Here’s how you can tell if your city is likely to get a Soho House in the future
Exclusive members-only club Soho House appears to be more popular than ever. However, questions regarding its parent company’s lack of profitability remain after more than two decades of being in the red.
Membership Collective Group, the parent company to Soho House and other membership clubs like The Ned and Scorpios Beach Club, reported Wednesday a $60.5 million loss for the first three months of the year. The company only went public last year, but financial documents in the lead-up to going public showed Soho House has never been a profitable enterprise.
The company hasn’t miraculously vaulted to profitability since listing on the New York Stock Exchange. Instead, its stock price is about 34% below its opening price last July and even lower than what shares were at during its initial public offering.
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This week though, company leaders emphasized the company is in growth mode. Profits will come, but you have to spend money to expand MCG’s variety of brands into all corners of the globe, the thinking goes.
“Our top line is incredibly important, and we are a high-growth business,” said Andrew Carnie, president of Membership Collective Group, on an investor call Wednesday. “We're equally focused on profitable growth, and improving our margin and hitting our targets. We'll achieve this through operational leverage, targeted cost management, smarter procurement policies and better management of fixed costs as we grow.”
There’s an easy way to figure out if your city is on Soho House’s radar.
One of the company’s membership platforms — dubbed Cities Without Houses — is for places without a physical Soho House but where there’s enough of a concentration of members that the company still deploys membership representation, committees and events. When membership levels hit a certain threshold, that informs company leaders it’s likely time to think about building a physical Soho House.
“Cities Without Houses is a really successful membership program for us,” Membership Collective Group founder and CEO Nick Jones said. “It's a really good indicator of how popular a potential physical house will be in that city.”
There are 70 cities in the Cities Without Houses network. The company has indicated in the past that cities like Boston, Atlanta, Buenos Aires, Tokyo and Shanghai are some of the markets on the Cities Without Houses line-up. You can check out the designated Cities Without Houses membership page to find out if your city is on the list.
Recent Soho House openings in Nashville, Tennessee, and Brighton in the U.K. came about because both markets initially had strong Cities Without Houses membership. Planned openings for later this year in Stockholm and Copenhagen similarly came about via Cities Without Houses.
An additional 15 markets across Asia, Latin America and Africa were added to the CWH network and will “really fuel [Soho House] openings over the next five years," Carnie shared.
The company plans to end the year with nine new Soho Houses and have a total of 85 of the clubs by 2027. There were 35 Soho House properties at the end of March.
Soho House still isn’t profitable, but does anyone care?
Its less-than-stellar stock performance means Membership Collective Group and its best-known product isn’t quite a Wall Street darling. However, people still seem to want to buy what the MCG team is selling at Soho House and other exclusive clubs.
The company’s more than 79,000-person waitlist to nab a Soho House membership is at a record high. Retention rates of existing members are at pre-pandemic levels, and the performance of the guest room component of Soho Houses in the U.K. and North America is impressive.
The hotel performance of clubs in North America for the first three months of this year was 22% higher than 2019 levels. It was 30% higher than 2019 levels in the U.K.
“January was problematic because the pandemic was still affecting our house openings, but by the end of January, all our houses were open apart from in Hong Kong, and we saw a really strong recovery,” Jones said. “Our members were very keen to get back to the houses, and they also very much enjoyed the fact that they didn't have to wear masks. There wasn't social distancing, and life seemed to be getting back to normal. That was really good to see.”
There are even signs this is somewhat of a recession-proof business when it comes to day-to-day operations. Soho House membership rates went up in February for the first time since 2019, and Jones later noted those increases ranged between 10% and 13%.
Food and beverage prices increased by 5% on average as a result of inflation, and guests don’t appear to be balking at the higher costs.
“There's been no resistance to that at all. Our members realize that things have gone up in price,” Jones said. “They're very logical about that.”
With increasing chatter there might be a recession on the economic horizon, what does it all mean for a brand like Soho House? A membership to an exclusive club might be the first thing cut if one were to rein in spending during economic downtimes. However, the Membership Collective Group team refuted that ideology during the Wednesday investor call.
The company only lost about 10% of its membership base during the worst months of the pandemic, and Soho Hose membership was similarly resilient during prior downturns, Jones said.
“We've been going for 27 years and there have been a few [recessions], and what we found, particularly in the last one in 2008, is actually members didn't give up their membership. They ended up using the houses more,” he added. “They also realized that to give up their membership, there was an incredibly long queue to get back in.”