In today’s Finshots, we tell you all about the exclusive Soho House and its expansion in India.

The Story

In 2016, Prince Harry (now Duke of Sussex) met his would-be wife Meghan Markle (now Duchess of Sussex) at a swanky club in London. It’s a place decked up with Georgian fireplaces and lavish interiors that serves ox cheek doughnuts as a snack and sea trout drizzled with miso beurre blanc as a main course.

Now, before you think that Finshots has turned into a tabloid carrying juicy gossip about celebrities, hold your horses. Because the place where the Royals had their first date is actually the central theme of our story today ― Soho House.

What’s that?

Well, it’s an exclusive members-only club where creative people get together. And there are over 40 such clubs spread out all across the world. But just being creative isn’t enough. For an annual membership in India, you need to have upwards of ₹1.5 lakhs to splash too.

And even then, getting a membership isn’t an easy affair. Because if you aren’t cool, you can’t be a Soho House member. No kidding! A committee, consisting of club members, decides who is and isn’t eligible for membership. For instance, if you want to get an entry pass to Mumbai’s Soho House you’ll be screened by a committee of Bollywood barons like Karan Johar, Masaba Gupta, Rhea Kapoor and Kiran Rao. At least, that was when it launched. So yeah, the criteria to get in is pretty subjective.

But the reason we’re talking about it is because Soho House is expanding its empire in India. It now wants to spread out in South Mumbai and New Delhi. And for those in cities like Goa, Hyderabad, and Bengaluru, Soho House is also rolling out its Cities Without Houses (CWH) membership format. So folks here don’t need to feel they’re missing out — they can shell out around ₹3 lakhs annually and get access to experiences, events, and full access to other Soho Houses. And this expansion is all thanks to the ballyhoo and perceived success of its Mumbai house, the first ever in Asia.

Why “perceived” success, you ask?

To begin with, it all started from a café in Soho, London that had become a hangout place for artists ― Café Boheme. The space upstairs had a small door which could make a perfect entrance to a private club. At least that’s what Nick Jones, the founder, thought; making way for the first-ever Soho House in 1995.

The concept of creative environments or milieux took off, a lot like how artists and architects rebuilt the trade and economics of Europe through a transition called the Renaissance during the 14th and 15th centuries. Maybe even Richard Florida’s Creative Class Theory of 2002 fuelled Soho’s membership fire simply because it suggested that diverse and cool cities or groups would bring economic growth and outperform others.

Members rose and so did the waitlist. As of today, it has over 1,90,000 members globally. And you may even have to wait in a virtual queue of about 1,00,000 applicants for anywhere between 3 months to a year to get in.

But investors in the company haven’t been too pleased with it. After Soho House launched its IPO in 2021, shares have dropped by 60%!!! One research firm even said its shares are worth $0.

And the reason for this pessimism is simple.

Soho House has not turned a profit in its nearly 30 years of existence! And it doesn’t look to be closer to achieving that goal either.

See, nearly 80% of its houses are leased. So even if it has been getting more memberships over the years, it’s simply because it has been expanding to rake in more revenues. Over half of its 42 locations opened only after 2018.

Now these expansions mean that lease rents increase simply because landlords shoulder the responsibility to renovate the clubs in exchange for higher rents.

Not just that. Growth for Soho House comes with huge bags of debt — the net debt is at nearly $650 million now. And what happens when debts rise? The company keeps having to shell out more interest payments. This keeps pushing profits even more out of reach.

The other problem is that the aggressive expansion may have killed exclusivity for Soho’s members. Here’s how an “every house” member who has access to all of Soho House’s locations worldwide describes his experience to The Guardian:

It’s like this every time, every time I come

You can never get a table, it takes ages to get served, and you’re paying a lot for the privilege of being a member. I don’t really know what the point is any more. It doesn’t feel special, I don’t feel special.

So why would anyone want to pay big bucks for non-exclusivity, eh?

And Soho House has heard these complaints. It has stopped accepting new members in some cities after getting way too popular.

But being a public company also means that you have to show investors that you’re growing and innovating. The business has to scale and limiting members doesn’t help with that cause. That also may be why Soho House wants to expand its presence in India too.

India’s affluent class is rising, with 60 million or 4% of the working-age population now earning over $10,000 annually as compared to just 24 million in 2015. That’s probably what Soho House is banking on.

But will this be enough for investors to smile about? We’ll have to wait and see if the Soho House frenzy continues to play out or whether the illusion of exclusivity is over.

Until then…

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