As I entered Soho House in London’s Greek Street, the birthplace for the global hospitality phenomenon, there was a sense of creativity and novelty in the air.
The Greek Street location is nestled in London’s vibrant Soho District and exudes charm that speaks of its almost three-decade old history.
The Georgian Townhouse is a blend of period features and contemporary design that creates an atmosphere both timeless as well as current.
But beneath its polished exterior and buzzing environment, Soho House 2024 will be under increasing pressure to prove that it is more than a perpetually losing enterprise.
After going public in 2020, the company struggled to convince its investors that their business model of private high-end membership clubs could translate into sustainable profits.
Soho House is at a crossroads as it begins its 30th year in operation.
Can it keep its cool and exclusive appeal at PS2,950 per ‘Every House membership’ while maintaining the growth and stability required by public markets?
Soho House numbers reveal a complex picture
Soho House’s Q2 2024 Earnings Report highlights several positive trends.
The global membership increased to 204,000 while the waiting list for potential new members has swelled up to 111,000.
Membership revenue increased by 16% over the past year. The company’s adjusted EBITDA increased to PS26million for the quarter.
Soho House continues to invest heavily to expand to new locations in the world, despite its overall loss.
The company has opened new offices in Mexico City, Portland and Sao Paulo.
In the next few years, there are plans to develop in New Delhi, South Mumbai and Manchester as well as Madrid, Madrid, Milan, Tokyo, and Milan.
Soho House is now owing PS502 Million in debt due to its aggressive growth strategy.
Investors are sceptical about the company’s path to profitability, as its stock price has dropped over 56% from its IPO date in 2021.
Glasshouse Research, a short-seller, published an unflattering report in February 2024 on the finances of Soho House, comparing it to WeWork’s failed enterprise.
Andrew Carnie is the CEO of Soho House, and he took over from Nick Jones, founder, in late 2022. Addressing these financial pressures, while maintaining Soho House’s carefully cultivated branding, presents a daunting challenge.
Carnie, in a recent conversation about the company’s attempts to maintain profitability, said: “We know it’s a 3- to 5-year plan.”
This timeline will test the patience of investors who have suffered years of losses.
Expansion amidst challenges
The hybrid business model of the company presents unique challenges.
Although membership fees are a steady source of revenue, Soho House is still faced with the high costs and operational complexity associated with running bars, restaurants, hotels, and co-working space across all its properties.
It is therefore more vulnerable to economic downturns and consumer behavior changes than a subscription-based business.
The aggressive expansion of Soho House has also required heavy investments in property development and renovations.
New houses often lose money in the initial phase of their opening before they reach maturity.
This growth-focused approach helped Soho House become a global brand but at the expense of short-term profitability.
As a result of the pandemic, there have been broader changes in social and work patterns.
Some members may not be as interested in co-working spaces or business clubs that offer amenities.
Soho House has made a transition by focusing on its leisure and hospitality offering, but it takes time and money to make this change.
Soho House is entering its fourth decade and faces many challenges.
To achieve profitability, while keeping up with newer competitors and maintaining its cool factor, it will take deft management.
Carnie’s team must prove that Soho House is more than a perpetually losing enterprise.
This article Soho House 30: Can the nearly PS3,000 a year club turn cool into money? This post may be updated as new information unfolds.
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