How ‘broken' Soho House plans to get its glamour back

Telegraph

a day ago

When Prince Harry and Meghan Markle first met on a blind date in 2016, they chose the discreet location of Dean Street Townhouse, an outpost of private members' club Soho House, for their clandestine rendezvous.
The date highlighted the enticingly exclusive appeal of the club, a place where David Beckham, Kate Moss and Leonoardo DiCaprio rubbed shoulders with a host of other A-listers.
Such was the buzz around the brand a decade ago that a former director once claimed it had repeatedly denied Kim Kardashian membership because its admittance was too selective.
Yet over the past few years, Soho House's glamorous star has faded. Its rapid expansion – it now boasts a not-so-exclusive network of almost 50 locations – as well as a troubled stock market flotation and criticism of overcrowding, has led to claims the brand had lost its way.
On Monday, Soho House made its most ambitious move yet to get its mojo back, striking a $1.8bn (£1.3bn) takeover deal led by one of the largest hotel operators in the US.
The takeover is expected to breathe new life into the private members' club as it fights to restore exclusivity to its global brand, but success is not guaranteed – can Soho House become the playground of the rich and famous once again?
Soho House was launched by restaurateur Nick Jones from a single townhouse on Soho's Greek Street in 1995, with the aim of providing an exclusive refuge for the great and the good of London's creative industries.
In the intervening decades, the group jettisoned its more stringent membership requirements and ballooned in size. It now has around 268,000 members in 46 clubs around the globe.
Wall Street woes
Yet this expansion has come with growing pains as members began to complain of clubs becoming too full, leading to lacklustre service.
Soho House briefly stopped accepting new members in London, New York and Los Angeles last year. Jones, who is married to BBC presenter Kirsty Young, said the group was focused on 'making sure our houses don't feel too busy '.
It is not just members who have been critical of the company. Soho House has also had a troubled relationship with Wall Street since its listing in 2021 at a valuation of $2.8bn.
The company's share price fell sharply during its life as a listed company, prompting Ron Burkle, its billionaire chairman, to complain that the market had undervalued the group and that it had 'all the costs of being a public company with few benefits'.
Perhaps most damaging was Soho House's clash with New York-based short seller GlassHouse, which published a damning criticism of the company's 'broken business model and terrible accounting'.
Bosses said the report included 'factual inaccuracies, analytical errors and false and misleading statements'.
The company has also faced pressure from Third Point, the hedge fund run by activist Dan Loeb, to seek outside investors who would deliver a higher valuation for the business.
Burkle appears to have taken heed of the activist's demands, and the chain will now resume life as a private company in a deal spearheaded by MCR Hotels, a sprawling group that operates 25,000 hotel rooms.
The $9-per-share deal, which values Soho House at around $1.8bn, represents an 83pc premium compared to the company's stock price at the end of last year. However, it is well below the $14-per-share price tag Soho House was given at its New York stock market float.
Other investors in the deal to take the company private include Apollo Global Management and Goldman Sachs, as well as a consortium led by actor Ashton Kutcher.
Burkle will roll over his existing stake under the terms of the transactions, as will Jones, as well as restaurateur Richard Caring. Tyler Morse, MCR's chief executive, will become deputy chairman of Soho House, while Kutcher will also join the board.
Under Andrew Carnie, who took over as chief executive from Jones in 2022, Soho House has been looking to refocus its efforts on quality.
It has upgraded its food and drink offering, introducing new wellness facilities and refurbishing some of its sites. It has invested more in events and experiences such as its London festival and pop-up hospitality suites at Formula One races, while it has recently opened exclusive new outposts, including Soho Mews House and Soho Farmhouse Ibiza.
Speaking to the Telegraph earlier this year, Carnie described the club's approach as 'global but local'.
'The goal is always that wherever you are in the world, you walk in and you feel Soho House', he said. 'Feel the environment that we've created, the energy, the members, the way we serve our drinks, the lighting and the music.
'We have a lot of brand principles, but we do want you to have a different aesthetic experience in these houses.'
Soho House has also cashed in on its popular homeware brand, which it is increasingly championing within its members' clubs with showrooms. The company now sells more than 30,000 units of furniture a year, up from 1,800 in 2019.
There are signs that the turnaround efforts are starting to pay off. Soho House recently posted its first run of consecutive quarterly profits following three decades in the red.
In an update published earlier this month, the company said operating profit stood at just under $60m in the three months to July – up from $35m in the previous quarter – while revenues grew thanks to increased membership and higher in-house food and drink sales.
The question now is how Soho House will harness its new lease of life away from the glare of the public markets.
The next chapter
Industry experts believe the step to go private will be beneficial for bosses.
Ted Schama, the founder of advisory group One Voice Hospitality, says it will give the company the 'autonomy to pick and choose roadmaps for growth and – during that period – not be penalised for investment and not showing profit'.
In MCR hotels, Soho House has a new owner who is unafraid to take on big projects. After buying the BT Tower for £275m last year, the US company has outlined plans to transform the Grade II-listed landmark into a hotel.
The group also owns a string of signature sites, including the famous 1960s-themed TWA Hotel at JFK Airport, as well as the High Line Hotel and the Gramercy Park Hotel in New York.
Schama says that, with Soho House, MCR is gaining a business that already has an estate of 'blended' sites. Soho House's membership clubs are often located alongside office space – Soho Works – and come with hotel rooms, restaurants and swimming pools.
'Blended offerings are where it's at,' he says. 'I think there is tremendous appeal in that regard on a global scale.'
Meanwhile, private ownership will undoubtedly liberate Soho House bosses from the expensive and time-consuming requirements of life on the stock market.
Members say they are hopeful this heralds the start of a return to form for the company. One person who has been a Soho House member for the past 20 years says they thought it 'never should have been listed', adding: 'Reporting quarterly earnings is not exactly cool.'
Already, there have been signs that it is rekindling its reputation as the place to be seen. In June, Dua Lipa hosted an after-party at Soho House's White City club in West London following her sold-out Wembley shows.
With around 111,000 people on a waiting list for membership, cultivating this exclusivity is likely to require a disciplined approach to growth.
In a memo to members on Monday, Carnie said the takeover would allow the company to 'think long-term, invest where it matters most, and keep strengthening what makes the houses and our membership community so special'.
However, the Soho House boss was keen to stress that exclusivity will be at the heart of this plan.
'This next chapter is about taking the best of what we've built and making it better for our members around the world', he said.
What this would mean is that 'membership feels just as special in the years ahead as it does today'.