IHRSA - Jul 2004 CBI Balthus

Triumph of an Idea

Club Balthus is spreading the good news about wellness in Chile

A little more than three years ago, a group of visionary entrepreneurs and investors planted a revolutionary idea in Gran Santiago, the capital of Chile.

Club Balthus, a modern $12-million, 75,000-square-foot multipurpose facility that first opened its doors on April 16, 2001, was designed to demonstrate to Chileans that physical fitness was about more than bodybuilding or playing sports. It was also about inviting exercise programs; mind/body disciplines; spa and beauty services; nutrition and medical counseling. It was, in short, about wellness.

'Balthus was the first club in the country to introduce the concept of wellness,' notes Mariana Undurraga Atria, the finance manager for the Wellness Company, which owns the club.

The market conditions weren't particularly auspicious. 'The main challenge we faced,' Atria explains, 'was to cultivate a new way of thinking about fitness in a society where just 20% of the population exercised regularly. Beyond that, we had to try to attract all those people who weren't acquainted with exercise at all.'

Today, the idea has clearly taken root. The club has more than 3,000 members, annual revenues, for 2003, of $4 million, and a profit margin of nearly 18% (it is expected to hit 20% this year). 'The club was built to serve 3,000 members, a figure we hoped to reach in our third year, so we're right on target,' she observes with satisfaction.

The club's success is the result of a complex of carefully orchestrated factors: e.g., a skilled management team, smart site selection, state-of-the-art equipment and programming, professional staffing, a serious service orientation, and a focus on member retention. 'Now,' Atria indicates, 'our new challenge is to continue to provide a solid offering, maintain a strong position in the market, and motivate current members to stay with us.'

Birth of a concept

Balthus is the brainchild of Jorge Leria, the majority stockholder in the club, and his fellow investors; the product of a group of talented firms, including architectural, marketing, and communications companies from Chile and Spain; and the ongoing work-in-progress of some 120 employees (e.g., receptionists, instructors, maintenance personnel, gardeners). Prior to 2001, most of the fitness facilities in Chile were small unimpressive hardcore gyms, but Leria envisioned something grander.

Chile, slightly larger than Texas, has a population of 16 million, more than one-third of it (6 million) concentrated in Santiago. It seemed the most likely location for an upscale club, but Leria maximized his odds, siting it in Vitacura, an affluent neighborhood with the highest rents in the city. The setting, on the slopes of Manquehue, Santiago's highest mountain, is not only majestic, but also moneyed. Balthus' neighbors include an airport, Casa Piedra (an events center), Borde Rio (a group of exclusive restaurants), Club de Polo (a polo club), and Club de Bridge de Santiago (a bridge club). Together with the adjacent communities of Lo Barnechea and Las Condes y Providencia, the market encompasses 1.5 million people, and 500,000 match Balthus' target demographic.

Leria hoped not only to attract individuals who saw the value in belonging to Balthus, but were also able to afford its services. The average per capita income in Chile is $4,508 per year; Balthus assesses a $300 initiation fee and $58-$98 in monthly dues for a membership.

'There's a great difference in prices among the different clubs, and a lot of people who aren't willing to pay high fees for good service and a highly trained professional staff,' acknowledges Atria. 'What we have to do is convince our customers that any investment in physical activity is, in reality, an investment in their own health.'

The 'cost/benefit ratio,' she indicates, is a critical selling point.

So too, of course, is Balthus and its eclectic lineup of member amenities. The club is divided into six operating areas: health, fitness, spa, sports, 'Harmony' (i.e., beauty treatments), and dining. It has full cardio- and strength-training areas, four exercise studios, eight tennis courts, two tennis courts, two swimming pools, hydro-massage bathtubs, and dressing rooms (with closets, bathing suit dryers, and complimentary towels). A special feature is the TGS electronic key system, which makes it possible for exercise equipment to automatically monitor a member's workout.

Programming is provided for aerobics, dance, yoga, Pilates, group cycling, stretching, relaxation, and martial arts activities. Balthus also offers massage, hydrotherapy, reflexology, full body and facial treatments, hair-styling services, fitness assessments, medical consultations, and guidance on nutrition and kinesiology.

Personal training, spa and beauty treatments, consulting services, and instruction (e.g., tennis, Pilates) generate significant nondues revenue.

'Our best marketing tool is the club itself,' notes Atria, 'and our best advertising is our current members, who promote the club enthusiastically.'

Building on success

As Leria had planned, Balthus has captured the hearts of the desired demographic. Most of its members have a university education, are professionals or business executives, and have a net household income of more than $6,000 a month; 48% are women, and 52% men, and concentrated within the 35-45 age range. Atria describes them as 'people who want to exercise, in a pleasant and pretty environment, to achieve physical and emotional well-being.' Only 5% hold family memberships.

Like upscale facilities elsewhere, Balthus has attracted its share of celebrity clients, including tennis star Nicolas Massu y Fernando Gonzalez and motorcycle racing great Carlo de Gavardo.

Balthus cultivates its members' commitment to a healthy lifestyle with attentive service, regular reassessments, and several publications, e.g., Balthus News and Balthus Magazine. The goal, Atria explains, is to educate, encourage, and promulgate with respect to the wellness concept. 'Word-of-mouth is one of our most valuable assets,' says Atria. 'When a members tells a friend that their life has changed since they joined Balthus'that's incredibly important for us.'

Though competition in the Santiago market has intensified'e.g., clubs opened by Powerhouse and Sportlife, another

Chilean chain'Balthus is confident that its wellness focus, and expertise, will serve it well in the future. 'We don't think that anyone else in Chile has our know-how,' observes Atria. 'We believe that we've positioned ourselves well'in such a way that it would be difficult for other clubs to offer what we do.'

Balthus is now planning to expand its health area, enlarge its group-cycling room, and create a dedicated Pilates studio.

Beyond that, it intends to open a second club in Santiago this year, launch two more in 2005, and, eventually, to build facilities elsewhere in South America. 'The new challenge that we've identified for ourselves is 'five years, five clubs,'' says Atria. 'The projects that we're embarking on now will, we're convinced, enhance our competitive advantage.'