Celebrity members club Soho House has lost money for nearly 30 years. Now its CEO is under mounting pressure to turn $22 cocktails into profits
Soho House CEO Andrew Carnie has spent the past three months trying to convince investors that—despite a plummeting stock price, a short-seller on the prowl, and nearly 30 years of evidence to the contrary—he can finally make his global, publicly-traded, members-only club both profitable and cool. So it’s probably a good thing that he spends his free time running ultramarathons and training for similar endurance challenges.
“There’s a lot more to be done,” Carnie tells Fortune, in a late April interview in London. "And I'm just focused on delivering."
He's facing a long, steep climb. Soho House has for years faced financial skepticism about its aggressive global expansion, along with cultural scrutiny over whether all this growth is damaging its exclusive, members-only brand. But things became publicly dire in early February, when short-seller GlassHouse Research released a report pointing out Soho House’s fundamental and long-standing financial problems: The company, founded in 1995 and publicly traded since 2021, has never made money. And its massive growth over the past decade has left Soho House carrying a mounting load of expensive debt, which will make achieving that profitability even more difficult.
Soon the vultures were swirling above the presumably rarified air of Soho House’s 43 locations: The company’s shares are currently trading at around $5.20, down more than 20% year to date and about 60% from their July 2021 IPO price of $14. In February, the company said that it had been considering offers to take Soho House private again; and in mid-March, Soho House reported a worse than expected 2023 loss of $118 million and a 20% jump in its net debt, to $638 million. “You go for almost 30 years without having ever generated a profit? I don’t know too many patient investors—private or public—who are comfortable with that,” says Pauline Brown, a former chair of LVMH North America and founder of consultancy Aesthetic Intelligence Labs.
Now Soho House—which has survived almost three decades as a closely watched but aging arbiter of young, cosmopolitan, vaguely creative cool—is counting on Carnie to turn things around. The former global president of retailer Anthropologie, who joined Soho House in 2019 and replaced founder Nick Jones as CEO in November 2022, has to make good on his promises that Soho House really can make money. Eventually.
“We know that it’s a three- to five-year plan,” Carnie tells Fortune, from his company’s original outpost in the London neighborhood of, yes, Soho. (A company spokesperson later says that Carnie isn't putting a timeframe on Soho House's path to profitability, but rather on "holistically re-orientating the business against our strategic priorities of growing and enhancing membership and operating efficiently to grow profitably.")
In the moment, Carnie says, “I hope we get given the opportunity to show that we can continue doing what we do really well—and then deliver on the profitability.”
But as Carnie tries to bring Soho House’s spending and debt load in line, he also has to reckon with the thornier—and less measurable—recent damage to its public perception. The recent financial scrutiny has led to international headlines debating whether or not Soho House is indeed still “cool”—or if its yearslong push for growth has threatened its not-for-everyone core appeal. So is it possible to expand—at least as aggressively as Soho House has—while still remaining exclusive and aspirational?
“They have captured the zeitgeist of young professionals with a social bent, and they’re both stylish and inclusive,” says Brown. “But this is the tricky part to any luxury business: How do you balance your commercial imperative with your need to stay exclusive and desirable?”
Members only
The original Soho House began in London in 1995. Founder Nick Jones was running a restaurant called Café Boheme at the time, frequented by artists and actors and other local “creatives." Building on Britain’s long tradition of private, members-only clubs, Jones eventually established an exclusive space for his regulars to socialize with one another. If that all sounds rather British and pretentious and like the sort of setting where Prince Harry and Meghan Markle would go on their first dates in 2016 (after which he invited her to Botswana): Why, yes, it is. That’s part of the appeal.
By 2003, Soho House had landed in Manhattan and made a cameo in the OG Sex and the City. It quickly became famous as an affordable luxury for strivers of the early digital-media generation and the young New York socialites they covered, especially ones born into the upper-upper middle class and hoping to vault up a few rungs. (Gawker in its heyday mocked this “snotty exclusive private club,” but also played into the aspirational myth-building—and threw parties there.)
In 2008, Jones sold 80% of the club to British restaurateur Richard Caring, who in 2012 sold off majority control to Ron Burkle, the billionaire private-equity investor who made his fortune buying up regional supermarket chains such as Food 4 Less and Ralphs. In subsequent years, Soho House flirted with an IPO, and set its sights on global domination.
The company has rapidly expanded since then, building up clubhouses and opening its doors to many people (and sometimes too many of them, current members complain). It also operates separate hotel and restaurant brands, including The Ned, The Line, and Saguaro; coworking space Soho Works; and a furnishings and decor business, Soho Home, where you can buy the low armchairs or dangling chandeliers you might have admired at your local Soho House.
Today, Soho House’s 43 locations now stretch from New York to Mexico City to Mumbai, as the parent company counts almost 260,000 members. If their applications to join are accepted, most U.S. customers pay between $1,000 to more than $5,000 per year in membership fees—plus whatever they spend on food and drink and hotel rooms at its clubs and, if they so desire, additional fees to access their auxiliary coworking spaces. In 2023, Soho House’s annual revenue grew almost 17%, to $1.1 billion.
Yet despite its hefty price tag, Soho House has lost money every year since its doors opened in 1995. That might be forgivable under some circumstances—you have to spend money to make money, after all—as long as the losses happen behind the scenes, affecting only the bank accounts of deep-pocketed billionaires or other wealthy, private investors. And for much of Soho House’s early life, it seemed to operate under Silicon Valley’s widely adopted conventional wisdom about prioritizing growth over profitability.
But the markets are much less forgiving these days. Since Soho House went public in 2021, its red-inked results have made it increasingly subject to financial scrutiny—especially in the wake of some notorious implosions of other companies also selling membership-based “third spaces” or coworking locations to young, urban professionals. Soho House seems somewhat akin to the now defunct The Wing, with its similar emphasis on community building and events programming in high-design spaces, although Soho’s short-sellers at GlassHouse Research tried to draw a comparison to the now-bankrupt coworking disaster WeWork: “We believe SHCO will eventually meet the same fate as the now defunct coworking space,” their February report declared.
(GlassHouse alleged that, because Soho House went public under the JOBS Act and its more relaxed accounting standards, it was able to get away with lax disclosures and “questionable” practices. Soho House has called the report “false and misleading” and says that an independent review of its accounting practices has “shown no material issues.” A spokesperson also contests the short-seller's overall comparison, pointing out that Soho House ended 2023 with nearly $50 million in net cash from operating activities, versus WeWork's negative $530 million.)
By the time Soho House went public in 2021—mostly to pay down debt, Carnie said at the time—WeWork and the Wing had both imploded. And Jones, who would later step down as CEO after a cancer diagnosis and recovery, was pitching Soho House as an investment similar to Peloton, a then-sexy company with fabulously recurring revenue from its subscription business.
But as Peloton quickly discovered, there was a fine line between exclusivity and overexposure. “Is it growth for growth’s sake, or for greed’s sake?” asks a founding member of Soho House’s Dumbo House in Brooklyn. “Or is it growth for the sustainability of the business—which ultimately is for the community’s sake?”
That founding member, who is Black and spoke on condition of anonymity, was one of several members who praised at least some of the company’s expansion efforts, especially in terms of building a diverse customer base. “We’re inclusive, we’re not exclusive,” Carnie tells Fortune. “We don’t go after one type of member.”
But many customers say today that Soho House has certainly gone after too many new members, at least without having enough infrastructure and staff to keep them happy and the company profitable. In late 2023, Jones wrote to members that the company would stop admitting new customers in Los Angeles, New York, and London. “The proposition is phenomenal, and I don’t think it’s washed up or played out,” the Dumbo House founding member says. “But the reality of trying to scale that proposition, and of turning something exclusive into something more inclusive: Therein lies the rub.”
Ultimately, it might be easier for Soho House to try to resolve all of these financial and cultural questions out of the glaring public spotlight. In February, after GlassHouse published its report, Soho House said that it had been exploring going private again. “At this point in time we have all the costs of being a public company with few benefits,” executive chairman and majority owner Burkle wrote to shareholders in mid-March.
Carnie won’t comment on the going-private talks, noting, “All of our investors are more supportive than ever.” And he’s made some progress on his profitability goals, cutting Soho House’s annual net loss almost in half last year, to $118 million. But he acknowledges that he still has years of work ahead to keep his investors happy: “My focus is more on leading the teams to deliver great results, irrelevant of if I’m public or private,” he says. “If we go private tomorrow, you’ve still got to deliver.”
To that end, Carnie is deliberately slowing down. Soho House will open fewer houses than originally planned in the next couple of years, he told investors in March, citing the impact of high inflation and interest rates on the company's developer partners. Meanwhile, Soho House is refurbishing its existing locations and focusing on improving their food and service. Complaints about the latter two are particularly rampant among Soho House’s current members, and Carnie tells Fortune that “improving the service is our number one initiative as a company. It’s actually our biggest investment this year.”
He’s testing new mobile-ordering technology, which should enable Soho House members lounging by, say, a rooftop pool to order food and drinks through an app; and he claims that Soho House has increased wages and benefits and training for its staff. It’s a tricky balance for an unprofitable company that needs to rein in expenses, but Carnie hopes the investment in his people will ultimately address both the financial and reputational critiques of Soho House today.
“We want to be A-plus-plus service,” he says. “And if we deliver better service, members will spend more with us—so it’s the best investment ever.”
Too much of a good thing
A few weeks ago, in the delicate spring twilight of an April evening, I met two friends for dinner at Dumbo House. It was the most fun Sunday night I’ve had in recent memory: The lights of the Brooklyn Bridge twinkled beyond the expansive patio, while indoors, the resident DJ mixed music at a volume loud enough to set the mood, but not quite loud enough to drown out conversation. The crowd was effortlessly fashionable and majority Black, but visibly diverse across races and ages: A few tables away, a mixed-race foursome appeared to be celebrating the birthday of a middle-aged white woman with a pixie haircut and fabulous chandelier earrings. I drank a cocktail called Brooklyn's Tap Water, involving mezcal, high-end gin, and five other ingredients, and ate charred cabbage and “pomegranate smoked” lamb ribs that I would happily order again. (Part of Carnie’s strategy in action: The menu had recently been updated, and massively improved, my friends said.)
The staff was friendly, busy, and stretched incredibly thin, as many Soho House members have complained about both publicly and to Fortune. It took 30 minutes for a promised table that “would be ready in five minutes” to materialize, and another 30 for our $22 cocktails to be delivered. As my friend, a writer who joined Dumbo House in 2019 and remains an overall fan, noted with a shrug: “The service has always sucked.”
Soho House may like to believe that it is “one of a kind,” as Burkle argued to shareholders in March: “It’s not a hotel company, and it’s not a food and beverage company,” he wrote. But Soho House is kind of both of those things, on top of its core membership business. Members can buy food and drinks and a night’s sleep at its clubs—and, for Carnie’s strategy to pay off, he’ll need to entice them to spend even more money there, on top of the pricey membership fees they pay to walk in the door.
So even if the main brand is something different—something “one of a kind,” as Burkle would have it—Soho House still has to act like a restaurant or hotel or coworking space. It has to pay rent and interest on its mortgages and the rest of the $638 million in debt that fueled its expansion. It has to hire and pay workers, and buy food and booze to resell at a markup. It still has to weather customer complaints, and worry about damage to its reputation as well as to its bottom line, if the food is bad or the service is slow.
In that way, at least, it’s not so different from hotels and restaurants, even those it might prefer not to be compared to. Aaron Allen, a hospitality-industry consultant, agrees with Burkle and Carnie that Soho House doesn’t have a specific peer among other luxury public companies. But he does draw comparisons to Major Food Group—the privately held and rapidly expanding restaurant operator behind Carbone, and also the members-only, $30,000-to-join ZZ’s Club in New York—and the Four Seasons, the luxury hotel chain now majority-owned by Bill Gates.
But maybe, Allen jokes, Soho House is most like another once-buzzy, elite-adjacent hospitality chain whose success couldn’t survive its expansion: “This is like a high-end Planet Hollywood,” he says.
Newer, younger models
And that’s the rub: Long waits and staff stretched thin are the natural by-products of overexpansion. It’s a hard cycle to break when you have the pressures of the public markets—and you’re no longer young enough to be the hot new thing. As Soho House stares down its 30th birthday, a younger, buzzier generation of competitors has gained a foothold in some of its key markets.
Today, at least in New York City, Soho House competes for elites with a crop of privately owned clubs and restaurants that are maintaining more secrecy—and, thus, more control over their reputations. Mayor Eric Adams has his unofficial office at Zero Bond. Taylor Swift reportedly took Matty Healy, the apparent partial inspiration for her new album, to Casa Cipriani, which opened the same year that Soho House went public. Something called Frog Club gets reviewed by restaurant critics, even though the only way for the public to get a reservation is to email an address that has now been scrubbed from its website.
Soho House does have some advantages as it grows up, in particular what members call the thoughtful way it has tried to build less stuffy, more inclusive communities. (In contrast, some of the storied British clubs that long preceded Soho House still don’t admit women as members.) "We love an even split of men and women, ethnicity and background mixes, different types of creative industries—we're really good at that, and we focus on that," says Carnie, adding that Soho House relies on its "committees" of local members to get the community balance right for every club.
True, something that charges up to $5,000 or more a year for the privilege of spending even more money there is always going to be somewhat exclusive. But the future of Soho House’s finances and cultural cachet may rest on wooing more members like Christina Blacken, a Black 36-year-old entrepreneur who worked in media before founding a DEI and leadership consultancy called The New Quo.
Blacken joined Soho House in late 2022, partly as a break from her home office in Brooklyn. She had occasionally visited the original New York location in downtown Manhattan, where her first impression was of a “very exclusionary and homogenous” crowd. But she has been impressed by the newer Dumbo House location in Brooklyn—and in how the company and its membership base has evolved. “The space is beautiful, the pool is amazing,” she says. “And they’re bringing in a more diverse, creative, and interesting group of people into the community.”
Still, even a founding member of Dumbo House worries about how it will maintain and refresh its community—especially when that location is part of a large, global operation that's continuing to expand.
“People used to say that Dumbo House was the Black house, and I say that proudly,” says the founding member. “But then what started to happen was that your Soho House members from Manhattan, and some of your bridge-and-tunnels from New Jersey—that population started to come over.”
It’s the never-ending conundrum for Soho House, whatever its public or private future. “If you grow too fast, and if you do let too many people in, you will dilute it,” that founding member adds. “And then people will find a new home.”
This story was originally featured on Fortune.com
