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(MCG) Q3 2021 Earnings Call Transcript

By Motley Fool Transcribing – Nov 18, 2021 at 1:00AM

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MCG earnings call for the period ending September 30, 2021.

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 (MCG)
Q3 2021 Earnings Call
Nov 17, 2021, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Ladies, and gentlemen, thank you for standing by. My name is Emma, your chorus call group operator. Welcome and thanks for joining the Membership Collective Group's third quarter earnings conference call. At today's recorded presentation, all participants are in a listen-only mode.

The presentation will be followed by a question-and-answer session. [Operator instructions] I would now like to turn the call over to MCG.

Unknown speaker

Thank you for joining us today to discuss the Membership Collective Group's third quarter financial results for 2021. Before we begin I'd like to remind everyone that certain statements may be made during this call that are forward-looking. These forward-looking statements are subject to various risks and uncertainties and reflect our current expectations based on our beliefs, assumptions, and information currently available to us. Although we believe these expectations are reasonable, we undertake no obligation to revise any statements to reflect changes that occur after this call.

Description of these factors and other risks that could cause actual results to differ materially from these forward-looking statements are discussed in more detail in our filings with the SEC. During the call, we also refer to certain non-GAAP financial measures. These non-GAAP measures should be considered in addition to, and not as a substitute for, or in isolation from our GAAP results. Reconciliations to the most comparable GAAP measures are available in today's earnings press release, which is available on the Investor Relations section of our website at www.membershipcollectivegroup.com.

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Nick Jones -- Founder and Chief Executive Officer

I'm Nick Jones, founder and CEO of the MCG and I'm currently in the newly open Soho House Paris which we're going to give you a quick tour before we do the third quarter earnings presentation. Please, follow me. Assia.

Assia Heinold -- General Manager, Soho House Paris

Hey, Nick.

Nick Jones -- Founder and Chief Executive Officer

How are you?

Assia Heinold -- General Manager, Soho House Paris

Good and you?

Nick Jones -- Founder and Chief Executive Officer

Assia runs the place. She's the general manager here. [Inaudible] 

Assia Heinold -- General Manager, Soho House Paris

So, we have the restaurant and we have our wonderful bar.

Nick Jones -- Founder and Chief Executive Officer

Hello. How are you? I'm Nick. Nice to meet you. Paul, how are you? 

Paul Samb -- Head of Membership in Communications, Soho House Paris

Good?

Nick Jones -- Founder and Chief Executive Officer

Very good. Hello, I'm Nick.

Unknown speaker

Nice to meet you. 

Nick Jones -- Founder and Chief Executive Officer

Paul is the head of membership in communications in Soho House in Paris and is sitting with a new member. How are you finding it? Do you like the house? Or to be honest.

Unknown speaker

Yeah. It's just so new in Paris. A big space, which usually in Paris where everything is so tiny and it's a crowded city. We have space to just chill.

Nick Jones -- Founder and Chief Executive Officer

Nice meeting you. See you around. Paul, I'll see you later. Thank you.

Enjoy your lunch. [Inaudible] Well. How are you? 

Unknown speaker

Yeah.

Nick Jones -- Founder and Chief Executive Officer

It's good to see you.

Unknown speaker

Good and you?

Nick Jones -- Founder and Chief Executive Officer

I'll have a burger. Very nice. This is our cinema. Also, we use it as a [Inaudible] room which is proving to be incredibly popular.

It's really good to see people back in our houses and stay in our hotels. I'm just going to show you a couple of bedrooms. In fairness, this is the nicest bedroom. Sitting room.

This room is Boudoir Plus. And then, the bedrooms are over here. So, what do we got here, Assia?

Assia Heinold -- General Manager, Soho House Paris

Nick, here we have our dipping pool.

Nick Jones -- Founder and Chief Executive Officer

Oh, this is nice. That concludes the tour of Soho House Paris, which has got 36 bedrooms. It's got a club downstairs. It's got a [Inaudible] room, it's a gym, wellness, health club.

It's going super well. We're really happy with it. Hello, everyone. Can I just say it's great doing this from New York and seeing the city flourish and our houses reopen and get the buzz in the business, which is so accustomed to? And I also hope that everyone enjoyed seeing our new house in Paris.

It's an incredibly beautiful space and we're super excited about it. I'm also delighted to welcome you all to the third quarter earnings call of the MCG. I'm going to take you through some of the highlights before handing them over to Andrew and to Humera for all the details. The MCG or Membership Collective Group enables our members to connect with each other wherever they are in the world.

Either in our physical spaces over our digital platforms. Q3 has been another strong quarter for us and we've loved welcoming our members back to our houses Scorpios Beach Club, the Ned and for this quarter, the Line, and Saguaro Hotels. All of our sites are lively and buzzing. It's wonderful to see our houses thriving once again.

And of course, it's a quarter which has also had its challenges. As the impact of COVID-19 on our business has diminished, we have seen pressures from rising inflation, supply chain issues, and most pressingly labor shortages at our sites. Albeit, they have so far had a limited operational impact on us. Before I continue, I want to pause and thank everyone who works at the MCG around the world for their passion, resilience, and incredible hard work in facing the issues of the past few months, it means a lot to me.

Turning to membership, we have welcomed nearly 17,000 new members to MCG in the last quarter. That's due to resuming membership intakes at our houses, but also down to the strong growth of our newer memberships Soho Friends, Soho Works, and Soho Home Plus. Demand for our membership has remained incredibly strong as ever. A waitlist has grown to just under 68,000 globally with every site having a waitlist to join.

When it comes to sales in our houses, momentum has grown through the quarter. Whereas before, it had been the UK leading the charge. I am delighted to see all the regions showing improving momentum, particularly through September. We've opened two new houses in the quarter in Tel Aviv and Paris.

We've also recently opened Soho House Rome in the San Lorenzo neighborhood. You've had a glimpse of a Paris house, but we're equally as excited about Rome. It's a 10 story building with bedrooms, long-stay apartments, Soho health club, and the rooftop [Inaudible] restaurant with views across the city. I have loved visiting these new houses over the last few months and I know our members will love visiting them too.

I also recently visited Austin in Texas. My God that is thriving. On retail, Soho Home had another great quarter with online sales up, an incredible 116%. We've also opened our first flagship Soho Home Studio on the King's Road in London, which has got off to a flying start and we'll be opening a second studio here in New York this week.

Scorpios Beach Club in Mykonos had a busy summer season despite ongoing capacity restrictions. Also, Ned, the Line, the Saguaro Hotels all saw a strong rebound with increases in occupancy rates as customers enjoyed being able to travel again. 2022 will be another exciting year for the MCG. As we open new houses in Brighton, West Hollywood, and Nashville in the first quarter, and with four more sites to follow.

We will also open our second Scorpios site in Tulum in Mexico as well as two new Ned properties. I'm incredibly excited to announce the Ned New York in midtown. This is opening mid 2022. It has 167 bedrooms, a public bar, and a restaurant plus a members-only in Ned's Club.

This growth is what the MCG is all about, continually increasing the value of our memberships by adding new access and experiences for our incredibly loyal members. And with that, I'll hand it over to Andrew to take you through some of the detail.

Andrew Carnie -- President, Soho House

Thanks, Nick. I will talk more about our performance and momentum throughout the quarter. Our profit recovery and MCG membership hitting an all-time high. Before I hand over to Humera for our financial performance in the quarter and outlook, I will spend time talking about our strategic growth plans at MCG and how we're progressing in the next 12 months.

I'll start with membership. It's at the heart of everything we do at MCG. Our global teams are here to give the best experience to our members and their guests. I am pleased to report that total MCG membership increased by 16,700 in the quarter to 145,00 and 20% above 2019 levels.

In the quarter just under a third of our total revenue came from recurring membership fees which grew to $51 million. This growth was driven by a combination of factors. The consistent high retention rates of Soho House members are in line with historical averages. The resumption of membership intakes across all our houses also houses even the oldest have experienced an uplift in membership numbers adding to their profitability.

Members continued to unfreeze membership with over 4,000 members unfreezing over the quarter and we expect this level of unfreezing to continue throughout Q4. A waitlist continued to grow to over 66,700 by the end of the third quarter with membership applications outpacing the rate of membership intakes. Our newer memberships added additional 10,850 members across Soho Friends, Soho Works, and Soho Home Plus. Our House members continue to provide us with the backbone for acquiring new Soho House Friends members.

We had over 140,000 guests registering with us on the Soho House app when they visited the houses as a guest of the member in the quarter. The exceptional membership performance contributed to a significant improvement in profitability with adjusted EBITDA turning positive in the quarter. Moving on to in-house revenues. We saw an acceleration of members using our houses throughout the quarter with over 120% growth of in-house revenues versus the third quarter in 2020.

We really, really enjoyed welcoming our members back to all our houses. Accommodation continues to rebound the group occupancy rate increasing to just below 70% with an average room rate of increase of 35% despite ongoing restrictions in Europe and North America. Encouragingly the weekly run rate of sales improved throughout the quarter and we're excited that our members can travel to North America again from this week. As you can see from the video, the first time since the pandemic we hosted a full events program across all our houses which live-streamed on our Soho House app globally.

From fashion week in Paris, prior events in New York, to offsite well-being events in Toronto, our members enjoyed a wide range of events that blended music art, fashion, and well-being worlds. I want to pause here and mention our membership credits. We issued membership credits when our houses were closed during the pandemic as a one-time goodwill gesture to all our members. Our members have loved the credits being able to redeem them against food, beverage, accommodation, and as well as Soho Home.

It was the right thing to do for our members. These credits will expire at the end of September for the vast majority of our houses and as you would expect we saw a peak redemption activity in the last few weeks of September. Therefore, there was a one-off impact from credits on our financials in the quarter. Since we have already recognized the cost of the membership credits program as an expense when they were issued to members when our houses were closed, when credits are redeemed in a house this sale is not included in our in-house revenues, which represents cash sales only.

In Q3 alone, credits for the face value of $21 million were redeemed by members equivalent to an estimated $12 million of potential gross profit if a cash sale had been made by those members. Although these membership credits are not included in the revenue numbers we are sharing with you today. Our MCG where a membership platform connecting members in our physical spaces and digitally globally. Every day we strive to make our members' lives better, socially, and in their work.

We have a large addressable market for Soho House, Soho Home, the NED, and Scorpios to expand into. Our revenue growth plan focuses on a number of areas including opening new Soho Houses with targets to open five to seven per year across the world as we expand our global membership. Launch and grow new membership types including Soho Friends, Soho Works, and the soon-to-be launch Soho House Connect membership. The expansion of other brands and MCG platforms including the Ned, and Scorpios, and Line with the plan to open one to two sites per brand each year.

The growth of our luxury interiors business Soho Home both digitally and physically via our Soho Home Studios. And finally, our global efficiency program, which Humera will talk more about. In Q3, we continue to make good progress in all initiatives. We opened two houses in the quarter, Tel Aviv in Paris, plus Rome in mid-October, bringing our total house openings to six this year in four new countries.These houses collectively have added over 1,500 new members.

We have decided to move Brighton house in the UK opening in March along with other openings in Q1 in Soho House West Hollywood, as well as Soho Houses in Nashville.  As Nick mentioned, we are on track for seven houses in 2022 plus two Neds and Scorpios. So a total of 10 new experiences for our members. Now on to our new memberships. Our Soho Friends membership has grown to just under 18,000 members at the end of Q3.

With just under 14,000 of these Friends interacting in the membership through the Friend's app. In the quarter, we opened a further five Friends studios across five cities. All used in our existing spaces to offer a creative space for members to visit, eat, drink, attend events, screenings, as well as hosting their own events. These events range from creative workshops to music nights, to charity exhibitions.

The outlook growth for Soho Friends remains very strong. In particular with the 350,000 guests now registered on the Soho House app to shop. Now to Soho Works, we welcome the addition of 1,370 members in the quarter, and our occupancy in our offices now is grown to 95% globally. The business continues to flourish as more members have adopted a flexible approach to working using our lounge, office, and meeting room spaces to develop their own networks and careers.

We have recently launched a Soho Works app allowing also Soho Works members globally to connect and collaborate. Now onto Soho Home. Soho Home is our retail segment which enables our members to bring the house home. The business had a stellar quarter with online sales up 116% and profit growth significantly outpacing sales growth.

Our members loved our new assortments launching in the quarter with an average order value increasing over 120% year on year and 95% of sales in the quarter at full price. With members making up more than 70% of all sales. The North American market was particularly strong with sales growth of 140% year on year. We opened our first Soho Home Studio in London.

A 6,000 square foot retail space showing our latest home collections, as well as brands launched and owned by our members and our members' galleries. This week, we'll be opening our second Soho Home Studio here in New York. We continue to be excited about the opportunity for Soho Home. Before I hand it over to Humera, I will finish on our progress on our digital initiatives, the shop or Soho House app.

The Soho House app has four main focuses all bookings globally, house pay, daily content by our members, and connect features for our members to grow their own networks both work and socially. Throughout Q3, we made improvements to booking's in-house pay functionality. We continue to see nice user growth in Q3 with we had over 93,000 active users with a daily usage increasing by 18% on the app. Whilst bookings and payments remained our most adopted features, our members are starting to use our recently launched connect features with over 20% of members actively connecting on a daily basis.

We have some exciting improvements planned in Q4, which will improve our member experience in the shop further. The resilient rate of increase in user numbers and engagement provides us with great confidence for the launch of Soho House connect membership, which we can now expect to launch in early '22. Before I pass on to Humera, I want to thank our teams everywhere for all their hard-working commitment to delivering a great quarter's results in a challenging environment.

Humera Afzal -- Director of Finance and Chief Financial Officer of Backed

Thanks, Andrew. I'll now take you through the financial highlights from the third quarter of 2021. Firstly, our total revenue of $180 million increased by 57% compared with the third quarter of 2020. In the quarter, membership revenue which of course is recurring revenue of $51 million was just under 30% of total revenue.

This was driven by the growth in our total membership base which Andrew has already spoken about. In-house revenue in the third quarter rebounded strongly increasing to $67 million. This increase was driven by strong demand from our members as well as select price increases across some of our food and beverage and accommodation offerings. Andrew has already mentioned it but it's worth rehighlighting the impact of member credits in the quarter.

As credits in the vast majority of regions have now expired, the remaining liability is now de minimus. Encouragingly, we saw an improving run rate in sales throughout the quarter even after excluding any short-term uplift from member credits. And if we think about exit rates out of the quarter, in September the UK was trading at around 10% above comparative levels in 2019, when North America trading 10% to 15% below. Although Europe still lagging at around 20% below.

Other revenues of $62 million also showed a strong recovery up 48% versus 2020 driven by the strength of Soho Home, Scorpios Beach Club, as well as our public restaurants in the UK, and North America. Other revenue also includes the management fees from the Ned in London which saw a strong recovery in food and beverage outlets as well as accommodation. Finally, in the third quarter, other revenue for the first time included the contribution from the Line and Saguaro Hotels. Moving to our profitability measures house level contribution, which is defined as house revenues less in-house operating expenses was $24 million for the third quarter of 2021.

And house level contribution margin was 21%. Understandably as volumes in houses rose, in-house operating expenses also increased in line with the industry. We've seen inflationary pressures across our food and beverage, indirect costs, and most notably our labor base. As mentioned in Q2, we proactively increased wage rates in June to attract and retain the best labor.

Therefore, the challenging labor market, the industry is currently facing is so far having a limited operational impact on our business. The food, beverage, and accommodation price increases we have implemented combined with ongoing efficiency programs have enabled us to partly offset the inflation pressures during Q3. It's worth noting here that we have only increased prices gradually so that our members felt the minimal impact. However, we believe we have more capacity to increase prices during Q4 and beyond to help offset inflation.

In fact, our food and beverage cost ratios with 3% better than the same period pre-pandemic notwithstanding inflationary pressures. Other contributions, which we define as other revenues plus non-House membership revenue less other operating expenses was $12 million compared to a loss of $3 million for third quarter 2020. This improvement was driven by the strong growth of our other revenue and in particular the contribution from Soho Home, Scorpios, and public restaurants. Adjusted EBITDA was $9 million, a significant improvement from the second quarter.

Net loss was $76 million for the quarter. As we report our adjusted EBITDA is fully burdened for growth meaning that we include expenses are associated with the growth of our business. The table in the slide shows some of these expenses. In the quarter pre-opening was 5 million and related to the opening of new houses.

Non-cash rent, which represents the difference between the rental cost in accordance with GAAP and the actual cash cost was $1 million in the quarter and deferred registration fees were $1 million. The capitalization table shows our position as of the end of Q3 2021. In the quarter, we received $402 million in proceeds net of fees from the IPO which has provided us with a significantly strengthened balance sheet as well as funding to support our growth initiatives. During the quarter as previously disclosed, we paid down our [Inaudible] facility of $98 million as well as repaying preference share payments totaling $20 million.

In addition, we paid down a $7 million loan related to Soho House Hong Kong. Excluding financing, cash usage in the third quarter related to the impact of membership credits. The ongoing impact on capacity at our houses as a result of COVID-19 related restrictions in some regions as well as for settling deferred rent balances from Q2 2021. Furthermore, there was capital expenditure on our digital platform and routine capital expenditure to support the ongoing reopening of the houses.

Turning next to the near-term outlook. The performance of our business in the third quarter gives us confidence in the ongoing recovery of our business. Of course, COVID is still here and does create some uncertainty, particularly with rising cases again in some regions. However, the strength of our waitlist and rate of applications also underpins the future growth of our membership.

In terms of new houses, we now expect to open Soho House in the first quarter of 2022. In addition to Little House West Hollywood and Soho House Nashville. The rest of our development pipeline remains on track for the remainder of 2022. And with that, I'll hand it back to Nick for an update on our house foundations program as well as some closing comments.

Nick Jones -- Founder and Chief Executive Officer

Thanks, Humera. This quarter we have made good progress on our ESG program house foundations. House foundation is are the core of what do and our members care deeply about the initiatives within it. We are committed to building an inclusive culture and helping to make creative industries more accessible.

This quarter we've launched new membership cohorts across the world in Hong Kong, LA, Chicago, and New York, and London. We currently have 423 mentees enrolled in the program across the world. This mentoring program pairs Soho House members with young people from under representative backgrounds. Helping them to grow their connections, confidence, and experience.

Ultimately providing them with a route into a creative career within our diversity inclusion program our inclusivity city board has worked alongside our teams around the world to help shape a culture of Soho House through events, training, and ongoing discussions. We've also launched the Soho fellowship program that gives complimentary Soho House and Soho Works membership to creatives who have financial barriers to accessing our spaces. Can I thank both of you Andrew and you Humera for your great support in this last quarter? Where, in summary, it's been a really strong quarter in challenging circumstances and we and I are incredibly excited about the future and the growth potential of the MCG and we're nothing without our members. And I really would love to thank our members from the bottom of my heart.

I also want to thank again our teams who have really worked incredibly hard in these challenging circumstances and also our investors for all of their support from the last quarter and their advice, and their help, and their encouragement. And I'm really excited about the coming quarters ahead.

Questions & Answers:


Operator

[Operator instructions] The First question comes from the line of Joe Greff with JPMorgan. Please go ahead.

Joe Greff -- JPMorgan Chase and Company -- Analyst

Hello, guys. Hopefully, you can hear me, OK?

Nick Jones -- Founder and Chief Executive Officer

Hi. It's Nick here from the MCG. Can you hear me?

Joe Greff -- JPMorgan Chase and Company -- Analyst

Great. Yes, I can. I'm just hearing sort of a massive reverb here. I'll ask a question if you can hear me and after that, we could talk offline.

So my question is this since the membership credits have expired. Have you seen any scenes in spending, visitation, or utilization of Soho House behavior in October or November?

Nick Jones -- Founder and Chief Executive Officer

Thanks for that question. I do want to start. This is Nick here. I'm here sitting here with Andrew and Humera.

It was a beautiful day in New York. We walked the streets and then we had loads of technical issues and I do apologize for that. It was not a start we wanted, but hopefully, you'll see a strong set of results there. But to answer that specific question October and November are we seeing people coming back to our houses? Yes, we are.

We're really seeing people come back to our houses. They really are making up for the lost time. They are obviously keen to meet friends, keen to have dinners, keen to have drinks, and keen to get back to life how they remember it. So, yes is the answer.

Joe Greff -- JPMorgan Chase and Company -- Analyst

Great. Thank you very much.

Operator

The next question comes from the line of Steven Zaccone with Citi. 

Steven Zaccone -- Citi -- Analyst

Great. Thanks very much for taking my question. I was hoping you could talk about the labor shortages that you mentioned. I guess how much is that impacting member experience right now, if at all? And I guess how are you approaching this challenge? What are the strategies in place to ensure the membership experience is still up to your standards? And I guess how long do you think this will be a bit of an issue for the business?

Nick Jones -- Founder and Chief Executive Officer

Well, thank you for that Steven. Yes, I mean I like the whole industry. There are have been labor shortages and has that affected member experience? Not really. In a few cases, I would love to put our handoff and say maybe.

But overall, it has not harmed the member experience. And I know because we've got such great teams that are happy to put extra hours in if necessary. It's all hands to that the support offices would be now in the houses. We've been doing everything to over overcome this and also, we've got loads of initiatives on how to try and overcome this.

I mean, we were half expecting this in the UK because of Brexit. So, we had already set up a whole lot of plans in the UK. Recruiting from different industries, retail airlines, etc. People we want, people we have, people who have given people, and people who have passion.

And they don't necessarily have to come from the hospitality industry. So, we've taken on that and made it much wider on where we're looking and also the rates of pay, the hourly pay. I think we're pretty well right up there as industry leaders, our training programs. The opportunities that people have as we're a global business to move around and to flourish within the Soho House and MCG organization.

So, yes it has been challenging, but we like a challenge and we're trying to find all sorts of ways around it. Andrew, maybe you want to add to that.

Andrew Carnie -- President, Soho House

Yes.

Humera Afzal -- Director of Finance and Chief Financial Officer of Backed

I was going to jump in there, Nick. Just to add some more color actually in terms of the increased in costs for us. We have actually increased our hourly rates in the UK for the GBP 2 per hour. And in the US, we've increased between $2 and $5 per hour and we started doing that back in June because we could foresee that this was going to be a concern for the industry and for us.

And those increases equate to about 10% to 15% increase in hourly wage rates for our staff. And we're seeing that pay off in terms of increased attention, improved spirit, and I think the spirit is really important because know the happy staff is as healthy members. So, we're certainly seeing that health.

Steven Zaccone -- Citi -- Analyst

OK. Great. That's very helpful. 

Nick Jones -- Founder and Chief Executive Officer

Thank you [Inaudible].

Steven Zaccone -- Citi -- Analyst

Thank you. It seems like the echo. Seems like the echo. The other question I had was on Austin.

If you could talk about that opening in a bit more detail since it's -- I guess it's one of your those openings in the smaller metro market in the US. One of the learnings has been thus far when it comes to awareness and that market may be house volumes out of the gate and then the projected timeline to profitability. Are there any learnings you can apply thereto when you open Nashville next year and maybe more broadly as you scale openings across smaller metro markets in the US?

Nick Jones -- Founder and Chief Executive Officer

Well, Austin has been open for four months. So, I was recently able to get visit it from the UK and I must say what a brilliant job the team did without me in being been there. The design is fantastic. The team is really strong and the membership has grown incredibly quickly.

And this is due to the fact that we had a very strong CWH, which is our city's without houses program in Austin. So, we started even though, during the pandemic, we weren't able to do a lot of outreach out like we normally do. We did have a very strong CWH, which meant that when we started to found a membership application they did come piling in and we are now very happy with how Austin is. It's an incredibly interesting membership there I think where we're heading toward over 2,000 members in Austin, by the end of the year, it will be even more.

The rooms are open and busy, occupancy is very good and the difference between that and Nashville, again Nashville obviously, we've got a long runway now because we're not going to be caught up with COVID restrictions and not be able to do all our pre-open activities. We're starting our pre-opening activities in Nashville straight after this weekend and that will then give Nashville -- again Nashville has got a very strong CWH. So we do prefer a longer runway and we have our houses have had to work around not having our runway because of the pandemic. But we're showing strong growth in all of the new houses which we've opened, which is not just Austin, but we've also opened in Tel Aviv, we've also opened to Paris.

Hopefully, the technical issue allowed you to see the beautiful house in Paris and also we've recently opened in Rome and we're seeing very, very strong demand for our membership. Maybe Andrew you want to add something.

Andrew Carnie -- President, Soho House

Thanks, Nick. I would just reiterate the importance of CWH in our growth because it gives us a really high level of predictability when we opened new houses and they obviously mentioned Austin, Rome, Paris, and Tel Aviv. All of them opened with a strong membership. All of them had been seated three years before seed age and when we look ahead to our openings next year between five to seven and in 2023, we've already got in every single location strong CWH membership.

And that is part of our secret source, which allows us to be very confident and successful in hitting our membership growth targets from years one combined.

Steven Zaccone -- Citi -- Analyst

Great. Thanks very much for the detail.

Operator

The next question comes from the line of Sean Kelly with Bank of America. Please go ahead.

Sean Kelly -- Bank of America Merrill Lynch -- Analyst

Hi. Good morning, everyone. Can you hear me?

Nick Jones -- Founder and Chief Executive Officer

No technical issues just yet and I can hear you, Sean.

Sean Kelly -- Bank of America Merrill Lynch -- Analyst

OK. Hi, there. Sorry about that. Yeah.

So, I think when we're talking about the inflationary environment a little bit. Humera it might've been, you mentioned a little bit about the ability to take price or selectively take price in some categories. I was wondering if you can elaborate a little bit on that and just talk also about the guest behavior you're seeing at the houses. What are we seeing in terms of price increase versus the just overall usage or visitation being higher given demand levels and probably some pent-up demand?

Humera Afzal -- Director of Finance and Chief Financial Officer of Backed

Behavior? So, Sean. Yeah, absolutely we have started to increase our prices already. So, across the food and beverage, we've increased between 5% and 10%. It varies depending on the product.

And depending on the specific market, but between 5% and 10%, we've already started to increase up prices on FNB. I see that we have more capacity. I think we were potentially slow to move in the initial phases, but now we can see we still have pricing power on FNB space. In terms of ADRs for room rates, we have increased those up by up to 30%.

Again varies by sort of the region, varies by the occupancy rates that we're seeing in particular houses that we can have gone up by an additional 30%. We deal to see more capacity coming forward in 2022. In terms of member behavior that can line up.

Andrew Carnie -- President, Soho House

Our members are incredibly understanding. They understand the inflation. They did not expect it to be passed onto them, but we are very, very sort of respectful in that because people do want to come to a house and feel that there is value for money. But they also realize that their weekly shop is more expensive and that translates into whenever they go out.

And so members are understanding. It's not stopping that behavior once they are in the houses. And we also -- to offset this as well an American touched on this but our purchasing is much improved. We are not only where we are -- we are negotiating hard with the new procurement team and all our products, which is also enabling us not to pass up all of it on to our customers and our members.

Humera Afzal -- Director of Finance and Chief Financial Officer of Backed

And the other place, I forgot to mention, which should dwell on is membership prices and we haven't increased those throughout 2020 or 2021 and I'd expect that there is the significant capacity to increase the pricing on membership fees. And I think we can really justify that on the basis that the membership offering has become significantly richer with the six houses that will be open additional in 2021. And the wider digital offerings that we have in place. So we have pricing power [Inaudible].

Sean Kelly -- Bank of America Merrill Lynch -- Analyst

Great. And maybe just as a quick follow-up then, as we net all of these pieces together would there be any real impact on let's call it your long-term margin targets? And I appreciate that. There are a lot of moving pieces here also factored into that. Any impact from some of the changes in the mix.

I think you're seeing some very strong results in some of your other revenue and home categories. So, would any of that, I guess what it kind of pulled all together have any material impact on some of the long-term margin goals that you set out?

Andrew Carnie -- President, Soho House

Sure, Sean, I'd like to take that. So, we're still very confident on long-term margin goals, you are right. Our business is growing rapidly. That's actually additive to the total MCG from a percentage rate.

We feel that we actually have more pricing power than we first thought across all of MCG, which we'll be working through for 2022 and beyond. And then as Nick mentioned, if you think about in Q3, our actual margins, that would be level with 3.5% better than in 2019. We still think there are ways to go there, especially in our biggest region in North America. So we're, in summary, we're pretty confident on where we're directing you guys on our margins and we think there's actually some upside in there.

Sean Kelly -- Bank of America Merrill Lynch -- Analyst

Thank you very much.

Operator

[Operator instructions] The next question comes from the line of Stephen Grambling with Goldman Sachs. Please go ahead.

Stephen Grambling -- Goldman Sachs -- Analyst

Hi, there. I know it's a little bit early, but could you just give us any initial thoughts on the kind of 2022 outlook? Specifically, on how some of the new houses are being planned and open compared to perhaps those that have already been opened in any concrete investments we should consider that could impact margins in the near term as we consider the digital membership launch or other initiatives next year? Thanks 

Nick Jones -- Founder and Chief Executive Officer

Thanks, Stephen. I'll start with and Humera will jump in. I mean, our plans for next year are very much on track. We've all said that we're going to be opening between five and seven houses a year on a low capital model and that is exactly the same.

I think it was remarkable that the teams were able to open during COVID and all the houses that we've opened this year and on our low capital model. So, there is also a lot of opportunities out that since coming out of the pandemic for potentially other sites as well. We know that nothing -- our members like nothing more than new houses and new territories and it just adds an incredible amount of new interesting numbers to be over global membership. So we're always on the lookout, but we're very happy with our development plan as it stands at the moment.

And it's still very much online to what we have said.

Andrew Carnie -- President, Soho House

Thanks, Nick. I'll just add another bit more color to that. So, I think what it would be more of trying to kind of assess is our margin going forward. So, if you think about our Q3, were very, very focused on retention rates and waitlist.

So, we're at record highs of 94%. That will continue throughout 2022, '23, and beyond. Our waitlist is at an all-time high and actually outpaced our intakes at 67,000. Those two are very, very strong metrics.

The MCG that gives us a high level of predictability and it helps with our margins. We're already at 30% recurring revenue. Our members continue to freeze through Q3, and we resumed intakes in our existing houses in Q3 is increasing. So, all -- if you take all of that going into 2022 and what Nick said on and we're very confident on opening our asset like new locations on time within the budget, we're very confident that our margins.

But we don't want to give you really concrete direction, but what we're saying is that we're very confident in Q3 on the outlook for'22. 

Stephen Grambling -- Goldman Sachs -- Analyst

Got it. And I guess just a very quick follow-up, are there any kind of concrete investments that we should be thinking about from some of the new initiatives that you can kind of have some visibility on already? Thanks.

Andrew Carnie -- President, Soho House

Nothing has changed from when we talk to on the investment roadshows. In the digital memberships, the investments have already been built in because we've been doing it on our app globally for existing members. So that's going to be curated into the digital membership and launch later next year. Our Soho business will continue to grow, but there's no extra capital investment in retail and I think Nick mentioned, our new houses are asset-light.

So actually there's no material change in our capital investment structure for 2022.

Stephen Grambling -- Goldman Sachs -- Analyst

Awesome. Thanks so much.

Operator

Next question comes from the line of Sharon Zackfia with William Blair. Please go ahead.

Sharon Zackfia -- William Blair and Company -- Analyst

Hi. Good morning. I guess I'm following up on the margin question. If I did the math correctly, I think the household margin was in the high 20s.

If you adjusted for the credit in the quarter. If you could confirm that? And then, I guess I would love to get your thoughts on kind of how that house margin might progress here in the fourth quarter? I assume given some of the inflationary dynamics, we'll see that moderate a bit. But would just be curious on your insight there. And then secondarily in North America.

I think you mentioned there's still about 10% to 15% below pre-pandemic levels. Can you kind of give some context on any regional variation you're seeing there? Thank you. 

Humera Afzal -- Director of Finance and Chief Financial Officer of Backed

Just out with the region.

Nick Jones -- Founder and Chief Executive Officer

Let me start with that first part about any regional difference. UK very strong, US strong together very strong. Europe, slightly behind that and but building. When there are no restrictions our houses are building very, very nicely.

So, we really do see the MCG and also the Ned, which you did have before lockdown 40,000 thousand customers would go through the ground floor and eat and drink every week. We're not quite back at that number but we're not far off it. So the recovery is strong in all our regions if not slightly behind in Europe. Humera?

Humera Afzal -- Director of Finance and Chief Financial Officer of Backed

And to pick up on your margin question, Sharon. Yes, you're right. So, to add back the effect of the credit sales would be it would be good and that would roughly get you to a high 20s margin. I think the only piece I would temper on that is one would question if all of those sales would have occurred if they weren't credits available because people had credits to spend and they needed to spend them.

So high 20s is generous, I would say to mid-20s would also be a good place to land on possible contribution.

Sharon Zackfia -- William Blair and Company -- Analyst

Great. And just to follow up on the first question. I was actually asking about North America and whether you're seeing the variations in regions across North America.

Nick Jones -- Founder and Chief Executive Officer

Sorry. No, I mean Sharon, Miami has been strong throughout the whole pandemic. New York's incredibly strong. I was down on the West Coast last week, very strong.

Chicago has picked up nicely. Toronto, really strong. So and Austin as I said really, really impressive what's going on in Austin considering it's only been open for months. So, we're very much liking what we're seeing.

Sharon Zackfia -- William Blair and Company -- Analyst

Great. Thank you.

Operator

Next question comes from the line of Thomas Allen with Morgan Stanley. Please go ahead.

Thomas Allen -- Morgan Stanley -- Analyst

Thanks. It's been about six months since you acquired the Line and say [Inaudible] brand. Just any update on pricing there and then any thoughts on additional acquisitions?

Humera Afzal -- Director of Finance and Chief Financial Officer of Backed

Capture in terms of the Lines where it continues to perform well, we've achieved high occupancy rates and really, really good ADRs across the business. So, it continues to be a positive contributor to our EBITDA as that's a management contract. And so, that's pure upside for us. We expect that business to continue to perform well against sort of the comp set.

In terms of going forward on acquisitions and continuing to be opportunistic in terms of looking at transactions, things do come across the desk quite frequently. We look at them but it's more opportunistic as opposed to the main part of our strategy.

Thomas Allen -- Morgan Stanley -- Analyst

Thank you.

Operator

Final question comes from the line of Ali Naqvi with HSBC. Please go ahead.

Ali Naqvi -- HSBC -- Analyst

Hi, thanks for taking the questions. Just in terms of the waitlist, how do you expect that to flex over time with house openings? I mean you've got three openings in Q1 next year would you expect the waitlist to go down? Or could you sort of set the expectation? So, we're not sort of surprised by it, please.

Andrew Carnie -- President, Soho House

Thanks, Ali. I've been doing this for 27 years and I've never ever seen such demand for applications that were precise moment. Not just any in our existing houses but also whenever we go into new territory, the applications they don't -- we don't to the existing waitlist, we create a new waitlist for all the new territories. And they're proving to be incredibly strong and I think membership is where it starts and where it finishes for us.

And some people have subscribers, we have members. Some people will have content, we have houses. And the more houses we open the more members we get and we're very happy we were all very delighted. The existing members are delighted when new houses come on board.

So, it's incredible the way that -- I think so -- also I'd like to add to that upright pandemic, what we offer within the MCG specifically. So, it has, is this real hybrid living. with Soho Works and which is our Soho Houses. People can pick and choose how they live their lives and we offer the facilities for them to be able to do that.

I'm currently sitting in Soho Work sitting in [Inaudible] in New York and the place is packed with people who might have been in a corporate office a year ago. And they would then go over to, so it has me packing for my lunch, or early evening drink. So we really are seeing that the outbreak pandemic way of living really suits what we're doing at Soho House.

Ali Naqvi -- HSBC -- Analyst

Andrew, if I could follow up quickly. With another question, in terms of occupancy or volumes versus peak times and mid-week, how does that compare to pre-pandemic? And how did you say that in-house was running at sort of 80% of 2019?  Can kind just get that?

Andrew Carnie -- President, Soho House

Yeah, I will take that. I think if you take all our global bedrooms in Q3, we actually jumped up to a 70% occupancy. Back in 2019, we were running super high at 95% and that's without any booking engines and it's all done on our own website and app. Week troop, we see that continuing to grow throughout the quarters back to 2019 levels by Q1 as people start to travel more.

Especially now with the opening of North America for us Brits. I've been to a lot of Brit's places, I've been here. That's fantastic for occupancy in North America. So for most occupancy bedroom perspectives, we feel very confident and you see in our Q2 note as it jumped.

From a house occupancy perspective, we're pretty much back to 2019, which was in most of our houses. So, we're pretty full. What we were able to do in Q3 was start our intakes in existing houses so we resumed our normal intakes which is pre-pandemic and that just adds to the comfortability in each of our houses. And that's a really key metric as we grow that we can always add new interesting people to our existing houses, which ultimately leads to increased profitability.

So hope that answered your question.

Humera Afzal -- Director of Finance and Chief Financial Officer of Backed

And just to clarify, I think you said there is an in-house 80% behind. It isn't that behind the 80% all 2019. So, it's a blend. Across the different regions.

The UK was 10% ahead. Us is North America's 10% to 15% behind. And Europe is still lagging it about 20% behind so that's sort of the weighted average across at this.

Ali Naqvi -- HSBC -- Analyst

Great. Thank you.

Operator

There are no further questions registered at this time. I would like to hand it back to Nick Jones for closing comments.

Nick Jones -- Founder and Chief Executive Officer

Well, thank you very much, and thank you for sticking with us during our early technical issues. My closing point is I think we have had a strong Q3. It's so brilliant seeing our members back in our houses, laughing, smiling. It's great to see get back out on the road again and travel around our new houses being in Paris and Tel Aviv.

And Rome and also the new opportunities in the future. And I know we've spoken about it earlier about the Ned and we're very excited to see the Ned come to New York. Ned nomad it's a spectacular building, a spectacular sight to be able to bring back what we've done in London and the membership over here to not only London, but it will also create a very successful nomad here. So, the memberships increasing everywhere which is the key.

Our digital transformation is happening at a pace. Our members are really enjoying using the Soho House app. They're really enjoying connecting with each other in a physical house but also, they really enjoy connecting digitally through to shop. I enjoy making book tables.

The friction is becoming much easier for them. So, the members are they've been incredibly loyal to us and we want to pay over the next 12 months and they're on after. Just keep on producing fantastic houses for them to enjoy, adding more and more interesting people to our membership, which then will create this unique global curated membership of interesting people. So, the feature is good and exciting.

I also want to obviously thank all my leadership team who have been incredible during this period of time. I'm sitting here with Andrew and Humera. But that's just the start and many, many more which I'd like to thank. And I'd really like to thank all the investors because I'm finding this whole going public experience really enjoyed [Inaudible] meeting smart people with ideas with good questions which just make us better.

So, I just want to thank everyone out there who is doing so. Is it for me? Next time I promise. Well, I can't promise because I'm not very good at the technical side of things but hopefully there'll be a much smoother introduction into our Q4 members. And obviously paying for a happy set of numbers as well.

So, thank you for me. Andrew thank you for you. 

Andrew Carnie -- President, Soho House

Thank you, guys. 

Humera Afzal -- Director of Finance and Chief Financial Officer of Backed

And thank you from me.

Operator

[Operator signoff]

Duration: 53 minutes

Call participants:

Unknown speaker

Nick Jones -- Founder and Chief Executive Officer

Assia Heinold -- General Manager, Soho House Paris

Paul Samb -- Head of Membership in Communications, Soho House Paris

Andrew Carnie -- President, Soho House

Humera Afzal -- Director of Finance and Chief Financial Officer of Backed

Joe Greff -- JPMorgan Chase and Company -- Analyst

Steven Zaccone -- Citi -- Analyst

Sean Kelly -- Bank of America Merrill Lynch -- Analyst

Stephen Grambling -- Goldman Sachs -- Analyst

Sharon Zackfia -- William Blair and Company -- Analyst

Thomas Allen -- Morgan Stanley -- Analyst

Ali Naqvi -- HSBC -- Analyst

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