There are over 800 health and fitness concepts in the UAE, but few that are really affordable. So when industry experts Frank Afeaki and Loren Holland came to Dubai three years ago, they found it hard to justify spending AED5,000 on a membership.
Having both been part of low-cost gym chains in Australia (Crunch Fitness) and the UK (Xercise4Less), they spotted a gap in the UAE market for a similar concept:
GymNation, which charges as little as AED125 per month with no upfront fees. Here is how they plan on capturing a share of the $380m fitness industry, where only six percent of the population are registered members of a health club.
Most gym membership schemes have fixed fees, which are generally higher than yours and include additional upfront payments. How will GymNation operate without these traditional payments?
Holland: The concept of GymNation is based on the low-cost, value-based model, which has been a huge success in Europe and the US in several sectors including hotels and airlines. Our model focuses on essentials and cutting out expensive frills. You won't find a sauna, steam room or swimming pool at GymNation, but you will find over 500 pieces of the latest generation gym equipment, more than 200 Les Mills classes a month, a ladies-only fitness section and ample free parking. We also use a lot of technology and web-based processes to reduce our overheads.
What were the biggest challenges you faced while setting up the business, especially as GymNation is among the few that do not require advance payments?
Afeaki: Our success is largely dependent on location and member convenience. Site selection is something we were never going to compromise on. We looked at over 100 potential locations over a six-month period before selecting our first site on Sheikh Zayed Road in Al Quoz, as it offers huge space, easy access to the main road networks and free basement parking. It is also an up-and-coming area with lots of cafés and sports facilities.
Holland: If we had followed our competitors in insisting on annual upfront payments, it would have given us the benefit of cash flow. But ultimately, we must stay true to our goals of making health and fitness affordable, and allowing members to pay-as-they-go on a monthly basis.
Do you have expansion plans?
Holland: The health and fitness market in the UAE is huge and growing rapidly, so our current focus is to deliver on local market potential. Given the overwhelming demand during our pre-sell, which has seen 2,000 members already sign up, we believe there is an opportunity for up to ten GymNation sites across Dubai, and we have tentatively started to look at other emirates.
What was the costliest part of developing the gym?
Holland: Setting up a 45,000 sq ft gym requires a healthy capital investment, and the business model is very sensitive to cap-ex and overheads. Controlling the fixed costs, with rent being one of the largest, is fundamental to us. We have strict parameters for each and every cost line and these are continually monitored. Providing memberships at one third of the typical market rate, while operating a profitable business which delivers the desired return on investment, is a fine balance. We must stay true to our goals of making health and fitness affordable.
Was funding it a challenge?
Holland: We took an early decision to find investment partners who could support us with long-term financial investments. We decided to seek partners from a real estate background, as the long term success of our business will be heavily dependent upon access to the right sites and getting the real estate financial model correct.
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