Private Membership Clubs Still Collect Dues, Despite Closures

(Bloomberg) -- If you ask multiple Soho House members how they feel about the club’s handling of the coronavirus pandemic, you’ll get a panoply of opinions.

“Soho House thinks they can charge people memberships during this pandemic? That is insane,” LNA Clothing Brand Director Ashley Glasson texted me the other day. “I was having a bad day, and this just really put me over the edge.”  

The longtime Los Angeles-based member promptly chose to freeze her membership, rather than pay $3,200 in annual dues after she discovered the Covid-19-shuttered club was offering only in-house credit for months missed, instead of stopping collection.

Chicago resident Sean Fitzgerald is more sanguine. “Soho House, I think, is doing the best they can,” says the five-year member. “Admittedly, I miss the house, but I was excited to splurge on spa products with my stimulus check.”  

In an emailed statement, Soho House explained that members are being given the pro-rated equivalent of their annual dues, depending on how long the houses are closed; credits for March and April have already been applied. They can be spent on merchandise or saved to use on bedrooms or food and drink when the houses reopen. 

For members’ clubs, it’s a slim line to walk as social distancing challenges the once-thriving industry.  Like so many restaurants and bars, they must continue to acquire enough money each month to cover property taxes and other expenses without frustrating and potentially alienating their most precious asset of all—members. (And they certainly don’t want a class-action lawsuit.)

Big Business

The U.S. alone holds approximately 3,500 private clubs with revenue of $1 million or more, according to Club Benchmarking, a data service. American clubs contribute more than $3.75 billion in taxes, service a total of more than 2 million members, and add $21.5 billion to the economy each year, according to the National Club Association.

The average club derives 43% of its revenue from membership dues and 27% from food and beverage sales, according to Club Benchmarking. Monthly expenses can easily reach six figures, even during a pandemic. Membership dues contributes roughly 70% of fixed operating costs, including payroll that cumulatively supports roughly 450,000 club employees nationwide. 

“In [the recession of] 2008 and 2009, clubs dropped dues or initiation fees,” says Henry Wallmeyer, the president and chief executive officer of the NCA. And it was a disaster. “We have learned from that lesson and are encouraging clubs not to do that this time.”

Instead, they’ve been instructing clubs not to change things, he continues. “Keep the membership dues where they are, keep even initiation fees where they are, but provide experiences for members in other ways.”

In Scottsdale, Ariz., for example, Otto Car Club is leading small group drives in which no one exits cars while it continues to charge its normal fees (minimum $400 monthly, plus an annual $5,000 to $8,500). New York’s Classic Car Club, while retaining the $5,000 minimum annual memberships and $180 monthly dues, is opening driving privileges to those with the less-expensive “social” accounts that normally stipulate that such members can use the clubhouse but not drive the cars. The club is also allotting additional driving points, running a virtual racing series on its track simulators, and cleaning the fleet of real sports cars cars with disinfecting wipes and ozone generators—a process that takes about three hours per car to remove all viral contaminants.

Roughly 30 members have let their memberships drop, says CCC co-owner Michael Prichinello. “It’s an annual commitment, paid monthly. We let them out of their commitment. Some people had to leave the city and hit a hardship. We’re not here to add to that.”

But most have been pleased. “They’ve done a great job communicating and keeping the fleet rolling—I’m looking forward to getting back to drinking Old-Fashioneds at the bar,” says longtime member Colin Britton. Applications to the club, Prichinello says, are up.

“Overall, we’re just trying to be of service,” he says about driving privileges for its high-powered Porsche 911s and brand-new Chevrolet Corvette C8. “If you saw the state of the subway system, no one wants to be in it, or an Uber car. We know members have to get around, so we’re trying to make it as clean and safe and flexible for them as possible.”

Different strategies for member retainment and appreciation take different forms, of course, depending on the nature of the club. In London, the 67 Pall Mall Club, a private club for wine enthusiasts, is crediting unused months during lockdown to members’ accounts and has put on “an absorbing program” of virtual wine tastings that have “gone down an absolute storm,” says member James Warren. “I couldn’t fault them.”

L.A.’s San Vincente Bungalows—the no-cameras-allowed hiding grounds du jour for Hollywood’s A-list elite—has closed but is allowing current members to suspend and carry over dues into future months.  

Maintaining Engagement

“The saying used to be, ‘A club will change its way of thinking one deceased board member at a time’—but now, we’ve seen clubs change at a rapid speed,” says Wallmeyer. “We prefer to say ‘physical distancing,’ rather than ‘social distancing,’ because clubs can still provide a social aspect of life. There are ways can we still engage members’ day-to-day lives.”

Much of it has to do with fostering humanitarian impulses among members. 

San Francisco’s the Battery club is running a blood drive and offering virtual seminars on nutrition and mental health, along with lighter fare such as DJ sets and Zoom conferences on the golden age of Bay Area rock music. Members also lobbied for the option of allocating their dues to support the club’s nonprofit program, Battery Powered, or to extend a lifeline to furloughed staff.

Michael Birch, a co-founder of the club, says 37% of members opted to pay it forward instead of taking food and beverage or hotel credits, with most of them choosing to help staff. “We couldn’t be more delighted,” Birch says. The funds brought groceries, health care, and cash payments.

Others such the New York Athletic Club are delivering meals to local hospitals or setting up commissaries that provide supplies such as toilet paper and cleaning agents for members. Soho House’s U.K. staff is helping provide thousands of meals daily for National Health Service workers; in he U.S., chefs at Cecconi’s West Hollywood are working with charity Frontline Foods to prepare 500 meals a week for health-care workers, and Dumbo House employees in New York are giving 500 meals daily to health workers in the area via the charity #InMyScrubs. Soho House Istanbul has provided 75 bedrooms for health-care workers; Soho House Amsterdam has handwritten cards to elders isolated in local senior communities. Other clubs are giving tennis and golf lessons and holding virtual book clubs.

Post-Pandemic Concerns

Beyond simple survival, a larger question looms: Once pandemic restrictions recede, will members even want to come back?

For some, club closures are an absence dearly felt. For others, prolonged time away, as can happen with lapsed gym-goers, could lead to the realization that they didn’t need to belong, after all. Those in the industry are banking on the idea that familiarity and safety go hand in hand.

“If anything, members’ clubs will be more relevant,” says Steven Rojas, a longtime social and lifestyle director in New York who has run programs for Soho Grand Hotel, Ian Schrager, and Equinox Hotels. “These places have always provided an upscale experience. The tight door and members-only environment will be crucial when deciding where to spend your time and money.

“The assumption is that, along with a more curated food and bar and a self-selecting clientele, you’ll also have more upscale, high-end sanitary conditions,” he continues.

That’s especially true upon considering that public alternatives are built to maximize table turnover.   

“Clubs will be the place where people feel comfortable returning to first,” predicts Wallmeyer. “Members will be familiar with all of the other people going to the club, and of course, they will trust that clubs will certainly be taking the necessary steps for precaution and hygiene.”

For some clubs, membership drops may almost be a moot point. Many of the more upper-crust clubs in the world have a golden parachute: They are canny real estate investments, especially for developers planning for and weathering a recession.

The seven-year-old Battery, which counts more than 4,600 members, occupies an artfully deconstructed warehouse near the piers in San Francisco. Robin Birley opened his elite 5 Hertford Street club in London’s Mayfair in 2012 to the tune of $50 million—with backing from the British billionaire Reuben brothers, who own the property. Soho House’s most recent expansion has been fueled by grocery billionaire Ron Burkle’s Yucaipa Cos., a private equity firm he used to purchase a 60% stake in the group for about $375 million in 2012. 

Meanwhile, Soho House is preparing for the future, improving its website and associated apps and curating (for purchase) boxes of home, bathroom, bar, and kitchen accessories sourced from and for members. Founder Nick Jones has even decided to open the club’s normally private website domain to anyone who wants to contribute art or creative work. The endeavor is meant to foster a sense of creative community.

“Being open to everyone at this time feels like the right thing to do,” Jones said in an email to members. “We see this as an opportunity to reflect, regroup and come back stronger than ever.” If it gets some potential applicants in the queue, all the better.  

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