striking. The climates are different. The lifestyles, beliefs-and languages-are different. I've lived and worked in the US and know that there are cultural differences from state to state, region to region-but they are no where near as great as what you encounter in Europe.
The operators who have come from the US-or even those from the UK-to the continent have experienced those differences.
The increased, legal influence from "Brussels" is also a big difference. For instance, for clubs that have a swimming pool the requirements for supervision at the pool are becoming more and more intensified-and that's coming from Brussels more than from the local governments.
Labour costs are high, rents are very high, and overall the operating costs are a lot higher than they are in the US for running a fitness facility. It would be great to have a uniform system of accounts in Europe as IHRSA now has for US clubs. It would help European companies to benchmark their performance and compare it to other companies.
Also, there is more of a tendency in Europe to retire at a younger age-55 or 60. People are getting these retirement packages from the government that we can't afford anymore.
People are living longer, so it places more of a burden on governments to support them over a longer period of time.
We have more older people than younger people. That's where the European Union needs to realize that they have to discourage people from going into early retirement and also, to help people stay healthy longer so that they can work and be productive longer. Clubs have a big role to play in keeping people fit for work.
What challenges are similar?
The retention issues are the same. Staff motivation and finding the right people to hire. And promoting the industry at large-the benefits of exercise. The US is further ahead in terms of the development of the fitness industry and penetration rates for health club membership.
And the US has more solid data on the benefits of exercise-both health and economic-but those studies are applicable to Europe as well. We can share these data with our governments and insurance companies in Europe to promote fitness.
I've learned in my career, having worked mostly for American companies, that the commonalities are greater than the differences. McDonald's, Coca Cola-all the big companies have had to adapt to the different countries, the different cultures. You can look within our own industry at Fitness First going across borders to other countries and continents: Asia, Australia and coming into Europe. They had to do things differently in France as opposed to the UK, and, again, differently in Germany as from Italy. You learn that by doing. The great thing about business is that you're forced to change because if you don't, you're not going to succeed. And if you come into another country with the notion that you're going to do it exactly the same way as you did at home, you're certainly not going to succeed.
You mentioned the increased legislative influence of the EU Parliament. What else is coming out of Brussels?
There are some labour regulation issues, but I don't have the full scheme of what's happening yet. I'm going to be talking to a few people to get more information on the issues that are on the hot plate in Brussels that are impacting the fitness industry. But there are, as I said, issues regarding swimming pools, staff certification, and the ability to deduct health club membership dues from income taxes. We have to make sure that we are at the table when issues affecting the industry come up. We must have a finger on the pulse when these new legislative measures are designed, so we can impact them.
What issues can clubs come together on?
Improving the image of the industry is an important one. We can use the data from the new report that Deloitte just did for IHRSA on the European market. We can use it to show that this is a real, serious business, with thousands of people working in it. Increasing the awareness of the benefits of exercise is another area that we can-and must-work on together. Also, GP referral schemes-getting more physicians to refer patients to health clubs for exercise programmemes. That brings me to another area we should work together on: certification. If we want physicians to refer their patients to our clubs, we have to give them assurances that we have qualified staff and safe programmes.
Do you have any other observations about the industry that you'd like to share?
European club operators continue to go to the US to see what is new, what's trendy. But now you also see continental club operators going to the UK to see what's new. And UK operators go to Germany, Spain, Italy, etc, to learn about trends. That's fascinating and shows we are influencing each other more and more....Another thing I've found interesting is that there hasn't been a lot of cross-border investment between the US and Europe on the club side. Most cross border investment has been from the UK into continental Europe, and I believe that will continue to be the case. Curves International from the US has come into Europe, but that's on the franchise side.
Both in the US and in European markets, there is so much potential. So maybe cross-border investment is just something that is yet to come.
CATHERINE MASTERSON MCNEIL is the editor of CBE and special publications editor for IHRSA. She can be reached at cmm@ihrsa.org.
