Taipei Times: Briefly describe how you came to establish a chain of fitness centers across Asia.
Eric Levine: I had clubs in northern California. My partner was Ray Wilson, one of the pioneers of the fitness industry. He owned 70 Family Fitness Center clubs in [Southern] California and I had clubs in Northern California. He had always wanted to open up centers in Asia, so he said let's go on vacation and check it out. We landed in Hong Kong checked out one or two of the fitness centers there and I noticed how fashionable the men and women were and I saw that they all had Channel and Louis Vuitton bags. I said how can everybody afford that? I was so taken back by how well everybody took care of themselves that within half a day I told Ray, "I'm staying." I said the California Fitness Center is going to become the coolest and most important membership card in all of Asia and we'll have a hundred facilities within 10 years all over Asia.
PHOTO PROVIDED BY CALIFORNIA FITNESS CENTER
It started by finding the perfect location in central Hong Kong -- all glass, ground floor so people could see and feel the energy. So California Fitness Centers started in Asia five years ago in Hong Kong. Currently we have 13 locations in Asia. Five in Hong Kong, three in Taipei, two in Seoul, one in Bangkok and two in Singapore. We merged with 24 Hour Fitness which are in the US with 280-odd clubs another 130-odd in Europe and became the world's largest global fitness chain. In total we have about 435 locations, 3 million members around the world and about 25,000 employees.
TT: Do your marketing concepts differ between Asian countries and those in the West?
Levine: The concept in Asia is very upscale. We call it "exertainment" where we've gone after the fun aspect of exercise as well as it being very fashionable and very cool place to be. Besides the fact that our facilities are the best in the world ... we've created an atmosphere which makes it super cool to be a member, super cool to bring your friends in and show off our membership card. We went after a very fashionable fitness concept being that if you're a celebrity, a movie star or a model or somebody who wants to feel like one then [California Fitness] is the place to come. Health and fitness will come as by-product of them coming to the club. If you exercise of course they're going to look and feel better from their very first workout.
But we have to capture the market in a certain way. We will get members that enjoy the benefits of fitness and they will stay on and on. But coming into Asia we found that almost 95 percent of our members are first-time users. So it's a different game. With that in mind, we have to give ultimate service.
In Europe people are used to more disciplined exercise. They realize how important fitness is. It's not new, it's part of their culture. When we came over to Asia we realized that our main target group 20 to 50 years old, after high-school they don't really have many hobbies that would [have them] exercising on a regular basis. So now is the time to step in and make it a part of the culture, and it's working.
TT: What are some aspects of the market that you have found are peculiar to Taiwan?
Levine: I found that in Taiwan people are very confident. Wherein other countries people may say "I'll come back with my friend" or "let me think about it," ... In Taiwan the people come up, we take them on a tour and people are confident enough to make a decision. They see it, they get it. There's no procrastination, [which] is really our competition. That's one of the main reasons we have three great clubs in Taiwan. And what I love about Taiwan is the people are so friendly. I think we have around 85 to 90 percent member referral to other members. That's really one of our most important numbers. That shows that we are doing lots of things that are right. We've captured the fascination and pleasure of lots of our members that are bringing in their friends. Also the ladies are very independent. They will join a fitness center without having to have a girlfriend or boyfriend come with them. They'll just come down and say show me where to get started.
TT: What is your main customer base in Taiwan?
Levine: Our main customer base is women who like Prada, and Channel and Louis Vuitton. Fashionable ladies who are very hip, know what's going on and want to be a part of it. And when you have [the women] the men follow. It's a beautiful principle. We're not really into the body-building scene. And especially in Asia men aren't looking to bulk up they're wanting to look more like Brad Pitt than Arnold Scwartzenegger. You see the guys, they're working cardio. They're toned, lean and muscular -- they're not bulky. And that's what we find the Asian style to be.
TT: Have you noticed any impact on membership due to the harder economic times here in Taiwan?
Levine: Our business takes on a different role when times are tough. Stress increases and exercise is a perfect antidote to stress. Members work out more. When people have a budget and they're concerned about their dollars they're not going to lose sleep over the US$85 we charge per month. They might not sign up for a country club for which they have to put down US$50,000. They might not get a car, but a membership for US$85 a month, that's theirs. That's their time. They're not going to give that up and it makes them feel like everything is still OK. I've still got my workout, I can still enjoy a multi-million dollar facility ... I'm getting in shape. On the financial side for us, well over half of our overhead is rent. So when times are tough, landlords are much more amenable to us taking over 40,000 to 70,000ft2 and they come to us.
TT: California Fitness Centers in Taipei are located in some of Taipei's busiest districts. How important is location to the success of your business?
Levine: You've seen some of the other fitness centers they're on the fifth floor, the tenth floor, the basement. I don't believe in that. You're not right in someone's face where they can feel the energy. When you walk by California Fitness Center it's already moving. Ten feet before you get in the club the energy is already smacking you in the face the music is going, the lights are going, people are exercising in the window. You're ready. You want to play. We choose only AAA locations. We pay top dollar.
TT: With a stagnant property market, have you been able to find any bargains?
Levine: We haven't been able to get any bargains but we're able to go to a landlord and say look we'll take 50,000 or 70,000ft2 and when we first come to a new country they don't understand what a fitness center is. Then when we have our first club what we do is drag the landlord over to see it and within in a minute they're ready to sign. Because we make their building so popular. We always become the anchor tenant wherever we go.
TT: What are the core precepts of making a buck in the fitness industry?
Levine: On the outside looking in, it probably looks like it's pretty easy. You put up some lights and some televisions and people are going to come. But the procrastination barrier is amazing. "I'll start my diet tomorrow, tomorrow I'll get in shape." Tomorrow never comes. There are so many bankruptcies in the fitness game. In the US I read that fitness centers are in the top three. It's because people get involved because they like to exercise and they think that they can run a fitness center. It's not the same thing. It's a very professional company in an industry that's growing very quickly. I've been doing it for 23 years. The CEO of our parent company -- 24 Hour Fitness Holdings Worldwide -- Mark Mastrov, has also been doing it for 23 years. We have been all over the world and we've made so many adjustments over the years. You've got to get a formula that will attack enough new members [and then] you've got to keep them. Keep them motivated, keep them getting results. Have them so happy that they bring in their friends -- and that is not easy. Getting them to stay as members is probably the most important thing. In Taiwan -- because people are mostly first-time users -- you see a spike in the first year in a fitness center. But as we've seen across Asia in years two, three and four, [the membership numbers] return to world-wide standards.
TT: How much have you invested already in Taiwan and when do you expect to start seeing some returns?
Levine: We're doing extremely well, better than we forecasted when we came into Taiwan. We're ahead of all of our forecasts. The Tonglin club [on Chunghsiao East Road] cost us US$11 million. The other two clubs cost us US$6 million each so we have about US$23 million [invested]. And it's usually in your third year when you've done all your homework, you've got a good loyal base in your third year you should be having a wonderful financial year.
TT: What have been the major obstacles to establishing a business in Taiwan?
Levine: There hasn't been any major obstacles. The government has really been very helpful. When we have any concerns we've been able to partner up with some great people like the Chinese Taipei Olympic Committee, the [National Council on Physical Fitness and Sports] and the Formosa Television Network. But there's been some challenges doing business, like the banks haven't been so connected. For example, in other countries you can do an auto-pay on Visa cards with one central system. They didn't have that infrastructure here [when California first entered the market]. So there was a lot of groundbreaking that we've had to do. There's been learning curves.
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