‘Our critics don’t understand our business – at all’

The CEO of the members’ clubs admits they expanded too quickly – but rejects scathing criticism from the City. By Christopher Williams

In a cobbled corner of Mayfair, Soho House is working to reclaim its reputation for exclusivity. From the wreckage of Hush, a Noughties celebrity haunt, Soho Mews House is emerging as a riposte to a rash of headlines claiming the private members’ club chain has lost its cool to overcrowding and substandard service.

This latest outpost – currently a building site replete with exposed breeze blocks and girders – on Lancashire Court is intended to be something special. Designs and fabrics laid out on a trestle table point towards a less voguish, more old-world feel than the mid-century interiors to which Soho House members have become accustomed no matter where they are in the world.

In any case, many of them will not be invited when the venue opens late this year (if work runs on schedule). Soho Mews House will target an older crowd of the most longstanding members as it jostles with clubs such as 5 Hertford Street and the Arts Club to cater for Mayfair jetsetters and hedge-funders.

It’s perhaps more Handel than Hendrix, musicians who both lived around the corner. Exclusive, no doubt, but it’s a far cry from the first Soho House which Nick Jones opened less than a mile away on Greek Street in 1995 as a meeting place for creative types.

The Duke and Duchess of Sussex had their first date at Soho House’s Dean Street Townhouse restaurant in London, with the Duchess celebrating her hen-do at the group’s Soho Farmhouse retreat in the Cotswolds. Celebrities including Leonardo DiCaprio and Margot Robbie have been pictured at its clubs, and one of its New York clubs featured in an episode of Sex and the City.

Jones, 60, is still a shareholder and director, but after beating prostate cancer no longer in day-to-day charge. Soho House’s latest expansion is instead overseen by chief executive Andrew Carnie, 50, the spearhead of a project to sharpen up the loss-making business and make it plausible to Wall Street investors following its stock market debut in 2021.

“We went public for all the right reasons,” he says over coffee up the street. “It was still the right decision.”

Not everyone agrees with Carnie, a father of three who lives in north London after a six-year stint in the United States with a previous employer.

The recent wave of criticism of Soho House was prompted by a scathing report in February by a faceless firm of stock analysts calling themselves GlassHouse Research. It claimed Soho House was facing an “existential crisis” as a public company, with a “broken business model and terrible accounting” that faced the same bankrupted fate as WeWork, the serviced office provider that attained an absurd $47billion valuation before crashing to zero.

“Soho House’s ambitious growth strategy… is working against the company as it loses its exclusive appeal,” the report warned as it wiped nearly a fifth off the company’s valuation to the benefit of short sellers, who bet that share prices will fall.

GlassHouse further claimed that “rapid member expansion may be stretching the company’s operational capabilities thin, leading to longer wait times, reduced personalised attention and an overall diminishing standard of service”.

Carnie, who first joined Soho House in 2019 before taking the top job in 2022, took at least some of that criticism seriously.

“We hired a top four accounting firm to come in and audit our auditors,” he says. “Then we got separate legal counsel to come in and check as well. We knew we were confident in our accounting but as responsible leaders we got them in. The good news is they didn’t find anything.”

While the accounting claims were investigated, Carnie has little time for the rest of the GlassHouse analysis.

“Fundamentally, they don’t understand our business,” he says. “They don’t understand maturation curves of houses. They didn’t understand membership – at all.”

Carnie is speaking the day before Soho House’s annual earnings report, which has already been delayed once. There’s a chance it could be delayed again as the auditors pick over the details, but 24 hours later Wall Street gets the numbers to plug into the algorithms that drive share prices up and down.

Losses are down by more than $100million, to $118million. Turnover is up nearly 17 per cent to $1.14billion. The total number of members around the world grew nearly a fifth to 193,865. Carnie tells investors he is pleased with “strong results”. They mark the shares down by 9 per cent to close to the depth they plumbed in the immediate aftermath of the GlassHouse report. Having begun trading in 2021 on a valuation of $2.8billion, Soho House is a whisker away from dipping below $1billion.

It seems difficult for the company, which has never made a profit as it has rapidly expanded around the world to encompass 43 clubs, to win. Wall

Street wants more expansion and selling. Customers want exclusivity and service. It’s a tension Carnie must navigate, with a massive and diverse global membership. “It’s different from when you’re a smaller business,” he says. “The members all behave quite differently. Folks in Mexico City behave differently to folks in Portland. So you’re trying to figure out how to maximise the experience in different regions. And because we’re in many different countries, they’re in different stages of macroeconomic changes that we have to be alive to.

“The word ‘desirability’ we don’t really use,” he says. “Our job is to connect great people, give them great service, great food, great atmosphere, great clubs, let them flourish at work and socially. So that’s what we just always remain focused on.

“And we’ve been very successful. We’ve literally doubled in size in the past five years.”

There may be some common ground between the bankers and the creatives, however. Both GlassHouse and members have complained that rapid expansion has damaged the Soho House experience. When the company made its Wall Street debut it said it planned to have 85 clubs by the end of 2027.

While missing targets is never welcomed by shareholders, after a series of delays Carnie can now embrace a slower, more deliberate pace. Soho House leases its venues from developers, so is dependent on their operations and financing to open new ones.

“The reality is throughout 2023 we didn’t open houses on time because developers really struggled getting labour and with costs going up.

“So we still have the pipeline [of 85 new houses] but what we’re doing is just saying ‘Let’s slow it down for the time being. We’re actually confident in our openings ... But it’ll just happen a bit slower. That’s all.”

There are still between five and seven new Soho House outposts planned per year. The latest is in Portland, Oregon, a City which has supplanted San Francisco as the West Coast’s counter-cultural hub. Manchester, where Carnie went to university, is due to get the first Soho House in the North of England this year, too. There are outposts in South America and India. With British soft power seemingly in retreat around the world, the Soho House experience has become one of few breakout exports of the past decade.

Despite the current turbulence, Carnie knows there are still tens of thousands of people who want in.

“Demand has never been higher,” he says, rejecting the GlassHouse thesis that deteriorating service could crimp Soho House’s crucial membership income. “We’ve got 100,000 potential members on our wait-list. Retention rates are really high. From every criticism that is written I get 10 dozen emails about a great experience.”

Nevertheless, even before it came under attack on Wall Street, Soho House had accepted it needed to improve service. In December, Nick Jones wrote to members to say no newcomers would be admitted at some of its clubs in New York City, Los Angeles and London following complaints it was too difficult to get a table.

“We want our houses to be buzzy but not too busy,” says Carnie. “There are a couple of houses in those cities that we just felt we should take a pause on. That’s what Nick was saying. And that will allow us to continue to improve some service and the members. That’s what we’ve been focused on.”

Moves to address the squeeze have included an expansion of the membersonly area at White City House, located in the former BBC Television Centre in west London. Another problem for

Soho House, and many other hospitality operators, has been that in the wake of the pandemic it literally can’t get the staff. The cost of living crisis has driven up wages across hospitality and retail. Inexperienced waiting staff in Soho House clubs have compounded dissatisfaction for some members.

“It has been really tough,” says Carnie. “But I would say from around September last year we started to see a marked difference and we could hire great people.

“There was this shift in folks wanting to work in hospitality again, and we did a lot of work on becoming a better employer. We rolled out flexible working, especially for hourly staff around the world.

“We can see service is improving, because we have a member satisfaction survey now that we have weekly, where our members rate us. We introduced that last year, so we get instant feedback.”

Post-pandemic staffing is one challenge that has forced Soho House back to basics. The massive change in the financial weather is another. When it made its stock market debut in the teeth of the pandemic, the financial world was high on rock-bottom interest rates.

Investors were ready to reward any company that could demonstrate rapid sales growth at almost any cost and Soho House responded with an ambitious expansion plan. Tech stocks commanded higher valuations than any other industry, so Soho House tried to sell itself as much as a smartphone app as a members’ club.

With interest rates higher for the foreseeable future and even real tech companies such as Meta, the owner of Facebook and Instagram, cutting its cloth for profits and dividends, life on the public market has been dizzying for a relative minnow such as Soho House.

‘We want our houses to be buzzy but not too busy. Let’s slow it down for the time being’

‘Is making a profit a medium-term goal for us? Of course it is. I’d be crazy not to say that’

Carnie has dumped the tech talk to focus on growing the stable membership income that investors now prize. Positive cash flow, once irrelevant, is now vital, as is reducing a heavy debt burden.

“We spend a lot of time on membership and then we run a really good business that generates cash flow, which then can lead to discussions about getting the debt down.”

It remains a remarkable fact that in almost 30 years Soho House has never made an old-fashioned profit. Throughout its history it has been able to fund its growth by bringing in new investors and lenders. Alongside Nick Jones, significant shareholders include Richard Caring, the West End restaurateur behind The Ivy. The controlling shareholder is the US retail billionaire Ron Burkle, who also sits on the board as executive chairman.

For Carnie, a real profit seems to motivate, although Soho House has not committed to deliver one.

“I’m a CEO, of course I have goals for the company,” he says. “Is making a profit a medium-term goal for us? Of course it is. I’d be crazy not to say that. Can we get there? Yes.”

“We have proven we can generate cash flow. We’re really proud of the last 12 months and I think we’ve got a really good balance on continuing to invest for our members.”

Fundamental questions remain, however, which Carnie cannot answer. In the wake of the GlassHouse attack, Soho House said it could abandon the stock market altogether. It said it had formed an independent special committee to consider offers from its existing shareholders to take the company private.

It would certainly mean a quieter life for Carnie and there can be little doubt that Soho House would readily be able to attract private capital if it needed to, not least from Middle Eastern investors weighed down with cash and hunting trophy investments.

“Going private is a board decision,” says Carnie, who prior to Soho House spent a career in public companies including the US retailer

Anthropologie. “So I’m not going to talk about that. I just reiterate that for the company going public was a great thing. What we’ve shown over the last 12 months is that Soho House can be more profitable, it can reduce its net debt. That is going to continue. It has sharpened us a lot.

“I’ve always worked at public companies. I enjoy the rigour and the rhythm of it. I think Soho House needed it. It helped us focus on what members want and how we make sure we are running a really great business.”

But when it went to Wall Street did Soho House listen to the bankers too much at the expense of its members?

“No. I think we just had too many ambitions at that stage. What we’ve done is narrow it all back.

“When I took over from Nick we took a hard look. What we have to do is wake up every morning and say ‘What do members want?’.”

It seems the company will need to remain ready to defend itself, however. GlassHouse Research says it will analyse Soho House’s full financial report. “It has still not disclosed any inaccuracies in our initial report,” it claimed in a post on X (formerly

Twitter) on Friday.

Carnie aims to remain philosophical. Soho House has been written off as uncool many times.

“We’re just a good story,” he says. “You can always use a picture of Harry and Meghan. It doesn’t affect us at

Soho House. It’s made us more determined than ever.”