The first time Paul Grymkowski backed a Gold's Gym in Russia, it was a miserable failure. In 1990, the president of Gold's Gym International Inc., a U.S.-based franchise with some 500 gyms worldwide, granted rights to a U.S.-Russian joint venture to build a club in St. Petersburg.
"The American developer had an arrogant, know-it-all attitude, and rubbed his Russian partners the wrong way until the personal relationship fell apart. Plus they had a lot of trouble with the mafia and getting materials into the country," Grymkowski said in a telephone interview from Los Angeles. "The project fell apart when it was 80 percent completed."
Six years later, Grymkowski played the Russian health market again, and won.
In November 1996, three Moscow partners -- Jake Weinstock, Paul Kuebler and Vladimir Grumlik -- convinced Grymkowski to sell them franchise rights and opened the now-booming, 4,400-square-meter Gold's on Moscow's Leningradsky Prospekt.
"Moscow is one of the leading Gold's Gyms in the world, certainly in the top 10 of 509 gyms in terms of revenues, size and design concept," Grymkowski said.
In the United States, Gold's facilities are generally no-frills weight-training centers. The Moscow club, on the other hand, features weights, aerobics, cardiovascular training equipment, spa facilities, a juice bar, a day care center and an on-duty doctor.
Membership fees in the Moscow Gold's Gym run as high as $2,500 annually -- about 10 times the prices at the company's franchises around the world, Grymkowski said. So with 1,000 members, the gym is a healthy revenue generator: Based on full membership fees -- corporate discounts, for example, may render dues cheaper -- Gold's Moscow club would bring in revenues of $2.5 million from yearly dues alone.
The Gold's story is typical of Moscow's nascent health club industry, where a few clubs have competed for a tiny slice of the population who want out-of-the-wrapper exercise equipment, solariums, aromatherapy massages and vitamin bars with marble countertops -- and will shell out up to $4,000 per year to get it.
Moscow health club memberships are expensive partially because real estate in the capital is expensive, and partially because costs are high to outfit a new gym and import equipment, most of which is produced abroad. But clubs also charge high prices because they can: Their market will bear it.
Club owners, although they were not forthcoming with revenue figures, agreed that the business is lucrative.
In addition to Gold's, the major players on the market are World Class, which opened its first club in 1993, and the Beach Club, which opened in early 1995.
Now, though, the market is expanding quickly.
Gold's representatives said they are planning to open another Moscow location, although they will not say where. Gold's Moscow directors have right of first refusal for any future Gold's Gyms in the Russian Federation, and Grymkowski and Weinstock said they were "excited" about future possible Gold's Gym franchises in Russia as well as in the Baltic States.
This month alone, a Russian-Austrian joint venture opened the upscale Fit & Fun club at Chistye Prudy, and a second outlet of World Class opened in southern Moscow.
And now, after its foray into the top-end of the market, the company behind World Class, World Fitness Corp., is ready to move into the middle-class sector. It has invested in Planet Fitness, a less expensive, slightly down-market alternative to the existing clubs, which is set to open later this year.
If Russia is like other emerging markets -- and here lies the rub, because it often isn't -- this could mark the first step into a big, muscular market.
"Usually what happens in emerging markets is the first few health clubs open up to serve the city's wealthy," said David LeCompte, a fitness and health club industry consultant, a former California health club owner and a longtime observer of the Moscow health club business.
With the upcoming opening of the Planet Fitness chain, Russia is starting to fall to the more typical pattern of emerging markets, LeCompte said, where the appearance of a "second tier" of health clubs should broaden the market to include the middle class.
For now, though, with just five private, full-service clubs in Moscow and even fewer in St. Petersburg, Russia is a laggard in the world's health club business.
Tokyo, for example, has an estimated 150 private health clubs. And in the United States, home of the world's first private health club industry, there are 13,000 commercial health clubs, according to the Boston-based International Health, Racquetball and Sportsclubs Association, the main organization for industry professionals.
By comparison, in former communist-bloc countries, where athletics was always lavishly funded by the government, the concept of private health clubs was nonexistent until the early '90s.
Until 1992, the only private health clubs in the former Soviet Union were one-room gyms in four- and five-star hotels that attracted die-hard fitness buffs -- mainly expatriates from Western countries -- desperate for even the most basic facilities that the tiny gyms offered.
The other option was, and still is, to work out in one of the many public exercise facilities -- swimming pools, weight rooms and other training facilities -- around Moscow and the country.
These facilities still capture the lion's share of the exercise business. Some 5,000 people pass through the doors of Moscow's Olympic Sports Center daily, compared to 200 or 300 for Gold's. Such facilities require no yearly membership fee, cost $5 to $10 per visit, and offer a wider range of activities -- water ballet, figure skating and karate, for example -- than their private counterparts.
Although these state holdovers serve the needs of much of the population, their low comfort environment and no-frills equipment and service have failed to meet the demands of a growing number of deeper-pocketed individuals willing to pay for a relaxing, luxurious fitness environment.
By the time Gold's opened in Moscow in 1996, World Fitness Corp., a Swedish-Russian joint venture, had been flourishing in this lucrative niche for four years. World Fitness established itself as the leader in the limited market with World Class, the first private health club to open in Moscow.
Located in a prestigious, diplomatic neighborhood on Zhitnaya Ulitsa near the French Embassy, World Class provided its clientele with some of Russia's top coaches and top-of-the-line fitness facilities, including squash, tennis, spa facilities and a swimming pool. The gym marketed the club by buying daily airtime on Russian television, where World Class instructors conducted an early morning exercise program.
World Fitness Corp. now has three clubs in St. Petersburg. One more World Class opened in the capital this month, a 1,000-square-meter facility on Prospekt Vernadskogo in southwest Moscow.
World Class continues to offer top services at top prices -- yearly dues are $3,000 for entry to both facilities -- a strategy that has characterized the Russian health club market as one of the most exclusive in the world.
Until Planet Fitness, that is. By the end of the year, World Fitness will open the first in a chain of lower-priced health clubs the company plans to bring to the Russian market.
"Two luxury clubs in this city is enough for the elite," said Olga Sloutsker, president of World Fitness Corp., explaining why the group's third club in Moscow will target a different population. "Now we want to focus on the masses. We are modeling ourselves after a typical American fitness club."
The prices for Planet Fitness will be "significantly lower" than those at World Class, Sloutsker said. Clients atthe Sokolniki-area club will be able to pay by the visit, rather than paying high yearly membership fees up-front.
Although World Fitness Corp. is entering a wide-open market for lower-priced clubs, that does not mean that the wealthy, upper end of the market is saturated: World Class still has a waiting list for membership, and more than 80 percent of the hopefuls are Russian.
The newest addition to the high-end market is Fit & Fun, a Russian-Austrian joint venture that opened Oct. 1 at the affluent, downtown Chistye Prudy neighborhood.
On the first floor of the luxurious, renovated building, which overlooks the neighborhood pond, is an elegant restaurant. The second floor contains dressing rooms, Jacuzzis, saunas and spa facilities, including solariums, a massage room and a beauty parlor. Only the third floor contains fitness facilities: a 1,300-square-meter, state-of-the-art exercise room, a small aerobics studio and a small pool for aqua aerobics, nestled next to a "relaxation area" with a bar, plants and lounge chairs. As of opening day, Fit & Fun had 100 clients, half of them expatriates. They plan to attract 900 more.
Fit & Fun markets itself not as a fitness center, but as "an exclusive sport and wellness club," its brochures promising clients that a daily trip to the club is like taking a vacation in downtown Moscow. And for consumers with money and time to spend -- more specifically, $3,000 to $4,000 annually -- they are not far from the truth.
"Health clubs have always been for those who have already got their basic amenities taken care of," said LeCompte.
With yearly fees at Moscow clubs starting at $1,800, bargain hunters will find little to cheer them in the way of price wars. The closest thing to a bargain comes in the form of "off-peak" rates: The Beach Club offers a $1,200 yearly membership -- $600 off the advertised yearly price -- for those using the club from 9 a.m. to 5 p.m., and Gold's offers a six-month off-peak membership -- 7 a.m. to 5 p.m. -- for $895.
Those who pay, however, receive not only a place to exercise, but a social outlet. LeCompte recalled the early days of the U.S. health club boom, when owning a health club card was a sign of status.
"Clubs used to be about dining, socializing and boozing, with maybe a workout on the side," said LeCompte. "It met the market's original needs."
LeCompte said he is not surprised that like California in the '80s, Moscow clubs are in a sweat-and-schmooze stage.
Mark O'Brien, the general manager of the 650-square-meter Beach Club, one of the smaller and less expensive of Moscow's private clubs, pointed out that the Moscow gym experience is part cardiovascular, part communal.
"There is a huge social element [in Russian health clubs] that isn't present in the United States," O'Brien said.
Currently, almost all of the Beach Club's 600 clients are Russian, primarily business people who work or live in downtown Moscow, where the three-story club is located in a side section of the large Lenkom Theater on Malaya Dmitrovka Ulitsa. The club is owned by the same company that owns Moscow's two Starlight Diner restaurants and Uncle Guilly's Steakhouse.
In contrast to what they call "mega clubs" such as Gold's and World Class, the Beach Club's smaller size has enabled it to stay afloat here by catering to those who want more of an intimate "club" environment where clients and administration are on a first-name basis and the atmosphere is communal.
To that end, the Beach Club -- which has the lowest membership prices on the Moscow market, with annual dues of $1,800 -- offers a monthly newsletter, a giant bulletin board for community announcements featuring photos of club members, and hosts gala evening affairs for its members at the holidays.
"Russian clients tend to want to meet people and be with people. They tend to linger longer," O'Brien said. "They like the social aspects of belonging to the club as much as they do the fitness. Expatriate clients tend to come in with their Franklin Planners, do their workout, and be done with it."
"The American developer had an arrogant, know-it-all attitude, and rubbed his Russian partners the wrong way until the personal relationship fell apart. Plus they had a lot of trouble with the mafia and getting materials into the country," Grymkowski said in a telephone interview from Los Angeles. "The project fell apart when it was 80 percent completed."
Six years later, Grymkowski played the Russian health market again, and won.
In November 1996, three Moscow partners -- Jake Weinstock, Paul Kuebler and Vladimir Grumlik -- convinced Grymkowski to sell them franchise rights and opened the now-booming, 4,400-square-meter Gold's on Moscow's Leningradsky Prospekt.
"Moscow is one of the leading Gold's Gyms in the world, certainly in the top 10 of 509 gyms in terms of revenues, size and design concept," Grymkowski said.
In the United States, Gold's facilities are generally no-frills weight-training centers. The Moscow club, on the other hand, features weights, aerobics, cardiovascular training equipment, spa facilities, a juice bar, a day care center and an on-duty doctor.
Membership fees in the Moscow Gold's Gym run as high as $2,500 annually -- about 10 times the prices at the company's franchises around the world, Grymkowski said. So with 1,000 members, the gym is a healthy revenue generator: Based on full membership fees -- corporate discounts, for example, may render dues cheaper -- Gold's Moscow club would bring in revenues of $2.5 million from yearly dues alone.
The Gold's story is typical of Moscow's nascent health club industry, where a few clubs have competed for a tiny slice of the population who want out-of-the-wrapper exercise equipment, solariums, aromatherapy massages and vitamin bars with marble countertops -- and will shell out up to $4,000 per year to get it.
Moscow health club memberships are expensive partially because real estate in the capital is expensive, and partially because costs are high to outfit a new gym and import equipment, most of which is produced abroad. But clubs also charge high prices because they can: Their market will bear it.
Club owners, although they were not forthcoming with revenue figures, agreed that the business is lucrative.
In addition to Gold's, the major players on the market are World Class, which opened its first club in 1993, and the Beach Club, which opened in early 1995.
Now, though, the market is expanding quickly.
Gold's representatives said they are planning to open another Moscow location, although they will not say where. Gold's Moscow directors have right of first refusal for any future Gold's Gyms in the Russian Federation, and Grymkowski and Weinstock said they were "excited" about future possible Gold's Gym franchises in Russia as well as in the Baltic States.
This month alone, a Russian-Austrian joint venture opened the upscale Fit & Fun club at Chistye Prudy, and a second outlet of World Class opened in southern Moscow.
And now, after its foray into the top-end of the market, the company behind World Class, World Fitness Corp., is ready to move into the middle-class sector. It has invested in Planet Fitness, a less expensive, slightly down-market alternative to the existing clubs, which is set to open later this year.
If Russia is like other emerging markets -- and here lies the rub, because it often isn't -- this could mark the first step into a big, muscular market.
"Usually what happens in emerging markets is the first few health clubs open up to serve the city's wealthy," said David LeCompte, a fitness and health club industry consultant, a former California health club owner and a longtime observer of the Moscow health club business.
With the upcoming opening of the Planet Fitness chain, Russia is starting to fall to the more typical pattern of emerging markets, LeCompte said, where the appearance of a "second tier" of health clubs should broaden the market to include the middle class.
For now, though, with just five private, full-service clubs in Moscow and even fewer in St. Petersburg, Russia is a laggard in the world's health club business.
Tokyo, for example, has an estimated 150 private health clubs. And in the United States, home of the world's first private health club industry, there are 13,000 commercial health clubs, according to the Boston-based International Health, Racquetball and Sportsclubs Association, the main organization for industry professionals.
By comparison, in former communist-bloc countries, where athletics was always lavishly funded by the government, the concept of private health clubs was nonexistent until the early '90s.
Until 1992, the only private health clubs in the former Soviet Union were one-room gyms in four- and five-star hotels that attracted die-hard fitness buffs -- mainly expatriates from Western countries -- desperate for even the most basic facilities that the tiny gyms offered.
The other option was, and still is, to work out in one of the many public exercise facilities -- swimming pools, weight rooms and other training facilities -- around Moscow and the country.
These facilities still capture the lion's share of the exercise business. Some 5,000 people pass through the doors of Moscow's Olympic Sports Center daily, compared to 200 or 300 for Gold's. Such facilities require no yearly membership fee, cost $5 to $10 per visit, and offer a wider range of activities -- water ballet, figure skating and karate, for example -- than their private counterparts.
Although these state holdovers serve the needs of much of the population, their low comfort environment and no-frills equipment and service have failed to meet the demands of a growing number of deeper-pocketed individuals willing to pay for a relaxing, luxurious fitness environment.
By the time Gold's opened in Moscow in 1996, World Fitness Corp., a Swedish-Russian joint venture, had been flourishing in this lucrative niche for four years. World Fitness established itself as the leader in the limited market with World Class, the first private health club to open in Moscow.
Located in a prestigious, diplomatic neighborhood on Zhitnaya Ulitsa near the French Embassy, World Class provided its clientele with some of Russia's top coaches and top-of-the-line fitness facilities, including squash, tennis, spa facilities and a swimming pool. The gym marketed the club by buying daily airtime on Russian television, where World Class instructors conducted an early morning exercise program.
World Fitness Corp. now has three clubs in St. Petersburg. One more World Class opened in the capital this month, a 1,000-square-meter facility on Prospekt Vernadskogo in southwest Moscow.
World Class continues to offer top services at top prices -- yearly dues are $3,000 for entry to both facilities -- a strategy that has characterized the Russian health club market as one of the most exclusive in the world.
Until Planet Fitness, that is. By the end of the year, World Fitness will open the first in a chain of lower-priced health clubs the company plans to bring to the Russian market.
"Two luxury clubs in this city is enough for the elite," said Olga Sloutsker, president of World Fitness Corp., explaining why the group's third club in Moscow will target a different population. "Now we want to focus on the masses. We are modeling ourselves after a typical American fitness club."
The prices for Planet Fitness will be "significantly lower" than those at World Class, Sloutsker said. Clients atthe Sokolniki-area club will be able to pay by the visit, rather than paying high yearly membership fees up-front.
Although World Fitness Corp. is entering a wide-open market for lower-priced clubs, that does not mean that the wealthy, upper end of the market is saturated: World Class still has a waiting list for membership, and more than 80 percent of the hopefuls are Russian.
The newest addition to the high-end market is Fit & Fun, a Russian-Austrian joint venture that opened Oct. 1 at the affluent, downtown Chistye Prudy neighborhood.
On the first floor of the luxurious, renovated building, which overlooks the neighborhood pond, is an elegant restaurant. The second floor contains dressing rooms, Jacuzzis, saunas and spa facilities, including solariums, a massage room and a beauty parlor. Only the third floor contains fitness facilities: a 1,300-square-meter, state-of-the-art exercise room, a small aerobics studio and a small pool for aqua aerobics, nestled next to a "relaxation area" with a bar, plants and lounge chairs. As of opening day, Fit & Fun had 100 clients, half of them expatriates. They plan to attract 900 more.
Fit & Fun markets itself not as a fitness center, but as "an exclusive sport and wellness club," its brochures promising clients that a daily trip to the club is like taking a vacation in downtown Moscow. And for consumers with money and time to spend -- more specifically, $3,000 to $4,000 annually -- they are not far from the truth.
"Health clubs have always been for those who have already got their basic amenities taken care of," said LeCompte.
With yearly fees at Moscow clubs starting at $1,800, bargain hunters will find little to cheer them in the way of price wars. The closest thing to a bargain comes in the form of "off-peak" rates: The Beach Club offers a $1,200 yearly membership -- $600 off the advertised yearly price -- for those using the club from 9 a.m. to 5 p.m., and Gold's offers a six-month off-peak membership -- 7 a.m. to 5 p.m. -- for $895.
Those who pay, however, receive not only a place to exercise, but a social outlet. LeCompte recalled the early days of the U.S. health club boom, when owning a health club card was a sign of status.
"Clubs used to be about dining, socializing and boozing, with maybe a workout on the side," said LeCompte. "It met the market's original needs."
LeCompte said he is not surprised that like California in the '80s, Moscow clubs are in a sweat-and-schmooze stage.
Mark O'Brien, the general manager of the 650-square-meter Beach Club, one of the smaller and less expensive of Moscow's private clubs, pointed out that the Moscow gym experience is part cardiovascular, part communal.
"There is a huge social element [in Russian health clubs] that isn't present in the United States," O'Brien said.
Currently, almost all of the Beach Club's 600 clients are Russian, primarily business people who work or live in downtown Moscow, where the three-story club is located in a side section of the large Lenkom Theater on Malaya Dmitrovka Ulitsa. The club is owned by the same company that owns Moscow's two Starlight Diner restaurants and Uncle Guilly's Steakhouse.
In contrast to what they call "mega clubs" such as Gold's and World Class, the Beach Club's smaller size has enabled it to stay afloat here by catering to those who want more of an intimate "club" environment where clients and administration are on a first-name basis and the atmosphere is communal.
To that end, the Beach Club -- which has the lowest membership prices on the Moscow market, with annual dues of $1,800 -- offers a monthly newsletter, a giant bulletin board for community announcements featuring photos of club members, and hosts gala evening affairs for its members at the holidays.
"Russian clients tend to want to meet people and be with people. They tend to linger longer," O'Brien said. "They like the social aspects of belonging to the club as much as they do the fitness. Expatriate clients tend to come in with their Franklin Planners, do their workout, and be done with it."
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