Hong Kong's Pure Fitness Is Losing Its Swank
A favorite of bankers, the gym chain has a big problem with asset-liability mismatch.
Not working out.
Photographer: Bloomberg
I am a Pure rat. For more than a decade, I’ve been an avid member at Pure Group, whose swanky gyms and yoga studios across Asia attract overworked bankers and wannabe influencers. Through Pure, I finished hundreds of hours of yoga teacher training, went on exotic retreats, and I am spending thousands of dollars trying to learn how to handstand, a gymnastic stunt that still eludes me.
When news broke last week that Pure Fitness was being sued for overdue rent at some of its facilities in Hong Kong’s Central business district, I was not surprised. It’s a fitness chain that tries to court aspirational luxury consumers, and is lost in a world where only the most exclusive or value-for-money brands can survive.
Details from the lawsuit showcase a services company that, not unlike WeWork Inc., the workspace company that recently emerged from bankruptcy, struggles with expensive long-term obligations, at least in Hong Kong. In June 2015, Pure rented floors from ICBC Tower and Champion Tower, two grade-A buildings owned by Champion REIT, in an 11-year lease that ends in December 2026.
A Renter's Market
Pure can lock in cheaper rent if it can get out of its long-term leases
Source: Bloomberg
The company has renegotiated its contract three times since 2015: in 2016, during Covid lockdowns in 2021, and as recently as this January, when it was becoming clear that the finance industry, which its ICBC Tower location relies on for clientele, was not bouncing back. At HK$1.4 million ($178,075) a month, the new rent for 2024 marks a 35% discount to the original 2015 tag. Pure defaulted in April, the plaintiff complained, thereby claiming it’s owed HK$12.7 million excluding interest.
The Art of the Deal
Pure's latest rental amendment marks a 35% discount to its original lease
Source: Hong Kong court documents
In a statement to Bloomberg News, Pure said it had been pushing for rental reviews and having discussions with landlords over the last few months, and most were understanding and supportive. The matter won’t affect normal services and operations at its branches, Pure said. In reply to emailed questions from Bloomberg Opinion, Pure said that because of the ongoing legal proceedings it couldn’t comment further.
Fellow gym rats have been worrying that Pure’s sales prospects are getting gloomier. An interesting detail from the lawsuit seems to confirm that. Occasionally, there may be new membership levies, which totaled HK$14,610 for June, the 10th anniversary of the signing of the lease. This amounted to only 50 new customers at the current rate. In other words, the ICBC Tower gym’s shimmering swimming pool did not make enough waves for many to sign up.
It’s a sharp fall from grace for an ambitious wellness brand that has expanded into Singapore, Shanghai and Beijing. Pure has been scaling back: It closed a Singapore branch last October, one in Hong Kong in March, and another in Shanghai’s high-end Plaza 66 mall in July. In 2017, the company was bought by private equity firm FountainVest Partners, which wanted to leverage its reputation for more growth in mainland China, at a more than $400 million valuation.
What I have witnessed in recent months is a brand working hard to try to sell value-added services. Equally clear is that its management is struggling to fill its gyms and classes, and to sell the value-add at a price point users will pay.
Last year, Pure launched reformer Pilates classes, which I enthusiastically attended to activate transversus abdominis muscles. Reformer classes are more expensive than say, yoga. These bed-like machines that use springs to strengthen your core are costly and bulky, which means smaller class sizes and more attention from instructors.
All of a sudden, Pure’s gyms and yoga studios across Hong Kong were retooled to cater to reformer classes, which were offered hourly. Attendance was dismal — unlike me, most members didn’t want to pay the extra. As a result, the company began selling monthly unlimited packages, a substantial erosion to its average revenue per user. Many classes are still not full.
At about $150 for a base monthly membership, Pure’s studios are nice but by no means luxurious. Wear and tear is starting to show — many yoga mats have lost their grip and become slippery. Its members can also be problematic. You can spot young people roaming around Central wearing Pure’s gym clothes, which are supposed to be returned after workouts. Once in a while, studios post signs telling people not to take home towels and wooden hangers.
Meanwhile, there’s a lot of competition in fitness. Fancy boutique studios are springing up every month, and you can do a simple gym workout at any time of the day or night at BC Fitness and Go24 Fitness just around the corner for a fraction of the fees. In Hong Kong, Pure might be the biggest, but it can never be the dominant gym, because this market is easily contestable and has low entry barriers.
Just like WeWork, Pure has a major problem with asset-liability mismatch. It locks itself into decade-long leases from the most high-end commercial real estate. But its customers can be fickle and stingy. The lawsuit suggests Pure’s future is uncertain.
More From Bloomberg Opinion:
- Luxury Looks Like a China Carry Trade Set to Unwind: Shuli Ren
- Coworking’s Frontier Is Moving Out to the Suburbs: Justin Fox
- Why Everyone in Finance Is Getting Ripped: Chris Bryant
Want more Bloomberg Opinion? OPIN <GO> . Or you can subscribe to our daily newsletter .
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.