By Lubna Hamdan
Has the $100bn fitness industry reached the end of the line?
If a massive mural of Muhammad Ali wasn’t enough to motivate members at TribeFit gym to sweat it out, a dozen spray-painted messages would have done the trick. That’s not to say it’s hard to stay motivated if you’re surrounded by 23,000 square feet of world class equipment, club-style lighting, perfectly sculpted personal trainers and every type of group exercise class you can imagine. Body pump? Check. Abs blast? Check. Pole dancing? Check. TribeFit even had live DJs spinning tracks for glow in the dark ‘clubbercise’ classes.
It was just one of 800 fitness clubs in the UAE welcoming thousands of members – 6 percent of the population to be exact – in December 2018, not far behind more mature markets like the UK, where penetration is at 15 percent, according to official figures.
It was all looking so rosy.
By 2022, the UAE’s fitness market was forecast to grow to $816m from just $354m in 2016. The numbers were just as optimistic worldwide, with consumers having engaged in fitness and wellness activities more than ever before in 2019, and the sector having exploded into a nearly $100bn market. Optimistic indeed. There was just one problem: a global health pandemic and an ensuing economic crisis.
In the UAE, government-enforced closures to tackle the spread of coronavirus wiped off gym revenues for three months starting March, leaving them heavily reliant on cash reserves, the mercy of landlords, and online fitness classes at a third of their normal price. Since then, even the most decked out of gyms with the fanciest of offerings have had to call it quits. Unfortunately for TribeFit, an economic crisis cares not for body pump classes, wall murals or Insta-worthy fit-outs. So after seven years of being one of Dubai’s most successful gyms, it closed its doors in the bustling marina.
And it’s not the only one. Despite the easing of restrictions in Dubai in May and the reopening of gyms across the city at a limited capacity, at least four others have been met with a worse fate. While TribeFit is attempting to reopen in another location in October, CrossFit GoldBox, Flywheel Dubai, Cult.fit, Engine Health and Fitness have all said goodbye for good.
“Dubai is going down the route of becoming more ‘normal’ and not as affluent a society as before,” says Phil Parkinson of Circuit Factory. “There will be people who have lots of money – there is always an element of society that has large amounts of wealth – but [Covid-19] pulls everyone back into the nitty gritty facts of life, which sometimes Dubai sandpapered off. I don’t think salaries will be as much, I don’t think companies will recruit as much.
“There’s going to be more pressure on employees, the packages will be smaller, the amount of money going into new investments will be less. Everything is going to be affected by this for many months, if not years.
“Dubai runs on people going out and having money to go out and consume goods and services. That’s what sustains this part of the world. The old money, the very wealthy ones, are the 1-3 percent even in Dubai. But the rest of us, we balance our budgets, we pay our bills. If we can save, we do. If we don’t, we worry. So we’re all going to feel it.”
It doesn’t help that Dubai has the world’s second most expensive gym memberships at $119.20, according to a 2018 report by Deutsche Bank. Loren Holland, founder of affordable fitness chain GymNation, says the market “makes it difficult for anybody to stay fit and active because you’re priced out of the market”.
He says: “Typical gyms in Dubai have been overcharging, and it doesn’t sit well with people to know they’ve been overcharged for so long. We’ve come into the market with a fresh approach to make it flexible and affordable. Where do you ever prepay for 12 months? You pay as you go at the cinema, restaurant, brunch; you pay as you go for every consumer product in the market. Why do gyms have to be different?
“Even rent in most markets is paid monthly, and Dubai is moving towards that direction. I pay my rent monthly now. That model of charging people upfront seems to be out of date; that’s what makes it unaffordable – not necessarily the price,” Holland says.
Together with co-founder Frank Afeaki, he set up GymNation in Dubai in 2018 to offer consumers a low-cost option (memberships start at AED99), having previously helped build affordable gym chains Crunch Fitness and Xcercise4Less in Australia and the UK, respectively.
“[‘People] might want to be fit and active, but can’t afford a gym membership. I fell into that category. I wasn’t willing to pay AED1,000 for a membership. Especially now with coronavirus, people were made redundant, lost their income or their discretionary spending has been squeezed, so having an affordable option is driving our business more than ever. We’ve already started to see consolidation in the market, with several operators not reopening post the coronavirus,” he says.
It’s worked out well for his gym, which has sold over 2,100 memberships since reopening. While its low membership prices require it to have more members to sustain its finances compared to smaller gyms, its massive size – it boasts the largest spin studio in Dubai – can welcome as many as 1,500 customers.
“We’re still trading below what we were before the virus, but this is fantastic. It’s beyond expectations... The common message that people got from the Covid-19 pandemic is that they shouldn’t take their health for granted. They’ve also been confined to their own homes and now they can’t wait to get healthy again. It’s a bit of a New Year effect,” says Holland.
Not everyone has been as lucky. Marcus Smith, founder of InnerFight gym and best known as the man who ran 30 marathons in 30 days, has suffered at the hands of landlords reluctant to provide rent relief or deferment. His gym which focuses on personal training and charges $143 for a single session, is currently in the process of moving locations from a warehouse in Al Quoz to a larger space in Dubai Studio City that it plans on opening in July. But the landlords “are not being helpful at all,” says Smith, which saw his revenue drop 70 percent overnight due to Covid-19.
“They’re not giving any support. There are certain mandates that have gone out for certain freezones but we don’t fall under any of them. So our landlord doesn’t have to do anything and therefore hasn’t done anything to make it easier for us. We still have to pay the rent we’re paying on the timelines we have to pay it on. It’s been tough because we expect business is going to be down.
“That’s what’s hurting small businesses the most. If you support us for six months, that for a small business can keep everyone alive. That’s how I pitched it to our landlord. I said we have a rental agreement for five years. This is just the first year. It’s a fraction that we’re asking you to support us with and it will make a huge difference to us. The harsh reality is we have a lot of costs... A lot of gyms have closed. It’s been really hard,” he says.
Smith won’t be mourning the closures of ‘vanity projects’ – or gyms that are there “for the wrong reasons,” he says.
“My gut feeling when I heard gyms are closing down is, why did they open in the first place? What was really their motivation? Is it because they really care about people or they thought it was a lucrative industry? It’s not a super lucrative industry. It’s a tough, 24/7, people industry... People have realised maybe it’s not as glamorous to own a gym. People say to me, ‘oh you own a gym, you must work out all day’. Well no, not really,” he says, laughing.
“But there’s opportunity in that as well, because the cream should rise to the top. It’s a little bit primal and the strong should survive. Hopefully we’re one of the strong ones that survive. It helps us a little bit when the vanity project people leave because it allows us to continue to deliver a high quality of fitness and health education...”
And they will certainly leave, according to Smith, who expects gyms to see another dip in memberships over the next three – four months.
“It’s a personal belief but I think people will leave the country because lots of people might lose jobs. Times are not great but I don’t think we’re at the bottom of this yet. The market will get a correction. It’s not different to any industry. We don’t need 55 burger joints on Jumeirah Beach Road. We maybe only need 45,” he says.
The same goes for personal trainers, according to Parkinson of Circuit Factory, who expects a smaller pool of PTs in Dubai due to Covid-19, but claims there will always be space in the market for their services, “because not everyone wants to pay AED35 ($9) for a workout. Some people want to spend AED350 ($95). Don’t forget there will always be people who have a lot of money out there,” he says.
Investment banker-turned-fitness instructor and influencer Tracy Harmoush agrees that “People follow people. You don’t follow a workout. You follow people.”
She says: “There are loads of fitness apps and online classes but why does one person relate to another versus a brand? A person has a stronger connection than a brand because they’re linked to a face, an emotion. I have live training programmes every day and I still get private messages every day of mainly women saying I specifically have this problem, I want a programme for this.
“A lot of people may not be able to correct their form, that’s why people pay AED500 ($136) for someone as opposed to going to a mass class. I don’t think that’s changed. It’s just moved to online,” she says.
Platforms like fitness giant Les Mills International have certainly seen their customers move online, with a 700 percent uptick in Middle East subscribers since the beginning of the Covid-19 pandemic. The New Zealand-based company is known for 30-minute high-intensity interval training (HIIT) workouts shot in high production and virtual reality settings, and distributed across 20,000 clubs around the world including GymNation in Dubai.
Parkinson of Circuit Factory expects a further rise in popularity for virtual classes, which his gym is offering at $9 a class, despite the reopening of gyms.
“I envisage that when Dubai opens up again, people aren’t going to want to rush back into a group exercise studio. They’re just not going to come back in the same numbers... so we’re going to use the virtual classes for people who don’t want to be exercising in groups for the first little while.
“I do expect more virtual, less group exercise classes in Dubai, maybe less PTs – because I’m not sure how they’re surviving at the moment – maybe less gyms opening up because the profitable ones become less profitable and the ones that are on breakeven will become loss making,” he says.
But Parkinson adds there might even be a squeeze on virtual classes. “What if someone figures out how to do it for AED5 ($1) a head?”
Some already have, except they’re offering classes entirely for free. The Nike Training Club, for example, waived all fees for consumers to help them cope with the pandemic. Now, users can train with virtual messages of motivation from football champion Cristiano Ronaldo as they tackle an abs blast. It’s not exactly the same as a massive mural of Muhammad Ali – it’s even better.
So it sounds like gyms in the UAE are going to need a lot more than a dozen spray-painted messages to do the trick for consumers this time.
By the end of 2020, the health and wellness F&B market in Saudi Arabia and the UAE is estimated to reach $14.56bn at a compound annual growth rate (CAGR) of 10.9 percent, according to a recent analysis by Frost & Sullivan.
The industry outlook highlights changing consumer habits, where customers in the GCC are more connected and health-conscious, and where the two countries account for nearly 85 percent of the region’s health and wellness market.
It also reveals the GCC health beverages segment is growing at a comparatively faster rate than the global market at 6.2 percent, with the snacks and savories segment expected to exhibit the highest health and wellness CAGR at 7.2 percent, closely followed by the readymade and processed goods segments.
Fitness centres and gyms in Dubai can operate at full capacity, following an announcement from Dubai Sports Council (DSC), as the emirate further relaxes its Covid-19 restrictions.
Children and the elderly in Dubai will be allowed to take part in sports activities under the measures revealed this month – previously under 12s and those over 60 were banned from taking part in sports, as part of efforts to curtail the spread of coronavirus.
The two decisions come after DSC announced the return of sports competitions in Dubai, starting with marine sports. However, they come with strict regulations issued by Dubai’s Supreme Committee of Crisis and Disaster Management and other relevant authorities, which includes maintaining a regular cleaning regime, and ensuring safe distancing is maintained at all times.
Operators will also have to follow all the other safety protocols and guidelines – such as the two-metre social distancing, wearing masks, checking temperature of visitors, providing sanitisers, etc – issued previously by Dubai Sports Council.For all the latest Sport news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.