David Lloyd CEO says “premiumisation” is key to aggressive growth

Barnes is confident the health club business is insulated from swings in consumer sentiment thanks to continued investment and a laser focus on delivering high-end experiences. Changing behaviours have helped too. As consumers embrace a broader definition of health and wellness, they’re willing to allocate a growing share of household expenditure.

But that also makes it a crowded space—prompting what Barnes describes as a relentless pursuit of differentiation.

“Premiumisation is the philosophy,” he says. “We invest in making a club look materially better. More luxurious. Higher in quality. It’s a bit like, you know, you’ll get a really good night’s sleep in a budget hotel. Of course you will. But there’s a reason you might want to stay at the five-star hotel.”

Invest in growth

Barnes is in no doubt about the economic challenges facing many UK households and businesses but is confident his business is protected.

“We went through the credit crunch and inflation. We’ve gone through high interest rates and the energy-crisis. And the truth of it is, none of those macro events impacted us in terms of consumer demand,” he says. “They’ve impacted us in terms of our cost base, but we haven’t to date experienced a downturn due to a macroeconomic shock.”

“The cost-of-living crisis is real. Of course it is. We are just not seeing any impact from it among our customer base at this moment in time.”

As such, Barnes is focussed on further investment and growth. Last year, David Lloyd invested £280m across its estate of 134 health clubs and put up its prices accordingly. But demand continues to grow.

Ideally, Barnes says he would like to open even more clubs to capitalise on the demand. However, he says a factor hampering his ambitions is the state of UK planning processes. He believes they should be adapted to encourage growth, not just for David Lloyd but across the UK economy.

“We need planning reform around business,” he says. “We’ve got an economy crying out for growth, and we’re a British company that wants to invest. We bring jobs and economic benefits to communities, but the planning process is cumbersome and we’re beginning to step away from potential clubs and opportunities because of planning constraints. We need a quicker process.”

Innovate and adapt

Where David Lloyd can move more quickly is in renovating, upgrading and augmenting existing clubs to serve the appetite for a wider set of health and lifestyle experiences.

Last year, the business invested £11m in new padel courts to meet the growing demand for the racquet sport. It also invested in creating co-working spaces and expanding bar and restaurant facilities to cater for a customer base who want to fold hybrid working, lunch or an evening beer with friends into the same visit.

Being more things to more customers also drives member retention and increases value for money scores—a customer-scored metric that Barnes keeps a keen eye on.

Another way that David Lloyd can provide new customer experiences without having to build new clubs or facilities is through the digital experience it creates for members.

Embrace the data

The business has invested £25 million in developing an app that members can use to manage their membership, gain access to the club, book classes, view restaurant menus and manage their health and fitness goals.

It also creates an always-on channel for David Lloyd to engage members when they’re not at the club.

“The digital experience is about keeping people engaged, encouraging them to book a class and motivating them to keep achieving against their fitness goals.”

Barnes says “attrition is directly linked to usage” and David Lloyd can identify in the data when disengaged members are likely to leave. So a digital experience that delivers value for members also creates value for David Lloyd.

Data is also helping David Lloyd improve member experiences by analysing when and where usage is happening, with a view to creating initiatives to smooth out demand throughout the week.

The final mile in understanding his customers is physical. Barnes believes it’s essential him and his team are among those members using the clubs and feeling that experience.

“I am utterly embedded in our business. I am in our clubs at least three times a week and every team member gets membership. It’s no good us just being obsessed with customer data. We are also customers, seeing the state of the showers, seeing how the gym equipment’s holding up, experiencing the pool temperatures. We’re doing all of that.”