You guys had so cool ideas!
My Gym would be Water type, that’s for sure. I would place it in a southern coastal region. The entrance being at the foot of a cliff, would open to a large littoral cavern with many submerged cave passages as well as rooms flooded or not depending on the tide, some other would be tranquil pools of water. Most of the cavern would be restricted and trainers could reach the actual arena by request (some kind of requisite such as number of medals, certain title, etc.) or assisted by their own Water Pokémon.
The arena is situated in a spacious room, relatively short-distanced to the ground, with natural cracks in the upper rock surface for the sunlight to sneak through and light the arena in a patchy way. If this is your the first time here, the match would necessarily happen during the day, as the cave has no artificial light. For this battle, I’d summon Staryu, Tentacool and Golduck. In case it’s a rematch, then it has to be at night; my Pokémon Team being Starmie, Octillery, Golduck, Lanturn and Milotic. Wildlife and luminiscent microalgi barely but sufficiently lights the arena at night, but trainers can use their own Pokémon for this.
Regarding the rest of the cavern which is restricted, there’s an explanation for it. The Gym is actually set in a protected natural area, mostly unspoilt. Its purpose? Protection of biodiversity and wildlife rehabilitation. Some of the Pokémon inhabitants of this cavern and its proximities are Staryu, Feebas, Remoraid, Clamperl, Tentacool, Chinchou, Corsola, Lombre, Krabby and Wiglett.
Also, it is said a Pokémon trio of magnificent power guards the deepest areas of the cavern, not fully explored to this day. Turn around if you ever reach a nest made of sea Pokémon’s bones, so dense you won’t see the surface of the cave. It gives home to a giant Kingler. It crushes skeletons under its feet and gives form to walls of bones with its pincers. Beware, as this Kingler seeks no friendship. Moreover, those brave enough to dive in the seemingly endless labyrinth of underwater passages, when up and down and right and left lose their meaning, will be granted with a fictional view: stacks of pearls in a stalagmite/stalactite way shine iridescently in every direction. There’s no human way of scaping this Huntail’s cage of hypnotic effects: you are its next meal. To put an end to this fairy tale, there’s a hidden place to mortals underwater. If you dream of setting foot in this realm, you must reach the no returning point of the cavern, so wet your skin melts with the water, so dry your lungs suffocate and shrink; your spirit, haunted now by Cursola*.
Have Water-fun!
*(the evolved Galarian Corsola, not mistyped).