Can this start-up win with pay-as-you train gym membership?

At our recent AQA BUSS1 revision workshops we had a session looking at the viability of the business concept behind The Gym - a growing chain of low-cost, no frills fitness clubs. According to this article on BBC Scotland it looks like the health club market is set for further challenges from new entrants.

one of the new entrants to the market is payasUgym. The payasUgym programme is due to launch at the start of 2011 and will let customers visit a network of clubs without having to pay membership fees. Gym-goers will “load” cash onto an online account which can then be used at various fitness centres. The easyJet entrepreneur Sir Stelios Haji-Ioannou is also said to planning to launch a budget fitness club in 2011 with monthly-only contracts costing as little as £15-a-month.

The payasUgym concept is an interesting one in that it utilises the existing capacity of the UK health club sector. The business is avoiding the need to raise the significant capital required to build health clubs. It is simply acting as a marketing channel for existing clubs. How sustainable is that business model? if a customer finds and uses a local gym that he/she really likes, what is to stop that gym from trying to recruit the member away from the payasUgym organisation? Students ought to be be able to identify other potential upsides and issues with this business model. A good one to analyse!