Skift Travel News Blog

Membership Collective Group is best known for its Soho House upscale member’s clubs and hotels and for being unprofitable for decades. The London-based company wants to change both of those things, it said during a Wednesday earnings call.

In a few weeks, it will change its name to Soho House & Co., and its executives said they have a path to profitability.

On Wednesday, Membership Collective Group reported that it had narrowed its losses in the fourth quarter, year-over-year. It had a loss of $13 million on revenue of $270 million.

“We’ve raised prices by a double-digit percentage this year,” Carnie said on Wednesday. “Since we’ve increased our new member pricing, we continue to see super high applications, which shows the strength of our business.”

Total members grew to 226,830, up 7 percent on the previous quarter.

The company forecasts that its 2023 revenue will come in between $1.1 billion and $1.2 billion. That partly reflects a moderation in the pace of its network expansion. The company is returning to a 5 to 7 openings a year pace — which is a pace that’s easier to streamline and keep profitable.

The company’s streamlining push has a few key areas, including analyzing data to find operational efficiencies.

Data analysis has, for instance, shown that its members are using their facilities just as much post-pandemic as before Covid, but they’re doing so at different times. So the company has adjusted how it schedules its staffing to reduce its in-house operating expenses.

“Wages as a percentage of revenues dropped approximately 1,000 basis points in December versus August last year,” Carnie said of this initiative’s impact.

The company has been trimming the production of content, digital, and other corporate expenses. In one example, it will cut its “editorial content” expenditure by about 40 percent “going forward.”

In recent months, the company said it has found “sizable opportunities” to be more cost-efficient in how it procures supplies for its food-and-beverage offerings.

“The changes we’ve made in our F&B program continue to drive growth margin expansion with like-for-like F&B margins 230 basis points above the final quarter of 2019,” Carnie said.

“It’s still early days in terms of driving the benefits of these profit initiatives, and we have much more to go,” Carnie said. “But we’re on track, and we feel confident that this will help us generate stronger, more [consistent] earnings going forward.”

Nick Jones said on Wednesday that he would step down from being CEO of Membership Collective Group nearly three decades since he founded the original Soho House that eventually led to the creation of the public company and owner of the Soho House chain.

Andrew Carnie, president of Membership Collective Group, will succeed Jones as CEO.

Jones battled prostate cancer earlier this year successfully but said he now wants a change of life priorities.

On Wednesday the company cut its guidance for this year’s adjusted earnings from between $70 million and $80 million to between $55 million and $60 million. The company also said it would scale back on its growth ambitions by cutting costs across all its operations, refocusing the business back to its core of Soho House properties vs other extensions such as Ned, Scorpios, its digital memberships, and most importantly cutting back on plans to open nine properties this year to instead only opening between five and seven, including delaying planned venues in Mexico City and Bangkok until next year. It is also cutting down its in-house digital content unit by 40 percent, it said.

More on its cuts, from its earnings call: ” To give members the best possible experience and to ensure reduced pressure on the organization, we are returning to our previous target of five to seven new houses a year, and this is in line with our already signed pipeline for the next three years. At the same time, our cities at houses offer will continue to provide a clear path for longer-term growth at a minimal expense to the company. As part of prioritizing the right investments for our business and our members, we are no longer pursuing the external digital membership…We are reducing our in-house operating expenses. Post COVID, we rush to get all our houses open as quickly as possible in the manner we were used to operating them. In addition, it was a tough and unpredictable labor market, which means our costs increased significantly. What we’ve learned is our members are using our houses just as much, but at different times, so we’re adjusting our cost base accordingly….we’re refocusing our G&A with targeted reductions on content, digital and other corporate expenses, without impacting the member experience. For example, we are reducing our editorial content spend by about 40% going forward. We can raise prices, but the real opportunity is to run a more efficient business.”

The group went public in 2021. Its shares lost about two-thirds of their value this year after the company’s post-pandemic recovery ran up against the pressure of inflation, unfavorable foreign exchange rates, and sudden layoffs in the tech sector.

In the third quarter, revenues at Membership Collective rose 48 percent to $266 million, while the company’s net losses widened from $77 million to $91.7 million. Its net debt rose from $326.2 million to $462.6 million.

The news of the company scaling back its growth trajectory helped to send Membership Collective shares down by roughly 18 percent.

The company owns dozens of Soho House clubs, plus The Ned hotel in London and New York, and the Scorpios beach club in Greece.

The company behind Soho House remains on track to meet its forecasted membership targets while opening nine properties this year. Membership Collective Group, which runs 36 Soho House venues, said it had 142,250 members for Soho House.

The company generated revenues of $243 million in the 13 weeks ending July 3. It has never made a profit, but in good news, it produced $15.3 million in adjusted earnings before interest, taxes, depreciation, and amortization — a sign that net profit may be in the offing.

Investors punished stock shares of Membership Collective Group, however, after it announced that it would trim its revenue and adjusted earnings forecast for the year. The stock closed down 16 percent by the day’s close.

To offset inflation, the company has been boosting prices. But that hasn’t deterred interest. Retention has stayed at about 95 percent. The company had a record waitlist of about 82,000.

In June, the company brought its Ned brand to the NoMad district of New York, where it has welcomed about 700 members.

The earnings presentation is embedded below.

Membership Collective Group is best known for its Soho House member’s clubs and being unprofitable for decades. The company reported earnings on Wednesday, continuing its unprofitable streak.

But Soho house membership grew 17.6 percent to 130,919, year-over-year. The waiting list to join is at an all-time high.

“Our promising revenue growth in the quarter was led by rising membership numbers and increased demand at our existing Houses, which accelerated in February and March and grew in-house revenues by over 400% vs. the same period in 2021”, said Nick Jones, Founder and CEO of MCG.

Above, a good overview of its business progress this last quarter, above, from the earnings presentation.

It plans to add nine new Soho Houses this year:

Private membership club Soho House aims to debut a digital membership for people to get to network and otherwise get to know one another before meeting at one of its properties.

Soho House founder Nick Jones confirmed that tidbit this week, according to Hospitality Insights.

“Lots of businesses, friendships, relationships have been created by a Soho House in a city. It’s only natural that we want to do that digitally as well. We want to become properly hybrid so members can digitally connect before physically meeting in one of the Houses,” said Jones, who spoke at the International Hospitality Investment Forum in Berlin on Thursday.

Jones also said Soho House would reverse its net losses into net profits in the near future.