Wellness Lifestyle Facility’s Graham Mowatt explains challenges of post-COVID operations for clubs

The open letter sent by Graham Mowatt, Director of South Australia-based Wellness Lifestyle Facility Pty Ltd has laid out the challenges being faced by fitness and health club operators.

Wellness Lifestyle Facility Pty Ltd, the operator of Spa Clubs Fitness as well as a number of other industry brands, has like other club operators experienced a impact on its business in terms of attendance (membership) numbers. 

Mowatt explains “as the numbers with the virus builds along with anxiety, we are seeing a further drop in membership. New Years Eve (or lack of it) was extraordinary. There was no lockdown but people chose to avoid crowds everywhere among all age groups. Venues across South Australia were empty. 

“Staffing has become a problem in every industry, to such an extent that the Government has had to relax the isolation rules to ensure that businesses can still operate. Some have had to close anyway. As a result, we are losing most of our Part-Time staff (Group Fitness Instructors) which are a major part of our business. We have had to reduce class diversity and it has put enormous strain of the remaining staff. This has caused disillusionment and anxiety amongst members as they worry about ‘their’ classes and whether the club will survive. These in turn leads to further cancellations and suspensions.

“People are so anxious about this new variant that they are choosing (rather than being compelled by Governments) to stay away from all discretionary interactions. In fact, Governments are now doing some things to encourage people to keep going out (safely) in order to keep the economy going.

“Some fiscal assistance is again being provided to certain business areas including the Fitness Industry. This is at a very low level and while certainly appreciated it is nowhere near enough to keep up with our current loss of income.

“January and February are generally the most buoyant time of year for our industry with hundreds of new members and lively attendance numbers. This has not eventuated this year. New memberships are a fraction of normal years and there are large numbers of membership suspensions.” 

Mowatt, in an open letter distributed to various stakeholders and interested parties including other facility owners and operators, went on to explain:

Further reduction in overheads is required
As a result of this reduction in income and insufficient assistance from the government, we have to reduce our overheads. As staffing has been pared to its minimum already and we are unable to reduce wages any further we are placed in a situation where we are no longer able to pay all our overheads and must reduce our outgoings by other means. I have no desire to close our facilities and I expect that the situation will recover albeit in 12 months’ time. So I feel I have no option but to reduce the payments of all non-wage related expenses. 

In 2020 when the pandemic hit and we were forced into lockdown, the government asked landlords to work with tenants to keep them in business. Not all of our landlords were willing to do this and we forced to vacate two premises and close those businesses. At that time I had the opportunity to remain and simply not pay the rent as the Government had precluded evictions for six months. As the landlords were unwilling to negotiate any reduction that would allow use to get through and there appeared no way to change their minds, I felt that it was not right to simply not pay rent until we were evicted and so I took the decision to close the business. We lost 60% of our entire business and since then one of the premises has remained empty for two years. Rent plus outgoings at this premises was approx. $150,000 pa. In hindsight I believe a wiser decision would have been to simply stay and not pay rent until evicted or the landlord was forced to negotiate something. I do not wish to go through this situation again.

Landlords, have already had to endure some financial hardship along with businesses over the last 24 months but there were many industry suppliers who did not burden any significant part of the loss in revenues we experienced. As such I have taken the decision that although I will need to reduce the lease payments to landlords during this downturn I feel it is incumbent on our other suppliers to bear the majority of the reductions we are required to make. Having been through enormous financial pain due to this virus I do not wish to put more stress on other businesses than is absolutely necessary. As such I have tried to adjust the reductions based on the amount they have been already been affected by the Virus. 

The percentages that we need to reduce are as follows. 

Rent: We need to reduce rental payments by 30%

Utilities 
Water: 50%
Electricity: 30% 
ESL: 100%
Insurance: We need to reduce by 50%
Council: We need to reduce by 50%
Bank mortgage repayments: All loan repayments will be halted completely until we are in a position to restart some repayments.

Special Note re Councils
I understand that the South Australian Government has already written the CEO of all councils requesting them to provide assistance to small businesses like ours that are struggling. I am unaware of the contents of this letter as I don’t believe it has been made public but I wish to draw particular attention to this letter for Councillors so they can request a copy.

Longevity of reductions
I understand that this action is unusual and unpleasant. It is not something that I wish to do, but reducing our overheads while staying operational is the only solution for the survival of my business. I also believe that it is in the best interest of all stake holders in our business including staff, suppliers and customers. I sincerely hope that you will find a way to agree.

These reductions are necessary immediately as we are already losing money. They will be needed until we see a turnaround in the normalisation of the virus within the community. I am not sure when this will be. Given what I understand about the current situation I expect that this will be required for at least six months as the Omicron variant filters through the population and people begin to feel safe again.

Graham Mowatt, Director of South Australia-based Wellness Lifestyle Facility Pty Ltd, the operator of industry brands including:

Spa Clubs Fitness - Owns and operates commercial fitness centres in Goolwa, Victor Harbor and soon to open in Hahndorf
Health Clubs Australia - Importer of commercial equipment, developer of fitness related apps and consulting to independent fitness providers
Intelligent Building Solutions - Designs and installs 24 hour access control systems for clubs.

Images: Spa Clubs Fitness (top) and Graham Mowatt (below).