Soho House plans aggressive expansion as it files for New York IPO

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Soho House, the owner of private members’ clubs in North America, Europe and Asia, has laid out aggressive expansion plans as it filed to go public in New York.

The group, which is switching its name to the Membership Collective Group as part of the initial public offering, is targeting a valuation of about $3bn, according to people familiar with the matter.

As coronavirus lockdowns begin to ease and vaccination programmes are rolled out, the company is trying to tap a wave of investor enthusiasm for travel and leisure stocks that has already benefited the likes of Hilton, Marriott, Hyatt and Airbnb.

Founded by UK entrepreneur Nick Jones and backed by US billionaire Ron Burkle, the hospitality group became known as a haunt for celebrities ranging from Damien Hirst to Prince Harry.

It intends to open another 18 new venues by the end of 2023, adding to the 28 it already has, according to a filing with the US Securities and Exchange Commission on Monday. Its long-term plan is to open between three to five new sites each year.

The company hopes that the resilience of its membership model during the pandemic will increase its appeal to investors. It retained 92 per cent of members last year compared with an average retention rate of 94 per cent between 2016 and 2020, according to the filing.

The group said it would change its name to the Membership Collective Group reflecting its other brands such as The Ned and Scorpios beach clubs, confirming earlier reports. It will list under the ticker “MCG”.

While the company did not say how many shares it will sell or for how much, the resilience of its model during the coronavirus crisis has given it the confidence to target a valuation higher than the $2bn marker it set in a $100m funding round last year, people familiar with the matter said.

Annual membership that allows access to all 28 Soho House sites costs about $3,400 in the US. At the beginning of this year, the waiting list for membership stood at more than 48,000, according to the filing.

“You can see why they are using this moment to IPO,” said Richard Clarke, a travel analyst at Bernstein. “We saw from how well Airbnb’s IPO did that there is appetite for travel.”

He added that Membership Collective Group could also benefit from the assumption that people would increasingly want to “work from anywhere” rather than return to the office but warned: “At the moment no one knows how that digital nomad trend will play out.”

Despite growing membership at about 16 per cent each year between 2016 and 2020, the company has never turned a profit thanks to the rapid opening of new venues.

Over the past two years, it has focused on increasing the proportion of its revenues that come from membership fees rather than relying on sales of food, drink and the staging of events in its clubs.

It has also stopped non-members using its houses and introduced a series of different membership levels, such as a £100 “Soho Friends” subscription that allows only limited access. It will launch a digital membership in the autumn that will act similarly to a paid-for social networking site.

“Offering a new digital-only option will make our membership truly global and diverse,” said Jones in the filing.

Revenues in the first quarter of this year totalled $72m, down from $142m in the same period a year earlier. The group also reported a net loss of $93m in the quarter, compared with a $45m loss in the same period in 2020.

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