The economic downturn, with a weakening oil market, resulted in the growth of divergent businesses that led to competition between destination-branded hotels and non-hotel-based firms in the fitness sector in the United Arab Emirates. Since hotel-based fitness firms have targeted both residents and tourists, the declining customer inflows have alarmed non-hotel-based fitness firms, leading to explore the market and appraise their service qualities, particularly given that their customers have experienced unexpected reductions in their discretionary spending habits. This paper analyzes factors in customers’ perception of service quality and its relation to customer satisfaction and retention. A sample of 186 member-customers was randomly selected from all non-hotel-based fitness firms functioning in Abu Dhabi. The primary data were collected through surveys and interviews. Respondents prioritized price, quality, hygiene and safety as major factors when assessing service quality. Although a high service quality index score and customer satisfaction indicated the drive for customer retention, the steady-state matrix apparent in the second year in a Markov analysis suggests that firms focus on improvising their marketing mix to increase customers’ spending time in fitness centers and maximize customers’ satisfaction with the main purpose of their visit, their own wellbeing and stress reduction. This study fills a research gap and helps fitness firms understand the importance of appraising customers’ perceptions of service quality in a downswing market, and of devising niche strategies to gain competitive advantage.