How long has it taken you to get the KSL deal over the line and what’s the thinking behind it?
The deal gives us a partner with deep leisure experience – and funding. Taken together this means we can be bold in our strategy and our ambition.
Going into the pandemic we were self-financing our growth and had a very good set of opportunities, however, the pandemic ate up a lot of our cash reserves while the quality and quantity of new site opportunities improved. We want to take advantage of these.
The new opportunities have mainly come from the huge amount of space that’s being repurposed from big box retail, added to the fact that landlords who are undertaking major redevelopment projects recognise that for both residential and office developments, fitness is the new anchor tenant and if it’s a premium development, then Third Space is top of their list.
Now’s the time to capitalise on this opportunity, hence the reason for seeking out additional funding. KSL saw the situation just as we did, hence our ability to get this done now.
KSL has a vision statement which is “to invest in the unforgettable to create the enduring.” I really like that. They’re a leisure-only investor and work primarily in the luxury segment.
They really understand that customer experience is at the heart of businesses like ours. In short, they have relevant expertise, their values align with ours and they believe in what we’re doing.
We first started talking to them over two years ago, so this was not a rushed partnership. It’s also great that our long-term backer, Encore Capital, has remained invested. This reflects their confidence and belief in what we do.
Will you extend the brand?
As a holistic lifestyle brand with fitness and training at its heart, we also have credentials in food through our successful Natural Fitness Food Brand and our restaurant The Pearson Room. Natural Fitness Food delivery also launched in April this year, allowing consumers to order our food outside the clubs, alongside nutritional support and healthy meal plans.
We also have a sports medical business, a spa business and we launched our retreats business Third Space Escapes prior to the pandemic. Once travel is more stable we see Third Space Escapes re-launching with new locations and for both restorative and adventure-led trips.
Our digital fitness proposition was developed rapidly during the successive lockdowns to support our members’ training at home with PT programmes and a range of our most popular classes, all delivered through our member app. Now it’s used both in and out of the clubs for personalised programmes and for members who are still partly working from home and wish to take a class from our on-demand library.
There’s an opportunity to continue to grow and obsessively innovate in all of these areas of our business to further support and enrich the lives of our members.
We continually re-invest in our clubs, repurposing space as trends and demands evolve. For example, with increased interest in recovery and relaxation, we’re adding cryotherapy and percussive therapy zones to our clubs.
A simple and obvious part of our plan is to add more great sites. We already have a strong presence in central London and our pipeline will take us into some of the more residential neighbourhoods of the city in the next two to three years. This will bring our brand to new people, as well as providing a great network for members to train, both near home and near to work.
In summary, our plan is to get better and better, as we also grow. The market demand is there and we’re going to meet and grow that demand.
How much value has been added to the company in percentage terms since your last funding deal?
Revenues from the Third Space brand increased by six-fold between 2014 and immediately prior to the pandemic.
How has trading been in the UK since the end of lockdowns?
We’ve actually bounced back better than we expected. Even though we’re mainly in central London locations, all our clubs have a significant residential catchment, plus some very dedicated members that would come to the clubs even if they were on fire!
Working from home is obviously a factor in some of our locations – and will be for some time no doubt. I fully expect it to be a year or so before anyone can say what the new normal really is.
Has Little Space been a success and if so, will you be rolling out more?
The Little Space kids concept has been incredibly well received by our Islington (London) members with children. Our fully-booked swimming programme has been particularly successful and parents are keen to get their kids back to activities again.
If the demographics and space supported it, we would definitely consider building more Little Space sites.
Has your demographic changed since the start of the pandemic?
What actions did you take that made the most difference when it came to getting through the lockdowns?
The most important thing was good communication. That applies to members and the team. With members, we immediately put them on free freeze and kept our brilliant membership team working full-time to deal with any and all queries that members had.
By being decisive, fair, transparent and contactable I think we protected our brand and even built further loyalty as we navigated the lockdowns.
The same principles applied to the team. Even when we didn’t know what was coming next we would tell the team that. We tried to keep them as up to speed as possible. Sometimes just saying there is no news is in itself reassuring. We also ran a whole load of training and development, as well as social clubs, book clubs, cocktail events or just getting together online for a chat. For some people, lockdown was incredibly hard, so we tried to be helpful and supportive.
As mentioned, we also moved heaven and earth to give members digital options to train with their favourite instructors. Looking back, the progress we made in that time was amazing – it’s incredible what can be done with total focus and a burning need.
Do you have global ambitions for the Third Space brand?
Yes at some point... I can’t say where or when yet...
What does this deal say about the state of the wider industry?
It shows how resilient it is. The last 18 months have been very hard for everyone in the industry, but the big tailwinds we had before are still there and with the right proposition there are plenty of opportunities still. Sophisticated investors like KSL can clearly see that, so this deal is great validation for our business.