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When Soho House announced its listing in New York in June, CEO Nick Jones received an email from the fifth member of the club.

Screenwriter agent Greg Hunt wrote that he used to sit in the bar of the first Soho House in central London, “want to know if this place will get busier.”

Twenty-six years later, the company has more than 119,000 members, 30 Soho Houses in 12 countries/regions, and was valued at $2.8 billion on Wednesday. The private membership club group raised US$420 million through an initial public offering and sold its shares for US$14 per share, which is at the bottom of its range of marketing to investors.

Jones said: “I never thought that I would sit here with the Financial Times before the float on Monday morning,” Jones said. He rented his Soho restaurant Café Boheme 26 years ago. After the lease of the adjacent building, a private members club was founded. “I just hope I can survive 1995.”

This company, which aims at “creative people” and has supermodel Kate Moss and singer Pixie Lott as members, has changed its scale. For this listing, it is rebranding itself as Membership Collective Group to recognize its other brands, including The Ned in the City of London and the Scorpios Beach Club in Mykonos.

What has not improved significantly is the bottom line of Soho House. It never made a profit, but expanded through expensive loans and investments from wealthy shareholders. It abandoned its previous listing attempts in 2018. Jones said these potential investors failed to grasp the benefits of its subscription model.

During the pandemic, restrictions forced its club to close, and MCG laid off approximately 1,000 of its 6,100 employees. The company stated that customers can freeze memberships, and only 8% of members are cancelled.

But even before Covid-19, the income statement seemed troublesome. Between 2018 and 2019, pre-tax losses expanded by 37% to US$123.5 million, while revenue increased by 12% to US$642 million. Last year, revenue fell by 40% to 384 million U.S. dollars, with a loss of 236 million U.S. dollars.

The company is counting on a thorough reform of its cost structure and Aggressive growth strategy To attract investors. Its goal is to achieve net profit by 2022 and be listed in New York, because the United States accounts for 41% of turnover, and members there pay approximately US$3,400 per year, which is the highest fee for the entire group.

Nick Jones opened the first Soho residence above Café Boheme in Soho, London in 1995 © Peter Nicholls/Reuters

American ambition

The United States is also home to MCG’s largest shareholder and retail billionaire Ron Burkle. He owned 53% of the company’s shares before going public. He will work with Jones and hotel industry entrepreneur Richard Carlin (in addition to One major shareholder) together retain the right to vote first.

Jones said that up to 7% of the issued shares are reserved for members, and about a quarter have registered interest.

MCG plans to open a new home in Nashville, Portland, by 2024, a second in Hollywood, a ranch in California, a beach house in Palm Springs, and a The Ned branch in New York. It acquired the American boutique hotel group The Line in June and plans to open a Line hotel in San Francisco in March next year.

Jones said that the trick to breaking into the US market is “don’t be so excited by failure.” The launch in New York in 2003 may mean “the company cannot survive because it will knock us down, and I think it’s worth the risk.”

MCG also followed WeWork into the co-working space, with eight office locations in London, Los Angeles and New York. Nevertheless, its prospectus stated that it has no “single direct competitor” except for local clubs and co-working spaces in individual cities. It claims to be in “an industry”.

Expansion of Soho House

Debt burden

Of the $450 million MCG hopes to raise, it plans to use $223 million to repay part of its $600 million in net debt, with interest expenses accounting for 41% of its revenue in the first quarter of this year. In March, it replaced the acquisition group Permira’s $345 million loan with a £560 million loan from Goldman Sachs at an interest rate of 8% and paid off $79 million in unpaid interest.

“The main reason to go public is to repay debt. We don’t really need it for capital investment,” said Andrew Carnie, MCG’s global president.

In order to achieve the goal of 5 to 7 new Soho Houses every year, the company is adopting an “asset-light” approach to allow owners to bear the cost of opening.

MCG plans to increase membership income from 26% of total income to more than 50% over time. Other income comes from internal food and beverage sales and a series of interior design products that will open the first studio in September. Of course, there are also memberships.

Bernstein analyst Richard Clark said that MCG’s recurring revenue subscription model provides valuable experience for other hotel groups to stand out from the pandemic: “Soho House’s success has expanded its membership and has seen flexibility through Covid. … It is recommended that customers are willing to pay upfront for status, exclusive experiences and benefits.”

He added that the young tendencies of the group’s customers indicate that “demand for these subscription-based memberships should remain strong in the coming years.”

For Jones, adding membership to any brand is an obvious choice, and he plans to provide services to other companies.

US members pay approximately US$3,400 per year, the highest fee in the entire group, to join MCG clubs, such as Soho House in Austin, Texas

US members pay approximately US$3,400 per year, which is the highest fee in the entire group to join MCG clubs, such as Soho House in Austin, Texas © Cristina Fisher/Soho House

Even underwriters can apply

Pierre Dourneau, the managing director of MCG North America, joined Café Boheme in 1995 as a waiter. He said Jones was “non-stop” and the company’s entrepreneurial spirit meant “if you are good… you will struggle.” “. Some employees will stay for three to four months. Others, such as Dourneau and Membership Director Vanessa Xuereb, another long-term employee, like “organized chaos.”

However, a former design team employee said that the rate of growth means that managers “are not confused about what needs to be done. They have brought a whole new team. [but] There was very little feedback to us and little understanding of what we needed to do. “

Ben Silverman, producer of the American version office He has been a member since 1996, and he says he values ​​the familiarity of the club: “It’s great to be with like-minded people in Berlin, Los Angeles or Austin, Texas, but you will also find people you know. And people from new locations.”

However, some members worry that rapid expansion will devalue their membership. “Soho House is still attractive, but it has been downplayed,” said a member who has worked in London for more than three years.

Jones said that MCG did everything to “ensure that we are a local club for local members, not a temporary club for people who may not live in the city for a long time.”

As for the standard: even bankers can join, he said, if they have a “creative soul.”

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