Soho House & Co: Building a Phygital Empire in the Experience Economy

In the post-pandemic world, the lines between physical and digital experiences are blurring faster than ever. For companies like Soho House & Co (NYSE: SHCO), this shift isn't just a trend—it's a lifeline. With membership revenues surging 17.2% in 2024 to $418 million and a global footprint of 45 properties, SHCO is proving that a hybrid "phygital" model can scale while preserving exclusivity. But can it sustain this momentum in a world where digital-native competitors are rising? Let's break it down.

The Membership Play: A Scalable Engine

Soho House's core strength lies in its membership model. With 212,447 Soho House members and a waitlist of 99,000, the company has tapped into a demand for curated communities. The 9.6% year-over-year growth in members, even as in-house revenues dipped slightly, shows that people are willing to pay for access to a brand that offers both physical spaces and digital connectivity. This is a critical insight: membership isn't just a revenue stream—it's a flywheel.

The numbers back it up. Membership now accounts for 34% of total revenue (up from 31.8% in 2023), and the 24.2% growth in Q4 2023 (to $95.8 million) highlights the stickiness of the model. Even as in-house RevPAR rose 4% year-over-year, the real magic is in the recurring revenue from members who return for events, co-working, and networking.

Phygital Innovation: The Digital-First Edge

Soho House isn't just opening new houses in Portland, Sao Paulo, or Bangkok—it's building a digital-native ecosystem. The launch of Soho Connect, a digital-only membership via the SH.APP, is a masterstroke. By enabling virtual events, AR-enhanced gatherings, and blockchain experiments, SHCO is creating a "conscious hedonism" brand that appeals to Gen Z and digital-first creatives.

This isn't just about adding features; it's about redefining the value proposition. For $1,000 a year, members get access to both a physical lounge and a digital network of 270,000+ people. The cost structure is a game-changer: digital expansion avoids the high fixed costs of new properties while scaling the brand's reach.

But the risks are real. Can SHCO maintain the artisanal quality of its physical spaces while scaling digitally? Competitors like Friends with Benefits (FWB), a DAO-driven community, are already challenging SHCO's model with token-based incentives and decentralized governance. The key will be balancing exclusivity with accessibility—a tightrope walk that could make or break the brand's long-term value.

Financials: Profitability vs. Ambition

Despite revenue growth, SHCO's net losses ($163 million in 2024) raise red flags. The $51.6 million in FX losses and $38.5 million in impairment charges are symptoms of a company stretching its wings. However, adjusted EBITDA rose 14.1% to $131.9 million, and margins improved to 11% in Q4 2024. This suggests that operational efficiency is catching up with expansion.

The $9.00-per-share buyout offer from Yucaipa and a consortium adds another layer. Going private could free SHCO from public market pressures, allowing it to invest in tech and member experiences without quarterly earnings scrutiny. But it also risks diluting the brand's cultural cachet if cost-cutting measures clash with its "creative sanctuary" identity.

The Investment Thesis: A Hybrid Bet

For investors, SHCO represents a high-conviction play on the experience economy. The company's ability to blend physical luxury with digital innovation creates a moat that's hard to replicate. Here's the rub:

1. Opportunity: The membership model is scalable, and the phygital ecosystem is a first-mover advantage. With Soho Home and Scorpios driving non-hospitality revenue, SHCO is diversifying beyond traditional hospitality.
2. Risk: Cultural dilution, competition from DAOs, and FX volatility could pressure margins. The buyout offer's outcome will be a critical inflection point.

Final Call: Buy, But Watch the Clock

Soho House & Co is a fascinating case study in post-pandemic reinvention. Its membership growth, digital innovation, and global expansion are compelling. However, the path to profitability isn't clear. Investors should consider a buy for the long term, but with a watchful eye on the buyout process and operational execution.

If SHCO can maintain its cultural edge while scaling the phygital model, it could become the gold standard for experience-driven brands. But if it falters in balancing exclusivity with accessibility, the magic could fade. For now, the stock offers a unique opportunity to bet on the future of community—and that's worth a seat at the table.