Know what's cool? Having cool people join your member's clubs. Know what's even cooler? Having members buy your high-margin upsells, like food and skincare products.
Soho House & Co. wants its social clubs to stay popular — but not too popular.
“We want to actually increase members’ spend and actually hold footfall,” said CEO Andrew Carnie. “We don’t necessarily need more footfall in our houses.”
The New York-headquartered company — which runs 41 Soho House members clubs mostly in Europe and North America but also with a just-opened club in Bangkok — is focused on upselling members. The biggest ongoing roll-out worldwide is a refreshed menu of food and beverage items that aim to be more locally relevant and trendy.
While the company’s flagship product is members clubs, at some locations, it also offers extras, such as rooms for overnight stays, ticketed events in hip venues, and retail goods, such as skin care products and linens.
Executives said on Friday they believe the company will become cash-flow positive sometime this year as it succeeds in keeping costs in line while upselling members on extras.
The company said it was targeting between $1.1 billion and $1.2 billion in total revenue this year. It aimed to reach positive cash flow for the first time since its listing in July 2021.
High Margin A La Carte
Soho House attempts to take the centuries’ old concept of the membership club and update it for today’s popular subscription model, driven by digital analytics.
One difference is that the traditional model was usually an all-in, one-price-for-everything model. Soho House is finding it’s better to have a lower annual membership fee and then seek profits on high-margin extras, from meals to hotel-like stays to linens and skin care products.
The brand still has buzz. Total membership rose 38 percent year over year in the first quarter to 237,961. The company’s waiting list to join hit an all-time high on April 2 of 89,000 — up 12 percent from a year ago.
Popularity is proving durable despite inflation. The cost of a UK membership to Soho House is now 42 percent higher than in 2019, and London is the company’s best-performing market.
Yet the company remains in the red. Net loss in the first months of the year to April 2 was $16 million.
“We continue our focus on operational excellence, which led to profit beating expectations, delivering adjusted EBITDA [earnings before interest, taxes, depreciation, and amortization] for the first quarter of $20 million,” Carnie said.
The company has boosted profitability in small ways. Its clubs, called houses, saw overall margins up three points to 24 percent in the quarter, while its other business lines pushed margins up four points to 13 percent. This year the company is guiding to an overall margin of 11 percent with a medium-term projection of about 15 percent within “the next few years.”
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Photo credit: A UK property in the Soho House & Co membership club empire. Source: Soho House.