PUMPING UP THAILAND
Jetts Fitness believes the country could support up to 100 branches of its gyms over the next few years.
Long-dormant Jetts Fitness is rolling out eight locations in Thailand this year after its parent company Fitness and Lifestyle Group was acquired by private equity firm Quadrant.
For close to two years, a family operated the only two outlets of Jetts Fitness in the country. Fitness and Lifestyle Group was acquired by Quadrant in 2014, after which the firm repurchased the two established locations (originally under a franchise plan), and began preparing to roll out an aggressive expansion plan in the region.
Jetts Fitness operates seven locations in Thailand and plans to launch another eight by year-end. It wants to add 12 companyowned outlets per year for the foreseeable future. There are over 20 Bangkok clubs in the pipeline.
“It wouldn’t be overly aggressive to say Thailand could support 100 of our clubs,” said David Lamb, Jetts Fitness’s Asia managing director.
At that rate, Jetts would have the most branches in the country within three years, pushing ahead of Fitness First, which leads the way with 29 clubs, and far ahead of other low-cost 24-hour clubs like Anytime Fitness and Fitness24Seven, which operate one and four branches in Thailand, respectively.
USING STARBUCKS’ MODEL
Each club represents an average investment of 30 million baht, said Mr Lamb, who was previously chairman of Virgin Active in Asia, and group managing director of Fitness First Asia. Quadrant is also the owner of Fitness First in Australia.
Mr Lamb said his team has identified at least 40 potential locations for new outlets in Bangkok, which at 600 square metres are about one-third the size of traditional brands like Fitness First or Virgin Active.
The firm has focused almost exclusively on community malls, but he said they are also looking at stand-alone locations along the BTS line and office buildings.
“I tell my real estate team, if you can have a Starbucks, you can have a Jetts,” said Mr Lamb.
Locations are especially important for low-cost gyms whose main selling point is convenience and affordability. According to New York-based marketing firm Distillery, users of high-end gyms travel in the US travel between 5-6 miles to get their clubs, while users of low-cost gyms travel close to half that distance.
Unlike other low-cost brands, Jetts will charge the fee for memberships across locations. “Real estate in Sathon is generally more expensive than in the suburbs, but higher land cost is balanced out by higher personal trainer revenue,” said Mr Lamb.
LEAN BUILD
Jetts is part of an increasing legion of low-cost fitness service providers challenging the supremacy (and market share) of traditional full-service players. Akin to low-cost airlines, these companies have shaved costs by stripping gyms to their main essentials: iron, access cards, and a few bathrooms.
Planet Fitness, one of the first large scale low-cost gym operators, manages more than 1500 locations in the US. Since its 2015 IPO, its stock has gone up 116%.
Planet Fitness was owned by private equity firm TSG Partners before going public.
In some cases, these gyms have done away with staff altogether, allowing them to charge as little as $15 per month in prime New York locations.
“These revolving door models in which you insert your credit card to go through the door are not in Asia yet,” said Mr Lamb.
A Jetts membership retails for 1,500 baht per month, about half of what a membership on full-service gym would provide.
When asked whether the company could offer prices as low as those offered by firms across the Pacific, Mr Lamb said, “When we came into Asia we knew that the bare-bones model would not work, since group classes are so important for consumers here.”
Jetts fees are in line with those of other 24-hour fitness centres, and local gym operators like Fitness 7.
“I am not sure we could get to that point under our current business model or that we need to,” he added.
Mr Lamb said he does not expect full-service gym brands to slash their prices after the expansion.
“Let’s just say that these operators could look to trim their margins if they really wanted to, but won’t because they would still have a healthy dose of consumers coming through their door. We hope they think we are growing the pie, not eating into it.”
“Members of Fitness First, Virgin Active and WE FitnessSociety want something beyond exercise, and they’ve all agreed to pay for it, even if the clubs made them dish out for 5-12 months in advance,” said Orawan Kleawpatinon, marketing manager of Fitness First, in a previous interview with Bangkok Post.
Mr Lamb said Jetts and full service gyms target slightly different consumers, but there is still an overlap. “We cater to the 18-30 category, while Fitness First is possibly targeting a 25-40 age range,” he said.
Jetts charges 50% less than traditional gyms, and operates 24 hours, which means it may spend more on utilities as well as personnel. The key to maintaining margins, he said, is increasing the number of customers per sq m by spacing them across the day.
Mr Lamb did not disclose the company’s margins, but an average Plant Fitness company-owned centre logged in a 41.8% earnings before interest, taxes, depreciation, and amortisation margin in 2017.
Jetts has around one customer per sq m, while traditional gyms draw less.
“As gyms get larger it is hard to find a location where you would be able to draw enough people to maintain that one-to-one golden ratio. For us an office building is enough to attract the 600 people we need for a viable business,” he said.
Traditional gyms draw 80% of their customers in a three-hour window, he said, which provides a natural ceiling for their member numbers.
“It self regulates — as soon as members feel that they have to wait 15 mins for a treadmill they will start withdrawing their memberships”, he said.
Always-open places like Jetts encourage customers to work out through the day, and attract shift workers, like nurses, doctors and policeman, who cannot work out at normal hours.
Some companies have introduced differentiated pricing schemes, which charge consumers who use facilities in less popular areas cheaper rates.
Jetts is also capturing a large portion of casual gym-goers who would not sign up for any fitness centre at the standard brands’ prices. These customers generally visit the facility less, but pay the same as their more committed counterparts.
The fitness market in Thailand is still in its early stages, said Mr Lamb. Around 5% of the population pays for gym memberships in Thailand, a far cry from the 20% that buy one in the United States and Europe.
Jetts is channelling most of its regional resources to Thailand, said Mr Lamb.
Thailand’s fitness market was worth 9 billion baht in 2016. There are close to 1,000 registered fitness centres in Thailand.