The Sports Grounds and Facilities industry has enjoyed strong growth over the past five years, buoyed by the Rugby World Cup and Commonwealth Games. Now it is expect to slow. By IBISWorld’s JASON BAKER.
Growth in the $2.2 billion Sports Grounds and Facilities industry is predicted to slow over the next five years.
Over the past five years, the industry grew by an average 6.3% a year thanks to increased participation in sport following the Rugby World Cup and Commonwealth Games. But as consumers’ enthusiasm for sport wanes without the big-event excitement, growth will slow to 2.5% a year over the next five years, to reach industry revenue of $2.3 billion by 2012.
The growth will come from rising disposable incomes, growing leisure hours, interest in new sports and health and fitness, and industry consolidation. Over the forecast period, the industry will continue to stage international events such as cricket tests and rugby union internationals.
KEY STATISTICS 2006
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The biggest sporting earner in Australia is health and fitness (35%) and the biggest business in the Australian market, with 8–8.5% market share, is Fitness First. It started in the UK in 1993 with only one health club. Three years and six clubs later, Fitness First was the first health and fitness company to float on London’s Alternative Investment Market (an exchange dedicated to small-cap stocks). It used the capital to expand internationally.
In September 2005, Fitness First became the largest health club group in the world with 424 clubs and 1.1 million members and was acquired by BC Partners, a European private equity group. There are now more than 500 Fitness First clubs worldwide, with about 180 in the UK, 190 in Continental Europe, 60 in Asia and 70 in Australia – serving over 1.2 million members. The Australian part of the business is 85% owned by UK-incorporated Fitness First Plc and 15% owned by Australian managing director Tony de Leede.
In fiscal year to October 2005, Fitness First recorded total revenue of $169.55 million, and net profit after tax of $26.58 million. For the year, the company employed about 924 staff and has total assets worth more than $115 million, largely reflecting its property holdings (clubs tend to be city-based and large), thereby facilitating scale economies.
Australian Rules football is the next biggest earner in the industry, accounting for 14% of revenue.
The Melbourne Cricket Club, with 5.5% market share, is the only other major player in the market. Smaller players include: Macquarie Leisure Trust Group, which owns tenpin bowling centres; Mirvac Group, which has a 20% stake in Telstra Dome; Melbourne & Olympic Parks Trusts, which operates Melbourne Park and Olympic Park; and Stadium Australia Group, which owns Telstra Stadium.
INDUSTRY OUTLOOK
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Key Success factors for operators in the industry
Carrying out all necessary maintenance to keep facilities in good condition.
Membership of an industry organisation. Establishments may gain credibility through a relationship with the relevant sporting association or organisation.
Provision of appropriate facilities. Establishments must have good quality, appropriate facilities to attract customers.
Having a high profile in the market to attract customers.
Easy access for clients. Facilities must be accessible physically (to meet disability and safety legislation), geographically (near transport infrastructure) and electronically (so people can use the internet to buy tickets and source basic information).
Production of premium goods/services. High-quality services provided by trained and qualified staff will attract repeat and new custom.
Ability to quickly adopt new technology. Larger industry companies must take advantage of technology to improve performances, consumer experience and value added offerings such as CDs/DVDs of events.
Access to volunteer labour. Not-for-profit establishments in this industry benefit from having access to volunteer labour.
Optimum capacity utilisation. Operators must make the most of facilities by hiring them out to third-party companies. Better capacity utilisation will lower per-unit costs and allow companies to offer consumers affordable tickets to events.
Financial position of the company (as against financial structure). The development of large arenas and stadiums is very expensive and highly capital intensive; therefore, superior financial management is essential.
Effective product promotion. To professionally promote the facilities will ensure greater participation at the specific sporting venue.
Ability to accommodate environmental requirements. Water restrictions are in place across many areas throughout Australia. Some sporting grounds must adhere to bans related to watering surfaces, which will affect this industry significantly.
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