Image: Spanish clubs are "facing a tough time"

VAT paid by health club operators across Spain is to increase from the current rate of 8 per cent to 21 per cent later this year.

There is concern among stakeholders in the Spanish fitness industry that the VAT rate rise will hit the already under-pressure membership numbers at health clubs.

When neighbouring Portugal increased its VAT rate on health clubs in 2011 - from 5 per cent to 23 per cent - the Portuguese trade association for fitness (Asociación de Gimnasios y Academias de Portugal, AGAP) said it had directly resulted in more than 100,000 people cancelling their club memberships.

Nick Coutts, owner of Portuguese premium low-cost chain Fitness Hut, says that the effects of the rate hike in Portugal were immediate and that Spanish operators will face similar difficulties.

"Spanish clubs are in for a really rough ride," Coutts said. "Since the increase in VAT, Portuguese clubs have suffered a 16 per cent decline in memberships and the national penetration has dropped to down to 4.6 per cent.

"The scenario for most clubs, whether part of a large chain, or independents, is of a sharp decline in rates of joining combined with a dramatic increase in leavers. I suspect the Spanish market will have it even tougher than what the Portuguese clubs did."

Coutts added the timing of the announcement didn't help either: "Typically, every year we see a sharp decline in membership during July and August in Portugal and Spain, and then we enjoy very big gains in September and October.

"The expectation and fear this year is that clubs will not see their member numbers climb again after the summer break."

The decision to raise the VAT rate in Spain was made by a government that is under pressure to cut public spending while raising tax revenues as the country battles with the worst recession since the 1930s.

Nearly a quarter (24.6 per cent) of Spain's workforce is currently unemployed - adding extra pressures on membership recruitment and retention for the fitness industry.

• Nick Coutts launched the Fitness Hut chain in June 2011 following a five-year sting as CEO of Holmes Place Iberia. The first Fitness Hut opened in Lisbon in November 2011.