A Quarterly Newsletter from the UAE and Oman member firms of the PKF International Ltd.

VOL 14, Issue 1 January 2012

Indoor Sports Centres In Dubai

“There is no business like show business – except sports business” – William J. Baker.

Sports centres in Dubai

Sport is a complex activity encompassing spectacles such as the Olympic Games, the FIFA World Cup, as well as an informal game of cricket played in an abandoned car park. To one sport may be an opportunity for entertainment; while to another, it may be a mode of personal recreation and fitness. To entrepreneurs, sports may provide a lucrative and continually growing marketplace for investments. For athletes, sport may lead to high levels of personal achievement, fame and fortune. For facility developers, sports may be a way to build revenue from tourists and local population.
While there are several facilities for one to play some kind of sport in Dubai, there are adjunct limitations in terms of accessibility and opportunity. With around 80% of the population being expatriates, sports centres are most acceptable to the expatriates. However, this segment could be developed further considering that only a few indoor sports centres operate in Dubai and none in the Bur Dubai and Deira neighbourhoods.

A sports club could be a club dedicated to a single sport or to several (multi-sport club). A sports club differs from a sports centre which is a purpose built recreation and leisure building or site which people frequent to keep fit or relax. Generally, access to local sports clubs in Dubai for use of facilities is restricted to the Nationals of the U.A.E.
The following table provides an overview of some of the salient aspects of different types of sports centres in Dubai.

Type of centre Indoor sports including fitness centres Indoor & outdoor sports centre Social clubs Local sports clubs
Ownership Mostly corporate Mostly corporate Board of Trustees Board of Trustees
Membership Optional Optional Mostly required Required
Open to expatriates Yes Yes Yes Mostly no
Mode of operation Direct* Direct* Mostly contract^ Mostly contract^
Adult : Child ratio # 80:20 60:40 30:70 Data not available
Coaching provided Yes Yes Yes Yes
Examples Insportz Ahdaaf, Al Nasr LesiureLand India Club, Iran Club Al Nasr Club, Al Wasl Club

^ Contract management offers Promoters an opportunity to divest some of their responsibilities to management staff
# Adult defined as above age 18. The ratio applies to usage of facilities in the centre.
. The Promoters assume direct control of the management and operation of the facilities.

While a majority of the users of indoor sports centres’ facilities are adults, in the case of sport facilities at social clubs and academies, children, up to age of 18, constitute a significant proportion of the user base, mainly due to the availability of specialized coaching and sporting facilities.

Indoor sports centres in Dubai

Sports complexes that are gaining popularity worldwide are indoor centres specializing in multi-sports facilities. Typically, such centres provide facilities to play indoor cricket, football, basketball, volleyball, hockey, table tennis, among others, in addition to offering coaching facilities. In Dubai, there is only one such indoor sport centre – Insportz which is privately owned. There are, however, other sport centres in Dubai such as Ahdaaf or Al Nasr LeisureLand that offer indoor sport but are limited to one or two sports. The advantage of indoor sports facilities in Dubai is that they are operational all year and are air-conditioned during the hot summer months which last 6-7 months in Dubai. These centres usually do not have separate timings for female customers, although such arrangements can be made on prior reservation.

The playing courts at the indoor sports centres are mostly interchangeable allowing a wide range of sports offered such as cricket, soccer, volleyball, etc. Most indoor sports have a federation that defines international court dimensions, rules of play and equipment. The indoor field dimensions of several sports are almost the same and therefore by adjusting the boundaries, the courts can be adjusted to suit most games. The equipment required for each sport is also available for hire and is typically included in the hourly/booking charge. The flooring of the courts is concrete covered with astro-turf carpets which are suitable for most of the sports offered.

Demand drivers for indoor sports centres in Dubai
Elaborated below are a few demand generators for indoor sports centres in Dubai. These generators may, however, vary from centre to centre depending on factors such as location, pricing, services offered, quality of management, etc.

Demographic and location demand drivers

  • High growth rate, in Dubai, of the target population i.e. children and adults up to age 39. This age-range comprises the highest user-base for an indoor sports centre. The target population, including nationals and expatriates, comprises around 80% of the total population in Dubai and grew at a CAGR of 7.56% during the period from 2007 to 2010. The table below provides an age analysis of the Dubai population:
Age % of total 2007 2008 2009 2010
Up to 4 4.0% 62,317 66,525 71,023 75,832
5 – 9 4.1% 64,199 68,549 73,200 78,172
10 – 14 3.6% 55,777 59,566 63,616 67,948
15 – 19 3.2% 49,750 53,139 56,764 60,640
20 – 39 64.3% 980,190 1,056,099 1,137,858 1,225,902
40 – 59 19.7% 300,067 323339 348,406 375,402
60 – 74 0.9% 14,836 15,912 17,070 18,312
75 + 0.2% 2,656 2,844 3,041 3,268
  • Nearly 85% of the total population in Dubai are expatriates. While this is expected to remain steady over the coming years, as the total population grows the inflow of further expatriates into Dubai can also be expected.
  • Non-availability of indoor sports centres in the residential neighbourhoods of Dubai such as Bur Dubai, Deira, Dubai Marina, Jebel Ali, Mirdiff, etc.
  • With the improved public transport system that Dubai has in place, parents can afford to send their children to nearby commute areas where indoor sports centres exist without the need for continuous ‘chauffeuring’ and ‘supervision’. However, such sports centres are usually quite far-off from residential areas as mentioned earlier.

Current market drivers

  • Usage of the sports facilities in the local sports clubs, social clubs, etc., which form the majority of the sports centres in Dubai, is restricted to the nationals and the elite members of the community.
  • Only a few private indoor sports centres are open to the expatriates. These are located in the Al Quoz and Garhoud areas which are not easily accessible by public transport.
  • Non-availability of budget and value-for-money deals in existing indoor sports centres in Dubai. The rates charged by these centres may not be affordable to customers who wish to use the facilities regularly.

These demand generators only re-affirm the fact that there are only few affordable indoor sports centres and that there exists a credible market opportunity for developing further such centres in the traditional residential neighbourhoods in Dubai.
Key operational characteristics of indoor sports centres in Dubai
Some of the key operational characteristics of current indoor sports centres in Dubai are highlighted below:

Pricing and membership – The following table provides a comparison of average rates for facility usage at indoor sports centres in Dubai.

Facilities AED per hour per court
Soccer 450 – 500
Cricket 450 – 500
Tennis 60 – 100
Squash 50 – 200
Badminton 200 – 300
Volleyball 200 – 300
Basketball 195 – 250
Table tennis 40 – 50

Some variations may be observed in charges levied by specific entities (Source: PKF research).

Annual membership charges usually range from AED 1,000 – AED 5,000 depending on the number of sports enrolled for at the indoor sports centres. Additionally, special camps such as summer, winter camps, etc., are also held. Average rates for attending such camps in the indoor sports centres range from AED 75 – AED 100 for a single day to AED 1,100 – AED 1,200 for 9 weeks.

Coaching
Coaching is offered by indoor sports centres employing full time or part time coaches or even coaches outsourced from other sports academies. Sports academies such as E-sports, Ace sports, etc., offer special instruction or training in various sports. There are also specialized sport academies that offer training for a single sport such as Arsenal Soccer School, G-Force Cricket Academy, among others. Most of the sport academies in Dubai do not have training facilities of their own. Facilities used by these academies are usually rented from schools and private clubs. However, coaching rates offered by sports academies are relatively lower than sports centres because the number of students per class is higher, except in the case of specialized sport academies. Coaching rates at social clubs are usually the lowest.

Average coaching rates

Sport
Indoor sports centres Social clubs Sports academies
Soccer 80 – 150 40 – 60 80 – 100
Cricket 250 – 400 40 – 60 50 – 300
Tennis 90 – 150 50 – 100 60 – 80
Squash 65 – 150 35 – 75
Badminton 70 – 100
Volleyball 35 – 50
Basketball 40 – 50 20 – 50 80 – 100

All rates are AED per session per person. Some variations may be observed in charges levied by specific entities (Source: PKF research).

Seasonality
Seasonality is generally observed in the level of demand for facility usage at indoor sports centres. The centres usually witness an increase in demand during the summer season i.e. from June to September. However, from October to May, the ‘regular’ and the ‘rotational’ users for the indoor sports centres ensure that the demand level remains constant with the hosting of various annual tournaments, practise sessions, annual sports day for corporate houses, etc.

Corporate sponsorship
A corporate sponsorship grants the sponsor exclusive naming rights within the sports centre, tournament naming rights, press releases carrying the sponsor’s name, hoardings on courts, promotional stands for the sponsor, etc., depending on the inked agreement. Typically AED 15,000-20,000 is the average corporate sponsorship fee for an annual league or tournament and AED 75,000 and above for the exclusive naming rights at the sports centre.

Profit margins
Established indoor sports centres have experienced slimmer margins in recent times with increasing utility costs, manpower costs, overheads and other expenses. The gross profit margins for indoor sports centres range between 65%-75%, with net profit margins between 25%-35%. The margins vary significantly between different centres depending on the grants received from the government, the facilities at the centre, etc.

Daily turnover
The daily turnover of an indoor sports centre varies depending upon the location, facilities offered, upkeep of the facility, etc. Our research indicates that the estimated average daily turnover of an indoor sports centre is in the range of AED 4,000 to AED 6,000.

Marketing strategy
Indoor sports centres advertise through various mass media channels such as newspapers, radio, television, etc., with specific advertisements being created with the help of advertising agencies. Exclusively created web-pages with recent updates and current offers of the sports centre are also marketed through various online social networking sites such as Facebook, Twitter, etc., and through bulk messaging of special offers through SMS and e-mail.

As part of the PKF research, we have obtained and collated specific feedback on usage of indoor sports centres located in the Deira and Bur Dubai neighbourhoods. It should be noted that our findings, detailed below, may be skewed on account of the small sample size.

Criteria for selection of indoor sports centre by respondents

Ranking Preference
1 Convenience/proximity of the centre
2 Facility timings
3 Fees levied for various facilities at the centre
4 Adherence of the facility to international standards
5 Availability of coaches at the centre

(Source: PKF research)

Price expectations by respondents for an indoor sports centre

For facility usage – Around 31% of the respondents were willing to spend around AED 100 for the weekly usage of an indoor sports centre, with more than 51% of the respondents willing to spend more than AED 100. 17% of the respondents were only ready to spend AED 50 or less for the weekly usage.

For coaching – Around 31% of the respondents were willing to spend up to AED 100 for a training class at the indoor sports centre. 40% of the respondents were willing to spend only up to AED 50 and 29% of the users were willing to spend more than AED 100 for a training session at the facility.

Preferred timing of respondents for an indoor sports centre

66% of the respondents prefer to use the sport centres in the evenings after work hours. Around 20% of the respondents prefer to use the centres in the morning, with after-school hours and weekends comprising almost 12% of the total respondents. Lunch hours found the least preference comprising only 3% of the total respondents.

Key success factors for establishing an indoor sports centre in Dubai

Highlighted below are a few factors, which could be critical for centres to be successful in the long run, and which may help these centres to establish themselves as competitive players in this market:

  • Location, preferably close to one of the densely populated neighbourhoods in Bur Dubai, Deira, Al Ghusais, etc.
  • Attractive and competitive pricing of the products and services to suit the ‘budget’ families in these neighbourhoods
  • Introduction of additional services such as specialized coaching, affordable summer camps, etc., and affiliation with international clubs, organizations, etc.
  • Negotiating for approval of government grants such as land grants, subsidized utilities, joint venture partnerships with the government, transport agreements, etc.
  • The mix of facilities provided and quality of maintenance
  • Experienced professional management

While the above is based on an analysis of the current operational characteristics and responses received from end-users of existing indoor sports centres in Dubai, the availability of these factors may not necessarily guarantee success of these centres.

Outlook for the industry in Dubai
The revenue generated by the indoor sports centres has declined since 2008 mainly due to the cautious spending of the consumers. The trend looks set to continue into the mid-term wherein these centres will face significant challenges in controlling expenses while pricing products and services in a manner that will maintain their appeal to consumers. However, in the long term, investment in the indoor sports centres offers one of the biggest growth prospects for investors in Dubai.

We believe there is a potential market available, especially in the Bur Dubai and Deira neighbourhood, which is not fully catered to by the existing sports centres. Residents of these neighbourhoods, who are equally concerned about their health and quality of life, would look towards the development and growth of indoor sports centre in their neighbourhood.

“Sport is a preserver of health” – Hippocrates.

[This article has been contributed by our Asst. Manager – Consulting, Mr. Ittira J. Chandy. Please contact Mr. Chandy and our Director, Mr. Hoshedar J. Cooper for any further assistance in this respect.]