The leisure operating market has never been in such a dynamic state of flux. Continued austerity, major budget cuts and polarisation of political philosophies on how services should be run all add to an environment where, more than ever, leisure operators have to be on their toes.
In the Sports Management Talking Point, a number of operators and advisors shared their views on whether the market had overheated and councils were demanding too much from their contracts.
The article was right to note that in some instances, councils (which sometimes take the wrong advice or do not take any advice) are seeing leisure contracts as cash generators only, rather than a sustainable market intervention to contribute to a number of wider strategic outcomes.
With borough treasurers putting the pressure on councils to find savings, revenue-positive leisure contracts can be seen as a potential ‘easy win’. However, I believe council officers and members should establish a joined-up approach to commissioning, identify their community’s needs, facility requirements and investment opportunities, and set sensible and achievable affordability levels. They then have the option to select the optimal management model – often over a period of two to four years before procurement – to enable them to achieve both their financial goals and deliver significant social value.
A broader role
A key factor missing in the article was the broader strategic role of leisure in contributing to agendas such as adult social care, regeneration, economic development, placemaking and social cohesion. Leisure cannot continue to try to justify itself for its own sake – it needs to co-create local solutions to bigger issues that can act as a catalyst for partnership working, combine funding through joint commissioning, and leverage investment from regeneration. This can often lead to co-location of new facilities with other functions and services, making better use of scarce resources.
The transformation of our town centres and cityscapes is paving the way from a retail-based core to a mixed economy of retail, leisure, community, commercial and housing. This creates huge opportunities for developing new models to support people’s changing lifestyles, health and wellbeing needs. Local authorities have an opportunity to leverage the expertise of the leisure sector to bring investment that will inject life and atmosphere back into these town centres. But I’m not convinced anyone in our sector has fully clocked onto this huge opportunity yet.
The experts commenting in the Sports Management article indicated that there are two core income streams – gym memberships and swimming lessons. In my view, this is missing a huge opportunity and reinforcing a myth.
Adapting the offer
Those operators that are succeeding in developing new revenue streams are leading the way, as well as winning and retaining more contracts. These revenue streams can be linked to children’s activities, commissioned health interventions, youth offers, active play and group-based exercise, as well as on-demand fitness and wellbeing classes.
In her editor’s letter, Liz Terry says that “if councils push too hard, they will spawn a whole raft of competition, as management contractors throw in the towel and decide to compete instead”. I believe those operators are the ones that have not adapted and innovated.
Many councils (and most of SLC’s clients) no longer want to work with ‘bog standard’ operators – they’re looking for partners that not only know how to drive an asset commercially, but add wider social value through outreach, innovative approaches to concessions and partnering with other agencies such as Public Health, Adult and Social Care, Children’s Services, Community Safety teams and the voluntary sector.
With increasing interest in in-house services and an aversion to what is deemed to be ‘privatisation’ from a number of Labour administrations, the market needs to take heed of this change by shifting the emphasis to promoting and leading activity beyond the traditional leisure centre setting. More of a ‘Community Activity Contract’ than a ‘Leisure Management Contract’ perhaps?
Chris Marriott of the Sports Consultancy was right, in his comment, in highlighting the golden period of aggressively bid contracts. Yes – it was close to overheating but has calmed down and operators are being more circumspect in qualifying bids and selecting which ones to compete for, particularly where there is a strong incumbent or where there is no ‘hook’ to add value through a different, innovative approach to service delivery.
Peter Gunn rightly highlighted the weaknesses in some procurement processes and the need for councils to be very clear in their financial and social objectives. Justin Jardine from GLL noted the “forward-thinking” approach by councils that involves setting “affordability thresholds in tenders that are realistic and achievable for operators”.
The trust sector has an opportunity to look at how it could use its collective reach and buying power to provide an alternative to the bigger players, but that will require transformative change that may be resisted by the individual leaders and boards of those trusts.
I understand there are some exciting partnerships being explored in Greater Manchester, which is really encouraging.
The article highlighted a concerning trend from some procurement advisors that are encouraging councils to ‘have their cake and eat it’ as regards to transfer of risk. This has and will result in some contracts not receiving bids. I suggest those councils be wary of advisors that over-promise on financial outcomes. Ultimately, the market dictates the value of a contract and the council sets the conditions and affordability levels for that contract.
One area I was surprised and disappointed not to see more of in the article is the role of councils in providing leisure services Using their legal powers, councils, can provide market interventions the private or voluntary sectors are unable to deliver.
Given the pressing need for the nation’s inactive to get moving and improve their health and quality of life, it’s concerning that many contributors to the article (advisors and operators) overlooked this core reason for local government leisure provision.
Budget gyms will not address the needs of the 70 to 80 per cent that want to move more, make social contacts, improve their mental health and make lifestyle changes.
There is still a huge opportunity for operators to innovate and create deep connections with the communities they serve, regardless of management model, as recently demonstrated by an independent trust, Stockport’s Life Leisure, which secured a publicly tendered leisure contract at Barrow BC, an authority looking for added value, rather than just a leisure operator.
Opportunities to thrive
Carefully considered and planned leisure partnerships with the right investment, linked to the strategic priorities of councils can deliver these objectives and run services at a surplus in many parts of the country. To achieve this, securing political commitment is vital and often takes time. Recent procurements that SLC has supported have demonstrated this with some outstanding examples of achieving both financial outcomes, improved services and enhanced social value. Many of our clients have redirected surpluses back into outreach and targeted interventions, rather than taking a saving.
So, to conclude, I’d like to emphasise that leisure operators can thrive in this challenging environment, by delivering localised solutions effectively, having a sensible balance and allocation of risk, sustainable business plans and investment strategies. Natural selection will play a part, as some of the traditional operators who have failed to see the opportunities presented by the public sector step aside for those that do. Getting it right isn’t easy, but the outcomes for all partners and the communities they serve can be well worth the effort.