A closer look at... private members' clubs

Introducing A Closer Look At…, a series of monthly deep dives on people, products, or places enabling connection.

This month I’m taking a closer look at private members’ clubs: are these a viable business model for connection?

Did a friend send this your way? Sounds like they know you. Subscribe here.

Andy

You just left a meeting in Central London and want to grab a drink before a client dinner. A friend sends you his location, which you walk up to shyly. It’s not entirely clear to you if you’re in the right place. You figure you are after a man with a large hat warily greets you at the door (has he seen you before?).

You make your way in, confidence picking up (slightly). A hostess asks for your phone, covers the camera with a sticker, ‘no pictures please’. The lights are dim and the halls look plenty. Off you go.

Please, make yourself at home.

Most sources trace the roots of modern-day members’ clubs to London’s White’s in 1693¹. Originally founded by Francesco Bianco (anglicized to ‘Francis White’) as a chocolate shop in St. James, White’s quickly gained popularity among local male aristocrats looking for a place to socialize (among others). As the crowd grew smaller and naughtier, a club was born.

Since, clubs have proliferated across social classes, genders, professions, interests, and geographies. By nature, the existence of a club will almost guarantee the creation of another - founded by those denied entry at the first. I was waitlisted in Soho House back when bankers weren’t allowed in and was also kindly asked to leave the bar at the Sind Club. Guess who’s thought of founding a club?

Soho House now accepts bankers disguised as rising artists and the Sind Club has updated the sign at the bar’s front door to: “No dogs or women allowed”. Despite these ‘innovations’, little has changed in the c. 300 years between Hogarth’s depiction of White’s and Friday nights at Loulou’s². The essence of private members’ clubs remains largely unchanged… and full of contradictions.

It all starts with the business model. Private members’ clubs essentially live on i) food and beverage consumption on site (in-house revenues), ii) membership fees, and iii) adjacent revenue streams, or other businesses (i.e. hotel rooms, events, products, partnerships, nurseries, etc.). For clubs like Soho House, on site spend represents c. 45% of total revenues. This is followed by membership revenues at c. 30% and other revenues at c. 25%. Unsurprisingly, costs are mostly made up of food and beverage costs, staff expenses, rent expenses, and utility bills. Let’s not even get into pre-opening expenses (how do you plan to make a return on that marble countertop shipped from Carrara again?).

And that’s where the customer experience comes in. Because clubs sell exclusivity, diluting costs is not as simple as just filling up the club with people. What that does is dilute the experience - a major no-no for members paying thousands of pounds to ‘belong’. This gets increasingly complicated when operating multiple locations. Who’s going to pay for Karen’s role in HR when all houses are barely breaking even?

So clubs end up operating a restaurant, a gym, and a bar, for instance, with a full cost structure while artificially capping the number of people who may walk in (aka, revenues). Unless this is offset by membership fees, and even so, well… there’s a contradiction. If these were standalone businesses, the goal would be to maximize foot traffic. At a club, the goal is quite the opposite: maximize the feeling of exclusivity. But, if your members don’t love you and want to throw their money at you, plus invite their friends, plus attend your events, plus stay at your hotels, then your exclusivity isn’t translating to a sense of belonging. Hello frustrated members and financial troubles.

Now, there are plenty of people who join clubs for reasons other than connection and belonging. Maybe the club has a great location for sporadic client meetings, maybe going to the nightclub is fun every now and then, maybe having a membership is just great social currency. These are all valid… and unprofitable in the long-term. Unless members feel the club provides them with greater value than what they pay for, they’ll eventually quit their membership or, more commonly, visit fewer and fewer times (goodbye c. 45% of revenues).

And that is exactly what is going on.

I went out to the streets (more like coffee shops and wine bars) and interviewed multiple expats who’ve been members at clubs in London for 5+ years to better understand their experiences. The reason I picked expats is because these tend to differentiate between exclusivity and belonging better than locals, who may already get a sense of belonging from their city. Unsurprisingly, none of them felt they ‘belonged’ to their club and were either only going sporadically, considering switching to newer clubs (‘maybe that’s my crowd’), or quitting clubs altogether³.

So what if the waiter asks for your water preference? If there is a dress code, isn’t it meant to be respected? Well, maybe - but let’s focus on what is really behind these complaints. How could members ever feel at home, when it’s been 10 years of the same questions and frictions? There are plenty of rabbit holes on Reddit about this too, in case you’re ever curious how outspoken people can get on the topic. And that is why clubs are so difficult to crack - they are supremely human. Knowing a member’s water preference and revisiting dress codes should be a part of every day business.

Understanding what people get at clubs vs. what people actually want translates into latent opportunities for entrepreneurs and potentially attractive financials otherwise scarce in the club world. Instead of acquiring a landmark building, clubs could rent a more welcoming townhouse. Instead of spending thousands on staff uniforms, they could invest in hospitality training. Pompous events focusing on decoration and social media could be replaced with meaningful gatherings focusing on member introductions. Dress codes could be replaced by conduct codes (fun fact: dress codes only came about in the second half of the 20^th century as a symptom of decline. Successful clubs have historically kept a degree of informality).

KIND bar’s Daniel Lubetzsky says that behind every complaint there are another 10 people who didn’t even bother to speak up but feel equally frustrated. Unsurprisingly, complaints like those of the people I interviewed have fed the rise of more progressive, affordable members’ clubs in recent years. These offer a twist to traditional establishments and seem more in touch with customers’ needs. Interesting concepts include:

Ultimately, successful clubs will be those that i) have a clear value proposition and stick to it (i.e. Priya Parker’s generous exclusion), ii) provide unreasonable hospitality, and iii) leverage technology as an enabler for connection. They must act like a friend, making members feel welcome, included, and valuable. That easy, and that hard.

So, going back to our question. Are clubs a viable business model for connection?

Well, picture this. You just left a meeting in Central London and want to decompress before a client dinner. You notify your club you’re on your way, as you’d do with a friend. A woman confidently greets you at the door. Andy, it’s been a while! Welcome back. Should we get your champagne ready?

You make your way in, the hostess walks with you. By the way, we’re having a wine tasting this Friday. Laura is coming, have you met? We’d love to introduce you if you’d like, she’s also in finance…

You sit down, your drink is waiting for you. The bartender doesn’t bring the olives, he knows you hate them. Instead, he gets some mixed nuts for you. How’s your day been?

—

Don’t get me wrong - this is extremely complex from an operational perspective. It implies an app, a customizable and heavily used CRM, trained staff, and more. But what it mostly implies is an intention – from the club and the member. An intention to go above and beyond into making interactions meaningful. Into generating connection. The infrastructure exists, the differentiator lies in how it’s used.

So, my answer is yes. Clubs can provide members with a sense of connection while remaining financially viable. It’s a matter of going back to first principles. For all their press, secrecy, scandals, and ridiculous waitlists, clubs remain a testament to the human need to belong.

The challenge is – are clubs and members willing to put in the effort required to make magic happen?   

FOOTNOTES

¹ Others trace the roots of private members’ clubs back to earlier in the 17^th century with English settlements in North America and the Circoli in Italy.

² If you’re interested in learning more, I suggest Behind Closed Doors written by Dr. Seth Alexander Thévoz.

³ Just like you’re not necessarily healthy if you aren’t sick, people weren’t immediately aware of what a sense of belonging meant (especially if they didn’t consider themselves lonely). However, once they realized what it meant, they were quick to complain and share thoughts on how clubs could improve.

LINKS TO PLAYERS

• The Dally, London

• Loom, London

• Kindred, London

• Moysa, Milan

• Groundfloor, Various

• Maxwell Social, New York

• MaybeItsFate, Louisville

• & the Table, Various

• Timeleft, Various

We’ll talk soon. Thank you for joining me at Casa Cinco.

Did a friend send this your way? Sounds like they know you. Subscribe here.

Was this marked as spam? ChatGPT that thing and take me to your main inbox.