Described as recession-resilient by the Financial Times, the booming health and fitness industry, still in its early stages of development here, is set for phenomenal growth in the Dublin area over the next five years.
Industry analysts predict that the huge growth that has occurred in this sector in the US and UK markets will be mirrored in the Dublin market in the next five years as UK operators look for opportunities to establish and expand their operations in what is viewed by many as a largely underdeveloped market.
Shelves at newsagents groan under the weight of glossy magazines dominated by the perfectly svelte and toned bodies of celebrities like Geri Halliwell, Madonna and Posh Spice: the spin-off has driven the rapid growth and expansion of the health and fitness industry, as ordinary joe-soaps desire to look like their screen idols. But fashionable as it now is to work out, is there long-term growth potential in a market driven by what appears to be fanciful demand?
Like the bottled water industry that was initially dismissed as a craze with a limited life-span, health and fitness clubs are not a trend that will soon run out of steam but are instead becoming a fixture in our lifestyles, says Ben Dunne owner of Westpoint Health and Fitness Club in Blanchardstown.
The health club market today is dramatically different from what it was five years ago. Compact city gyms of approx 4,000 sq ft with limited exercise areas and aerobics rooms were once the mainstay of the market. Today, developers are looking to establish networks of 25,000 sq ft superclubs in busy suburbs, complete with swimming-pools, climbing walls, multi-floors of exercise space and many more ancillary facilities.
While the Dublin fitness club market still remains largely undeveloped, the competition between the major gym operators to expand is heating up and the rush is on to mark territory in the suburbs and city centre catchment areas.
Presently there are four major established players which include the West Wood group with branches in Leopardstown and Clontarf, Crunch Fitness with branches in D·n Laoghaire, UCD, UCG and Limerick, Total Fitness owned by Albert Gubay with branches on the Malahide Road and in Castleknock and Ben Dunne's Westpoint Health and Fitness Centre in Blanchardstown. While all four groups are actively planning to expand their operations, smaller operators and UK groups are also looking for a slice of the market.
LA Fitness, the British-based super-gym with over 30 branches around the UK, including one in Belfast, is currently in "active negotiations" on five locations in and around the Dublin area with another five "under consideration", according to agent Fintan Tierney of Lambert Smith Hampton. The arrival of this high street-style chain will have a big impact on the Dublin market.
The five sites under offer are all approximately 10,000 to 15,000 sq ft and are a mix of greenfield sites and refurbished buildings strategically spread around the city and its suburbs. With a market capitalisation of £120 million sterling on the London Stock Exchange, LA Fitness has the financial clout and experience to invest heavily in its Irish operation to maximise its position. The eagerness of the group to establish a network of clubs here is also an indicator of the pivotal point the market is at.
While restaurants, hotels and other players in the leisure market can expect to see a downturn in revenues as a result of the slowdown in the global economy, the health and fitness industry is still enjoying double-digit growth. According to statistics compiled by Mintel, the market research firm, 16.5 per cent of the 18 to 65-year-old population are health club members in the US. In the UK, the penetration rate is about 7 per cent and growing. Although there are no figures available for the Republic's market, industry sources estimate the penetration rate at around 4 per cent.
There are many windows of opportunity in and around the Leinster region at present for whoever can get in there fast and establish a presence. One of the main criteria for establishing a health and fitness club is that there be a population of 20,000 within a 10-minute drive of the centre. The appeal of health and fitness clubs spans right across the adult population from the late teens to the grey market. Research in the UK has shown that the over-55s are the fastest growing category of regular gym goers.
The south and west suburbs of the city are the areas most likely to be targeted for club development as the northside has already seen substantial development in the last few years. Already there is a super-sized facility at Clontarf, West Wood, with a 50m pool, creche, spa treatment centre, indoor running track, indoor tennis courts and a 24,000 sq ft gym equipped with the latest cardio-vascular equipment. Built two years ago, the overall project costs were in the region of £10 million (€12.7m) according to Andrew Hughes, general manager of the West Wood gym.
Albert Gubay, the chairman of Anglo International Holdings, owns two super gyms on the northside, one located on the Malahide Road and the second located in Castleknock by the M50.
Another big player with a health and fitness club on the northside is Ben Dunne, who owns the 40,000 sq ft Westpoint club in Blanchardstown, which has a membership of 3,000. Expansion of the group is a main priority for Dunne. Already there is a second Westpoint being developed at a greenfield site in Kimmage. Work on the £13 million (€16.5m) 50,000 sq ft fitness centre will begin next February, after clearing final planning hurdles, and this will be followed by the opening of a centre in Dundalk. Dunne has also purchased a six-acre site off Griffith Avenue, Dublin 9, where he plans to build a third Dublin fitness club.
Jackie Skelly Fitness based on Clarendon Street in the city centre will open a second larger facility at Park West business park off the M50 in Clondalkin at the end of the year. Facilities at the 25,000 sq ft club will include a 20m swimming-pool, fully-equipped gym, beauty salon and juice bar. The 8,000 sq ft premises on Clarendon Street has 2,000 members and is one of the best known gyms in the city centre, but due to its location cannot expand its facilities. The company is currently in negotiations on two sites on the northside and one on the southside of Dublin, and is actively seeking further sites of 10,000 to 25,000 sq ft.
At this rate of growth it would seem likely that such a multiplication of health and fitness clubs in the Dublin area could only lead to market saturation. However, industry experts disagree, saying that currently the market here remains so underdeveloped that there still remains "phenomenal capacity" for more growth, pointing out that this is exactly what happened in the UK and US markets.
Like the supermarket industry, "which many people initially thought would suffer from market saturation and competition from British multiples, increased competition will keep us all on our toes," said Dunne.
Reinvestment in equipment and technology is crucial in the health and fitness industry. The initial purchase of equipment and its replacement are the single biggest financial expenses associated with running gyms.
New equipment with advanced functions launch regularly on the US market. "Equipment needs to be replaced every three to five years," said Andrew Hughes of West Wood. Equipment costs range from £3,000 to £6,000 (€3,809-€7,618) per piece according to Mark Tooke of Jackie Skelly; equipment fit-out costs start at around £300,000 (€380,921).
Membership fees account for between 80 and 90 per cent of club revenues. Secondary spend, the money spent by members on other services when visiting the club, is becoming an important source of revenues and more and more clubs look to provide complementary services such as beauty salons, juice bars and spa treatment facilities.
Ben Dunne has plans to open a men's hairdressing salon at the Blanchardstown facility. "We already have a hair and beauty service, so why not provide this service for men? If people are coming to the club two or three times a week, then the convenience of it makes sense," he said.
The next five years are the crucial years for the development of this industry in the Dublin area. By then most of the fitness groups will have a network of gyms not only in residential suburbs but in business parks and elsewhere.
High rents are the main barrier to the establishment of health and fitness clubs in the city centre as they result in very high capital costs.
Rents can vary from £30 to £45 (€38-€57) per sq ft, so without large capital, a city centre premises is not viable and it's unlikely to see profits in its first years, commented Karl Dunne, managing director of Sanovitae, a new 10,500 sq ft gym at the Clarion Hotel in the IFSC. With a daily population of some 11,000 office workers and apartment dwellers, this financial district was a prime target for a health and fitness club. Although part of the hotel, Sanovitae is an independent facility jointly owned by Dunne and Paddy Kelly and represents an investment in the region of £750,000. A second facility is due to open on Baggot Street late next year, capitalising on the huge daily population of another high density office area. The fit-out of 133 Baggot Street will start early next year and will include a swimming-pool. A third Sanovitae club will follow in Smithfield, another area of the city with a big population of young people.
