Gym slips

Not fit to open: Nirvana closed five gyms in Beijing

A generation ago, exercise in China meant an hour in the park. More recently, many locals have begun to embrace the fitness culture of their yuppie counterparts in the West.

Though physical fitness is still largely an urban, middle-class concern, mentalities are changing alongside the obesity level. Fitness clubs are moving in to respond to demand from the urban Chinese who wish to reshape their bodies after too much time spent with fried chicken and sugary drinks. Increasingly sedentary lifestyles, longer periods spent commuting to workplaces (and no longer by bike) and the rapid encroachment of property developers into parks and privatised spaces have all contributed to expanding waistlines. The Chinese may not be as fat as the rest of us quite yet, but they’re catching up fast.

Hence the resolution to look after their bodies. “Those who were born in the 1960s and 1970s have been working so hard, they have been pursuing success at any cost,” said Yin Yan, the former editor-in-chief for the fashion magazine Elle in China. “Now they have it – money or social status – thanks to China’s economic development. But they also find their health worsened and their lives in a mess.”

But some of the Beijingers with hopes of getting into better shape in 2011 will have to rethink their plans. That’s because one of the capital’s largest fitness chains, Nirvana Fitness & Spa, closed all but one of its locations two weeks ago.

Nirvana Fitness, which has more than 80,000 members nationwide, announced on its website in early January that five of its clubs in Beijing would “temporarily close” until further notice.

The company also sent a text message to all its members: “As a private company without any support from the government or investment groups, it was difficult to keep ourselves afloat”.

Wu Xiaotian, the firm’s marketing manager, told 21CN Business Herald that Nirvana Fitness was suspending its business because of cash flow problems but reassured the newspaper that the company’s directors were discussing money-raising measures.

Founded in 2000, Nirvana was the first fitness club in China to adopt the franchise model, with 16 outlets around the country. The strategy was to open swanky clubs in tier one cities like Beijing and Guangzhou. The potential looked good, given that 1% of Chinese people are members of a health club, compared with 16% in the US and 12% in the UK.

But as it turns out, the fitness industry is a particularly tough slog. Property and staff costs have increased faster than membership fees, while competition from other sports is fierce. Nirvana has also faced pressure from the growth of no-frills work out centres that have stolen customers from the pricier venues.

Industry experts say Nirvana is not the only fitness firm with financial problems. Other large fitness chains like CSI Bally and Hosa Fitness have been closing down locations since 2008.

“There are big risks in investing in the fitness industry,” Zhang Guanghui, a fitness coach at Ozone Fitness, another gym club in Beijing, told the China Daily. “Too fierce competition has made it difficult for many clubs to survive.”

Many rely on prepaid packages for cash flow. But Nirvana’s Wu says: “Since the financial crisis, fewer and fewer members are willing to buy prepaid packages, which lead to less money up-front. Nirvana has suffered losses and has been using the money from prepaid packages to fill the ‘holes’.”

Still, customers were shocked to find that the gyms in question had closed. “I was here working out last night and was very surprised at its sudden closure,” said Li Shulang, a club member for over two years, adding that she just extended her membership another year for Rmb4,980 ($754) one month ago. “As far as I know, some even paid for five years’ membership and even longer, some even paid last night.”

The experience is leading some industry observers to call for better protection of consumer rights in cases of sudden gym closures. Members with prepaid packages are considered unsecured creditors in the event of liquidation and their chances of recovering their cash are low.

Ge Youshan, a lawyer specialising in consumer rights at the Beijing Lawyers Association, says the government should strengthen supervision of companies in industries where prepayment is common, including fitness centres and beauty salons, to protect consumer rights. A year ago (WiC47), we wrote about the prepaid card industry looking similarly risky. In one of the worst cases, in Shanghai in 2005, the sudden bankruptcy of the Maya Group convenience stores left thousands of customers with cards full of worthless credit.

At least Beijing’s gym-goers can comfort themselves with the news that their predicament is not unique. In Hong Kong, the same problem has plagued yoga practitioners recently, with a series of centres shutting up shop overnight. Last week the newspapers were reporting on another one locking the doors, as Living Yoga abruptly closed for business. Customers were loud in their complaints, forgetting momentarily to breathe deeply and focus on their inner Zen.

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