Profiting from the Rise of Private Members Clubs

Members-only private clubs are enjoying somewhat of a boom today, with steady revenue flows from membership fees attracting new players to this market. Here is what investors and developers should know about the sector and how they can tap into its growth potential.

Private members clubs – or exclusive hospitality organisations that offer premium sport, cultural or social amenities and facilities for membership fees – are seeing a surge in membership numbers globally. Their services vary depending on the specific profile and focus of each club, but in many cases offerings include a combination or mix of high-end sport facilities, wellness or spa services, exquisite culinary options, workspace and meeting capacity, or even luxury accommodation. Programming can range from sport tournaments to entertainment events and professional gatherings.

Millionaires look for privacy and exclusivity

Growing demand for members clubs is likely supported by an increase in overall luxury spend, which hit a record €345 billion globally last year and is forecast to grow by up to 12% this year. Spending on luxury travel is also at a high, as reflected by robust hotel occupancy and room rate performances in 2023. All this seems to have a correlation with demand for private clubs. The continued effects of Covid also has a positive impact, as wealthy customers value privacy and a sense of community more than ever after the pandemic, operator Core Club’s founder and CEO Jennie Enterprise has told CNBC.

Club giant plans to go on a US shopping spree

The main categories of private members clubs include country clubs that normally operate in suburban or rural areas with a special focus on sports, most likely golf, tennis or swimming. These organisations dominate in the US, but are also popular in other countries, including Canada, Australia or Spain. About 63% of clubs increased their membership counts in 2022, and 62% had a waiting list for prospective members at the end of 2022 and early 2023, consulting firm GGA Partners found in a recent survey that mostly included country clubs. The report states the outlook for the industry remains strong.

Despite the relatively rosy picture, future supply of new country clubs seems to be short in the US, where undercapitalised independent players are going through consolidation. Invited, the Dallas-based owner and operator of about 200 private clubs with more than 430,000 members in the country is planning to acquire three to five clubs a year. “There are tremendous secular tailwinds for demand, and there are no new country clubs. You have a supply and demand imbalance, and it’s not going away,” the firm’s CEO David Pillsbury said in August. “I am incredibly bullish,” he said.

Tiger Woods also jumps on the club bandwagon

But there are new projects in the US market. The owners of the long-closed Skyline Woods Country Club in Nebraska are planning to upgrade and reopen the complex as a private club with a 18-hole golf course, tennis courts and a swimming pool. Construction could start in 2024 or 2025. In another development, golfer legend Tiger Woods has teamed up with baseball star Mike Trout to build Trout National – The Reserve in New Jersey by 2025. This complex will have a private championship-style golf course, a clubhouse, a restaurant, five-star lodging, and a wedding chapel, among others.

Glitzy social clubs are mushrooming in big cities

Another category of private members clubs that saw demand growth in recent years is urban social clubs, which operate in major cities across the US, Asia or Europe. Originating from early gentlemen’s clubs in 17th-century London, this sector is evolving at an accelerating pace, with a surge in new openings and overall membership. Soho House, probably the best-known membership club chain globally, increased the number of its properties to 41 in July 2023 from 30 in July 2021, while boosting its membership to over 176,000 from less than 112,000 in this two-year period.

Recent openings also included the Zero Bond, Aster, Heimat or Core Club in the US, Club C+, Whale Club or The Third Space in Asia, and Pavilion, Maison Estelle, Shoreditch Arts Club or Apollo’s Muse in the UK. New-generation social clubs often differentiate themselves by targeting niche audiences or specific demographic groups. NeueHouse offers art galleries, screening rooms and podcast studios to creative types. Chief aims to connect female executives, The Gathering Spot is geared toward African Americans and B_together offers programming to busy parents with at least one kid.

Restaurants bring new flavours to the market

Launching members-only social clubs have become a popular option for restaurant groups and hotel chains to extend their existing brands and attract new customers. Major Food Group opened its first ZZ’s Club in Miami in 2021 and is launching a second location in New York this year, while Cipriani is planning to open a new Casa Cipriani in Miami in addition to its existing properties in New York and Milan. Hotel operator Rosewood has added Carlyle & Co. in Hong Kong, and Aman has launched its Aman Club in New York. Soho House has launched a hybrid hotel and club concept with its Ned chain, which now has three properties and operates a separate membership programme.

Harrods steps closer to the super-rich in China

Venturing into the private members’ club market can also make sense for players from other sectors. Qatari-owned department store operator Harrods is planning to open The Residence, “a private shopping suite”, in Shanghai this year to reach out to high-spending Chinese customers that generated 16% of the firm’s sales last year. “We always knew that shopping would go back to China,” Harrods managing director Michael Ward told Bloomberg. “We want to have a base to be able to maintain that relationship,” he said. The club will feature a Gordon Ramsay restaurant, among others, and “access to the first-class international lifestyle services that only Harrods can offer”, the company said.

Arts Club outpost boosts competition in Dubai

New entrants to growth markets not only increase competition but can also help sustain general buzz around members-only clubs. The Arts Club Dubai, the first international outpost of the historic London club, has stirred conversations about membership choices since it opened in the city’s financial district in 2020. Its focus on cultural offerings is often compared to the more business-focused approach of Capital Club Dubai, a local flagship that launched operations 15 years ago.

But the two clubs insist that they are not competing against each other directly. No doubt, there seems to be plenty of room for growth for both in Dubai, which has an estimated 68,400 millionaires and over 200 centi-millionaires with at least $100 million of investable wealth. The city is forecast to see its centi-millionaire population increase by a massive 78% over the next decade until 2033.

Membership fees can soar beyond $100,000

The biggest selling point of private members-only clubs is exclusivity, which comes at a price. Country clubs and other private members-only clubs across Florida charged an average joining fee of $129,000 and additional annual membership dues of $18,600 in 2023, advisory RSM said in a report in July. GGA Partners found in its survey that clubs were planning to raise their joining fees by 13.5% and annual dues by 8.2% in 2023.

Fees for social clubs in major cities continue to vary wildly. Soho House charges a one-off fee of £550 and annual fees of £2,750 for the regular access to all of its houses worldwide if the applicant will mostly use the chain’s first ever property in London, opened in 1995. In comparison, Core Club reportedly charges $15,000 for individual and $100,000 for family memberships, with annual fees of $15,000 to $18,000. Joining the new Harrods club in Shanghai is expected to cost the yuan equivalent of about $21,000 a year.

Ready to join? Expect a long waiting list

Most clubs are limiting the number of their members, and many still accept newcomers by invitation only or based on recommendations from existing members. Chief has an extensive list of criteria and requirements for senior women executives wishing to join, who also need to complete a 30-minute phone interview during the application process and pay annual fees of $5,800 to $11,900 once accepted. This doesn’t seem to deter applicants, as the club is said to have a long waiting list with a whopping 60,000 names.

Operators also cash in on food and drinks

Initial lump-sum fees and annual membership dues provide a steady revenue flow for private clubs, which also generate additional income by offering food and drinks, sports, wellness or other services. Fees accounted for more than 61% of the average annual operating revenue of $16.5 million of private clubs in Florida in 2022, with sports generating over 16%, food more than 13%, drinks about 5% and other 4%, data from RSM show.

Soho House increased it revenues by 19% on the year to $288.9 million in the second quarter of 2023, with membership fees accounting for just 31% of this total and in-house and other revenues having a share of 43% and 26%, respectively. The firm cut its quarterly loss to $2.6 million from $82 million.

Some clubs may fare better than others

Despite their ability to generate non-cyclical membership revenue, some argue that private clubs do not offer an attractive business opportunity precisely because of their operational model. Many private clubs are owned by their members and operate as non-profit organisations, while for-profit clubs owned by various investors simply cannot accept an unlimited number of members as it would erode their exclusivity.

But even critics admit that certain approaches can be more promising than others when it comes to the growth potential or profitability of private member clubs. Bloomberg has calculated that Harrods may generate $5.25 million a year at its planned 250-member club only from membership fees, which indicates better results when compared to the $4.9 million of overall combined revenue Soho House had last year at each of its 4,000-member clubs.

Banning jeans was no longer a good idea

Maintaining an outdated concept can contribute to the failure of even storied social clubs, such as the Princeton Club in New York. One of the Ivy League alumni clubs, Princeton Club shut down in 2021 after defaulting on its $39 million mortgage and losing a third of its 6,000 members and much of its revenue during Covid. But it struggled to recruit members – especially from the younger generations – already before the pandemic, partially because of policies like not allowing jeans until around 2010. It is also telling that its spring 2020 programming included a workshop on how to use an iPhone.

In some cases, even extensive facilities can’t prevent a private club from going under. Members of the 99-year-old Decatur Country Club voted to shut it down in December 2022 partially as low membership numbers didn’t cover overhead costs. The club closed its golf course already in 2017 because of the reduced number of golfing members. The property was sold and the club stayed on as a tenant in its building under a lease that also included its swimming pool and tennis courts. “Country clubs are not the thing they used to be” and it takes a lot of money to play golf now, said a long-time member.

Here is one tip to create a cult-like following

New entrants to the private club scene need to develop a unique brand that defines all of the various experiences on offer. Without such a strong central identity, sports and wellness features, culinary options, networking and professional programming will remain nothing more than a simple mixture, or potpourri, of different attractions. Leveraging the appeal of a singular brand can make it easier to attract and retain members, and even create a cult-like following.

Getting the club concept right is key for generating regular and well-balanced membership revenue and an additional flow of extra income from F&B, sport, wellness and other services. The expansion of well-known hospitality chains into the private club market show that linking the club concept with hotel or restaurant operations could spur further revenue streams.

Our CEO, Roger Allen after visiting JNcQUOI with a few friends and partners and is the one taking the picture.

About the author:  Roger  A. Allen, RLA Global Group CEO

Roger is the Group CEO of RLA Global and brings a no-nonsense approach to the leisure industry,  which is based on a proven track record of representing owners and operators best interests. Roger has worked with many of the leading real estate developers, entertainment venues, hotel operating brands and most influential hotel owners around the world.  Furthermore, successful ongoing engagements with government entities and high net worth individuals keep him fully engaged with the day-to-day project development responsibilities.