Fitness shapes up as new Asian growth industry

Author: EIC | Economic Intelligence Center
Published in Bangkok Post/Asia In Depth: Asia Focus section, 16 October 2017

Asia’s fitness businesses are working up a sweat. As incomes and waistlines expand throughout much of the region, so does interest in keeping fit and attractive through exercise. With some 31,000 fitness clubs and 17 million members across 14 Asia-Pacific markets in 2016, the regional industry’s membership fee and secondary revenues surpassed $14 billion that year, according to the most recent estimates by the International Health, Racquet & Sportsclub Association.

Yet it’s clear that Asia’s gym business is still in its early days. Just 4% of people across the Asia-Pacific region are members of a health club or gym, according to IHRSA.  In countries like Thailand, Malaysia, Indonesia, China and India, the rate is below 1%. In the US, where the fitness club market has reached maturity, the rate is 19%. Extrapolating from industry data, each percentage point rise in membership penetration in Asia would mean an extra $3 billion in spending per year throughout the region.

Numbers like these have prompted a few international fitness chains to expand here. In February, UK-based Fitness First, which has the most clubs in Southeast Asia, announced the merger of its Asian operations with Celebrity Fitness, the region’s second largest chain, operating in Indonesia, Malaysia and Singapore. With a total of 152 branches here as of February, their combined revenues were about $300 million last year, according to a company press release.  Virgin Active, one of the world’s largest fitness chains, last year announced its plans to invest $210 million to open as many as 30 gyms in Thailand and Singapore. Australia’s UFC Gym opened its first branch in the region in Ho Chi Minh City last year.

With competition heating up, it takes savvy to succeed in this business. The key consideration for any operator is location, since this is the factor that most influences a member’s decision to join, according to a Nielsen survey of some 4,600 people across 13 countries in 2014. The typical gym customer is most likely to choose a club that is located within a 15-minute trip from his or her home, work place, or frequent hang-out like a shopping center.

For a large, full-service gym, which needs to have lots of members to cover its costs, the strategic locations are few in number in most of Asia, usually in the central business district of a city or in a big shopping mall, where many customers have easy access. This prime commercial space is expensive, and a major gym requires 30,000 square meters or more.  The challenge of finding a good site can be seen in Thailand, where many gyms have ended up competing nearby each other in the same urban hot spots. Five of Virgin Active’s first six branches in Bangkok were opened within walking distance of an existing gym operated by Fitness First Platinum, so both companies are vying for the same group of customers.

Medium-size and small gyms can compete by operating in smaller spaces and locations that are less costly but nevertheless accessible to nearby residents and workers. Each operator might have any one of a variety of business models, usually requiring less investment.  Asia’s gym operators have an advantage because they can pick and choose from successful models developed elsewhere and adapt them to the local market. The industry is continually changing, with many different market niches and service specializations.

One popular model is the budget gym, which focuses on core features and omits fancy extras like a sauna or drink corner. It might use technology like a self-check-in system to reduce or eliminate the need for front-desk service staff. Lower operating costs let it serve the mass market.  The rise of the budget model can be seen in the US, UK, and Australia. In the UK, for example, the revenues of budget gyms grew 58.8% per year from 2012 to 2015, far beyond the 2% growth rate for traditional clubs. In Thailand, one example of a low-cost, modern gym is Jetts Fitness, which opened its first branch in 2016, with another on the way. It stays open 24 hours a day, seven days a week.

Boutique gyms and exercise studios are now coming on strong in Asia. These specialize in any one of a number of activities like spinning, yoga, Pilates, cross-fit workouts, martial arts and others. A boutique gym typically requires low investment, competing instead on the expertise of staff like trainers and class instructors.

Many of these smallish clubs have increased their customer reach by joining the regional GuavaPass network, which includes thousands of classes in 11 countries.  GuavaPass customers purchase monthly subscriptions that provide access to classes or workouts at facilities throughout the network, booked via its website or mobile app. This fitness subscription model, which is similar to the ClassPass group in the US, raised $5 million in venture capital funding last year.

Apps and the internet are indeed helping the industry develop and widening the options for customers. Anyone can access lots of fitness information on the web free of charge or use a low-cost, online training program tailored to his or her needs. This lets a small, condo gym function more like a full-service gym, since the user can get a workout similar to one provided by a personal trainer or class instructor at a traditional gym.

Whatever the business model or service offering, the fitness industry appears bound to grow for many years to come in Asia as the region’s middle classes expand and spend more time and money on leisure. Health clubs in Europe and the US earned more than $56 billion last year, from a total population that is much smaller.