An Auckland gym owner has defended requesting people continue paying for a membership they can't use throughout the COVID-19 lockdown period, telling Newshub it's all part of a "give and take" relationship.
A concerned member of fitness centre Kingsland Health and Sport posted on the New Zealand subreddit this week about being bothered by the way the gym "handled lockdowns".
"From what I've heard from friends, most gyms suspend memberships automatically with no action required, but this one does not," the member wrote.
"Whenever there is a lockdown, they wait about a week before communicating about it. Then they send out an email giving you the option of continuing to pay full membership fees (no action required), remaining a member for $10 a week by filling in a Google form, or to cancel your membership."
In the email to members shared with Newshub, Kingsland Health and Sport owner Terry Michaels wrote it had to remain closed "whilst the powers that be continue their questionable strategy of 'eradication' of COVID-19 and the Delta variant".
"I can tell you that from a business perspective this one is going to really hurt, and I can't express enough just how much we need your continued support. In short, we need you to keep paying," Michaels told members.
He said claiming the wage subsidy only helps with staffing costs, but extra funds from members would go towards "extensive fixed costs" like rent, utilities, licences, maintenance, compliance costs and capital investment.
It is not clear if Michaels has also claimed the resurgence package created to help support businesses through a COVID-19 alert level increase to level 2 or higher.
Gym members have been offered three membership options throughout level 4.
- The "no action required" option meant members would pay their full membership rate, which Michaels guaranteed to "always be at least 20 percent below our [membership] rate going forward".
- Members "who need a bit of a break" during the alert level 4 lockdown were encouraged to accept the "on hold option" of paying the gym $10 a week throughout lockdown. "This option makes a valuable contribution to helping the business survive and secures your discounted rate going forward," the email explained.
- Lastly, members "getting smashed by this lockdown and in no position to stay" were encouraged to "terminate" their membership - fully cancelling it so they were no longer part of the gym.
The anonymous Reddit user expressed disbelief at the order to cancel their membership if they didn't want to pay the $10 a week option.
"I want to resume going to the gym once the lockdown ends, isn't that obvious? If I'm not able to use the gym, how the hell can they charge me for it?" they questioned.
The member expressed concern that upon cancelling their membership during lockdown, they'd be forced to sign up at a new, higher weekly rate and a new contract.
"You have to fill out this form EVERY TIME. We've been through three of these now, and all three times I've been required to fill in this form," they added.
'A two-way street'
Michaels told Newshub his decision to charge members when they couldn't use their membership was a result of a close relationship with his gym members, which he called a "two-way street".
He insisted that around 99 percent of his customers were happy with the arrangement.
Membership rates inevitably increased year-on-year due to increased inflationary pressures, he said, but members who paid during the lockdown period would always be guaranteed a minimum 20 percent off the 'rack' rate: "Whatever the membership cost is, they'll be guaranteed [an amount] off that".
"And we've had unbelievable support from our members they've been really, really good," he told Newshub.
"Like with any initiative it's never going to work for everybody - we don't make decisions to cater to the one percent."
A Commerce Commission document regarding "Disputed Travel, Events and Trade" during COVID-19 lockdown points out the Fair Trading Act prohibits businesses from "demanding and taking payments if, at the time of doing so, they do not have reasonable grounds to believe that they can supply the services at the specified times".
"Businesses should not be invoicing customers for services that they cannot provide during the lockdown period. Equally, consumers do not need to keep making regular payments for services that are not being provided," the legislation states.
"Once the Government restrictions were in place, traders in the 'non-essential' category should not be continuing to demand or receive payments for services that they do not have reasonable grounds to believe they can supply."
However, in this case, the payment scheme from Health and Sports members is entirely voluntary - although the alternative is to quit the gym entirely, and then pay to rejoin later.
Other gyms around the country, including Jett's, City Fitness, and Les Mils pushed immediate pause on memberships during lockdown. But Michaels says as a small business, "it's very important to compare apples with apples".
"Phillip Mills has more money than God. And I don't begrudge him that - he's worked hard. But it means he has a huge balance sheet," he said
"I employ 60 people, we're a family-focused club."
Michaels said he "wasn't trying to make anyone's life difficult" and told Newshub outside of lockdown he ran a 'Tough Times' initiative, where families or individuals suffering financial hardship are allowed to remain at the gym for free.
When pressed on why members unwilling to pay $10 a week during lockdown had to apply for new memberships, Michaels cut in that he was "explaining how we work with our members going through a tough time".
"I'm telling you, I have wives in here crying, thanking me because their husbands have been made redundant and their kids love the club and I allow them to stay for free," he added.
Michaels also pointed Newshub to his presence in the community, including having over "500 local children" enrolled in the gym's swim program.
"We employ about 50 staff and play a big role in supporting the physical and mental health of our many members," he said.
In response to the Reddit user's concerns, Michaels guaranteed to Newshub those who cancelled their membership to avoid paying the 'on hold' fee will be able to sign up again at the same rate and same contractual time period as they had pre lockdown, "subject to any rejoining fees that may or may not apply at the time".
That being the case, when asked why members were forced to cancel their membership instead of allowing them to hold until their return, Michaels said it was a "subjective conversation".
"Our members are familiar with this structure and it works. We don't make changes to suit the one percent but we do listen and we do care and there is always the management ability to make exceptions," he said.
The email to members claimed Michaels needed extra funds to keep gym and staff going over the lockdown period, especially with instructors providing online classes.
He refused to provide Newshub with an answer on whether he made any staff members take annual leave during previous lockdowns, instead saying he was "offended" at the question.
"Our average length of service for staff is five years. That would be a record for this industry. We are a generous and caring employer and have supported our staff through all lockdowns," he responded.
"We have made no staff redundant. What we pay our staff is subject to privacy laws."
Michaels told Newshub the gym members are their "lifeblood"
"For the avoidance of doubt, any member who inadvertently pays us fees during lockdown will receive a full refund," he said.
One former Health and Sports member who inadvertently paid fees during lockdown last year told Newshub she was surprised to see a weekly payment taken from her account at the time, and approached gym administrators to ask why she was being charged.
She placed her membership on hold for $10 per week and she received no offer of refund of the extra fees she'd paid on that occasion, but pointed out that lockdown was over a year ago.
"Things might have changed since then," she said.
The ex-member also told Newshub members who paid full fees during the level 4 lockdown of March/April 2020 had their names placed on a poster on the gym wall, labelling them 'Bloody Legends'.
"I felt like they'd been robbed," she said.
Most commenters on the anonymous original Reddit post advised the member to "get out of there".
"This is a really unprofessional way to address the issue of lockdowns. Regardless of the manager's political opinions, they should not try to guilt-trip people into paying for a membership to prop up their business whilst providing no service," one person wrote.
"Cancel. That doesn't look like a business I would want to get behind," wrote another.
But another commenter wrote their gym is employing a similar strategy: Taking weekly payments and once back in level 2, offering a refund or leaving the payments as "support".