update in brief...


gym group secures funding Low-cost health club operator The Gym Group has revealed that it has secured a £20m funding package towards its plans for expansion. Primary investor Bridges Ventures and a ‘revolving credit facility’ from HSBC will help fi nance the group’s move to grow its UK portfolio. The Gym Group is looking to


acquire up to 20 sites during 2011 and aims to expand its estate to 50 clubs over the next two years. CEO John Treharne says: “Our


ability to secure substantial fi nancial backing – at a time when capital is so constrained – is testament to the robustness of our business model.” The Gym Group launched its fi rst club in 2008 and now has 14 sites.


construction begins on st albans wellness complex Preparatory work has now started on a multi-million pound scheme to revamp the Westminster Lodge Leisure Centre in St Albans, Herts. A number of buildings will be


demolished to make way for the new facility – which has been designed by S&P Architects – with the main construction phase due to get underway this month. The new Westminster Lodge


Leisure Centre, which is due for completion in summer 2012, will feature a 200-station fitness suite with group cycling studio, a four-court sports hall, 647sq m (6,964sq ft) of water space and a 500sq m (5,382sq ft) spa area.


nottingham leisure scheme gets under way Construction work is underway on Nottingham’s new £9m Victoria Leisure Centre, designed by London-based architects Levitate. Parts of the former facility,


which shut on 1 April 2010, have already been demolished to allow for construction to commence. A six-lane, 25m family swimming pool with separate kids’ pool and fun splash play area will feature at the heart of the development, along with fitness and health suites.


10


news vat hike to hit portuguese clubs


Pedro Ruiz, CEO of Portugal’s largest health club chain Vivafi t, has warned that up to a third of clubs in the country could be forced to close due to the government’s decision to increase VAT on fi tness from 6 to 23 per cent. The raising of the levy


comes just two years after the government cut VAT on fi tness and all supervised physical activities from the standard rate of 19 per cent to just 5 per cent. VAT since rose to 21 per cent, and the fi tness tariff to 6 per cent – but now fi tness is being pushed back into the general VAT category, which rises to 23 per cent this month. Speaking to HCM, Ruiz


accused the government of ‘persecuting’ the fi tness sector: “Since the government’s announcement of the increase in tax, the number of membership cancellations at clubs has skyrocketed to levels never seen before. Hundreds of fi tness clubs are already closing their doors and I expect at least 30 per cent of facilities to close during 2011.” Ruiz does, however, admit that


It’s feared that up to a third of clubs in Portugal could be forced to close


government agencies, whose mood was bolstered by extremely subjective and quite aggressive media coverage. “In hindsight it’s clear that many


the government’s decision was taken mainly due to the reluctance of fi tness operators to pass the 2008 cut in VAT directly on to members. Nick Coutts, former CEO of Holmes Place Iberia, agrees: “It’s absolutely clear that the fi tness sector is to some extent continuing to pay the price for not ‘playing ball’ three years ago,” he says. “The government’s decision to clarify


VAT at a signifi cantly reduced rate back in 2008 was a positive one, but the communication process was fl awed as the government also advised members to ‘expect’ a mandatory signifi cant subscription rate discount from their clubs. Members were even encouraged to submit legal claims against operators who did not pass on the full value of the VAT reduction with immediate effect. “Several operators did lower prices,


but these reductions were implemented during a six- to 18-month period following the VAT reduction. Meanwhile, clubs ran the gauntlet of upset members and various


Read Health Club Management online at healthclubmanagement.co.uk/digital


operators did not communicate their pricing and VAT strategy well enough to their members, and consequently paid the price in terms of a loss of ‘goodwill’ from key stakeholders across the sector.” Coutts adds that clubs in Portugal


now face three options: “The fi rst is to increase prices, but this is sure to anger existing members and make recruiting new joiners even more of a challenge. “Even if clubs decide to maintain


current prices, they’re unlikely to receive much gratitude from members as they’re sure to see it as the club’s obligation to their loyal members. “Clubs could implement a ‘hybrid’


approach, maintaining prices for existing members and increasing prices for new joiners. However, in reality this will mean a massive fall in margin and profi ts from existing database revenues, as well as a far tougher task in terms of generating new sales. And all this during a time when the Portuguese economy is suffering its worst period in decades.”


january 2011 © cybertrek 2011


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