Investing in fitness - What's the right financial workout for a gym?

Avia Collinder, Business Writer

Jamaica's city dwellers aren't fanatics when it comes to exercise, but they do like to keep fit.  That culture is on display mornings and evenings among young and old walkers and joggers on neighbourhood streets or whatever open space accommodates the activity.

The more dedicated healthy-lifestyle adherents, mostly young professionals, tend to flock to fitness centres and gymnasiums.

That tradition has served the market for gym services, but the business ebbs and flows, as many struggling gyms attest.

The survivors in the business have sought to get around it through niche marketing or specialty services.

At the SandWest Fitness Studio in Liguanea, Kingston, for example, the target is the market for personal training.

SandWest clientele includes individuals who are recovering from illnesses as well as those with fitness targets they want to reach with the help of a personal assistant.

The eight-year-old company has built its business around Jamaicans who fear the crowd in larger gyms.

"They want the knowledge and motivation of personal training. They feel lost in gyms," says manager Omar West, describing his target.

The health of the gym market is itself tied to a commitment to fitness among the community in which such businesses reside, and which places gym operators at the mercy of people's willpower.

Additionally, gym exercise is a low-priority activity for persons with low disposable incomes.

West said the business is just as constrained by banks that are unwilling to provide loans.

Still, official data indicates that gym operators often fail to get their business models right.

Trade data from Statin shows a fall off in the value of equipment for gymnastics, athletics and physical exercise imported during the last five years, coinciding with reported closure of some gyms under recessionary conditions.

The value of imports, according to the most current data available, halved between 2007 and 2010, having fallen from US$3.05 million to US$1.7 million

The Jamaica Business Development Corporation (JBDC) is bullish about future prospects, however, saying the fitness industry is in the growth phase of its life cycle in Jamaica.

JBDC is both an adviser and financier of small and micro businesses.

Its business development officer, Winsome Armstrong, says one sure sign that the fitness market is growing is the fact that seven out of every 10 JBDC clients in the agro-processing sector express interest in offering health-related products.

Physical therapy

Individual entrepreneurs have also pitched plans to JBDC for physical- therapy programmes that address pain management in a natural way, Armstrong said.

The JBDC is willing to back such ventures, based on declarations on its website.

"The sport, health and fitness industry can be big business, not only at the professional level, but also with the social and recreational sports person," the state agency says.

It sees promise in personal training; diet and nutrition; adventure sports; camps and holiday tours; health and medicine; product research and design; coaching clinics; marketing and promotions and equipment hire and sale.

Omar West of SandWest notes that gyms also need the backing of traditional banks if they are to survive and grow.

In December, his gym was able to secure a loan from National Commercial Bank Jamaica, which West says will finance his expansion to Montego Bay and secure larger space in Liguanea, where the gym space is too small to accommodate his growing clientele.

A more recent market entrant, Gym Al Fresco, was opened two years ago by confectionary manufacturer Paul Lue-Yen as a hobby and has stayed open despite the closure of others.

The open-air gym resides above a cluster of six warehouses and offices in a 10,000 square foot building at the top of Molynes Road, just a heartbeat away from the pulsing Half-Way Tree square.

Lue-Yen said he launched into business after buying up the equipment of a gym that was closing down.

Of three ventures started in 2009, after a roof-repair project turned into the creation of new operating space - a music studio, a bar and the gym - only the gym remains as a profitable operation, he said.

The gym boasts the full range of sculpting, cardio, and free-weight equipment and a full-time gym instructor.

Al Fresco's income depends on membership fees which are paid monthly, but it also earns revenue from the sale of health and nutrition products.

Membership fees pay for full use of equipment and aerobics classes between the hours of 5 a.m and 9 p.m.

Open-air design

As to be expected, overheads for a fully air-conditioned gym can be high.

Al Fresco, however, has an open air design with bamboo enclosures, which controls its energy bill.

Lue-Yen says, however, that he still faces stiff costs for utilities, including electricity, water, telephone and cable television for clients.

The largest cost is staff which consumes 60 per cent of revenue.

"Presently, we are at break-even. We hope to do better in time and take on more staff. We have five now," said Lue-Yen.

At SandWest, which opens from 5 am to 7:30 p.m., West says 85 per cent of income comes from training, and 15 per cent from smoothies and supplements. In 2012, the fitness studio hopes to add personalised meal plans with full menus, a service that is expected to improve turnover by five per cent.

"The majority of clients come for weight loss, but others need to gain weight, control health conditions and increase flexibility," West said.

He also caters to persons in need of "physical therapy after surgery and sports-specific goals related to track and field and football".

Al Fresco's monthly fee is J$5,500, or J$40,000 per year.

SandWest quotes monthly fees of J$15,750 to J$26,250 for a varying number of personal-training sessions, and annual fees of J$137,743 to J$229,572.

Gyms do their best business in the first quarter of the year and worst of all during the Christmas season, according to industry operators.

Females dominate membership. Al Fresco's, for example, is 70 per cent female, while at SandWest it is 64 per cent.

Lue-Yen says the biggest challenge is sustaining membership which is now at 500 with only 100 who are truly active.

"If people had more income, they would come more regularly," he said, adding that for many Jamaicans, gym membership is a "luxury".

SandWest, on the other hand, says membership retention is not a problem, with the only constraint being lack of space and a shortage of cash to buy more equipment.

Acknowledging that some gyms have closed for want of support, West nevertheless maintains that "any gym with good management will do well. The whole world is becoming more health conscious and there are health problems to be avoided with exercise".

West, who notes that he is a master trainer with the International Sports Sciences Association, says his fitness studio gets frequent, referrals from doctors who send in patients with cardio and bone issues; and that athletes also come in periodically.

Al Fresco plans to offer special corporate rates in 2012, according to Lue-Yen, who says his gym is well positioned in a mass-transit point and has enough equipment that can comfortably accommodate up to 60 individuals at the same time.

And at evening time, the view of the hills of St Andrew is spectacular, he adds.

business@gleanerjm.com