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Merlin Entertainments


RobF

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I don't know the full details behind this move, but this sentance in the statement sums up exactly the problem I have with M£rlin as a whole right now:

 

"Over the period of 2018-21, we will reduce Existing Estate capex by approximately £100 million, reallocating this into accelerating our highly successful accommodation roll out programme, as well as increasing our investment in our Productivity Agenda."

 

That's right. Forget about your current parks. Forget the state they are all in. Forget the numerous cuts being done everywhere. Forget the ridiculous opening hours. Forget leaving your rides to rot into oblivion. Forget the lack of long-term shelf life in your investments. Forget the potentially hundreds more staff that will be made redundant as a result. As long as people get another hotel to shell out £200 a night in, which must be a world first and have an IP plastered over it and be marketable, that's all that matters now.

 

At this stage, I have no faith things at our UK parks are going to get any better anytime soon with this announcment. Potentially, more rides will close or have limited opening times, further opening hours and days will be cut, further cuts to staff and special event budgets will be made and prices are going to soar even further for everything in return. I want to be proven wrong on this so much right now.

 

Who cares about a theme park when we can have hotels?

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Having spent a bit more time looking into Merlin's report and presentation (which anyone can see here - https://merlinentertainments.biz/results-and-presentations ), some things make sense, and others don't.

 

It's quite clear that, for whatever reason, the theme parks simply don't make as much money as any other offerings Merlin have.  They do make a profit on them, but the profit margin is nowhere near as good as Legoland parks and midway attractions.  I guess it makes sense in some ways; theme parks require more money invested them, meaning they have to make significantly more, usually in much less time.  You can say 'if they spent more money, they'd earn more', and though that might be true, it might simply be a case that the extra investment doesn't justify the extra money they get in.

 

Accommodation works amazingly well for Merlin, despite what we may think.  Across Merlin as a whole, their accommodation outperforms the parks themselves both in terms of profitability and satisfaction.  The one exception to all this is Splash Landings, which is hardly surprising given it's Towers.  Though maybe they're burying their heads in the sand a bit and saying 'it'll recover, it's just aftermath of Smiler...'

 

Legoland parks seem to do wonders and the pre-school market many of them appeal to just suits Merlin perfectly (which is why they've gone for Peppa Pig as well, plus seeing how well Paulton's have done).  New one opening in New York in 2020, plus Korea and China ones on the way...

 

The terror attacks this year did noticeably affect attendance at Merlin places in London (look at the graph in the presentation, and you do see a massive spike after they had been improving), and I think it's fair to say it is having a long term affect.  Merlin's offerings in major European cities are also being affected, but even then, are still performing better since they're much newer.  

 

 

The big issue right now for Merlin is their resort theme parks.  Simply put, how you best run a theme park doesn't fit with Merlin's current philosophy.  The way they've seen it is they're continually pumping money into these things, and not getting as much as they'd like out.  To top it off, they're going through a rough patch at the moment, so it's better to play it safe than to take big risks.  A fantastic quote from Nick Varney highlighting this says

 "When you are experiencing storms, the sensible thing is to navigate around them”

 

So I don't think that, in the short term, things are going to get much better for the theme parks.  I don't think they'll get any worse and we'll still see good investments everywhere, but I don't think we'll see enough of what they need.  Maybe in a couple of years they'll change their mind and philosophy and getting the parks on a more upward turn (after all, I think it's fair to say they did do good when they first took over).  

 

With the lack of confidence in the air that surrounds this update, and Merlin's unusual blaming of certain factors ('poor weather' - yeah no), it's not hard to see why share prices fell pretty dramatically.  And for us as a theme park enthusiasts, it's not a pretty picture they've painted.  Things aren't much worse than they are now in my opinion, but they ain't getting better any time soon...

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Also, I want to put this in a separate post because I see what feels like everyone drawing the wrong conclusion...

 

Quote

Over the period of 2018-21, we will reduce Existing Estate capex by approximately £100 million, reallocating this into accelerating our highly successful accommodation roll out programme, as well as increasing our investment in our Productivity Agenda.

This isn't saying that £100 million is being taken away from the money currently being spent.  This is saying that £100 million that was going to spent across Merlin is now going to be spent on new accommodation, as well as new Legoland parks (focus on Legoland New York in particular) and more midways.  

 

This doesn't mean there are more budget cuts imminent (there could be, but not because of this news).  What this does mean is that we will likely see less new attractions (so maybe an end to the 'every park must have something new every year' idea), less rethemes, less new restaurants / shops, etc.  The £100 million is across 4 years, and across the whole of Merlin (though mainly theme parks and midways).  It's a lot, and certainly will have a negative impact on guest experience in the theme parks (spent wisely, even small new investments will improve guest experience massively - take the Island Shop for example).

 

I'm not defending Merlin here, but I'm just trying to clear up a misconception that many people have (especially since that misconception make it seem arguably worse than what it is).

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The reduction in capex is going to hit the theme parks hard on future projects and I'm willing to say that Thorpe's next ride has just taken a budget cut or worst case cancelled all together. I highly suspect DBGT didn't perform as well as they hoped and it's no secret that the swarm didn't either. Which put together is going to paint a picture to Merlin that large investment at Thorpe doesn't pay off. 

The lack of investment is going to put off visitors as there is nothing new and quality is already low at the parks. The terror climate is unlikely to improve so that will continue to deter guests. All of that adding up and it will not surprise me that in a few years there is negative growth in the parks and that really won't please share holders. 

 

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Personally, I think that we'll see little to no investments in smaller years now.  Major investments do pull people (even if the likes of Swarm and Ghost Train haven't done so to the level they expected).  So I'd be surprised if they do go ahead and stall on major rides, even at Thorpe.  I expect we'll see less I'm a Celebritys, Galacticas and Pandamoniums now though...

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This news is certainly concerning on the forefront that we could see a very noticeable slowdown in Midway and non UK parks, but we shall have to see how this develops.

 

Surely we will still need to see new stuff every now and then, as what's the point in building new accommodation if there is no development for years. After all, developments encourage people to visit the park which may also encourage them to book overnight stays alongside. 

 

My assumption with the budget cuts (which basically affects everything that isn't a Legoland or hotel), is projects may be downscaled, spread out and/or perhaps cancelled. I would like to think if any cancelled projects happen, it would only be for low-medium investment years should they still be a thing. And large investments continue during regular intervals. I.E Chessington's next coaster.

 

Unfortunatrly the next few years for many things will not be easy and terror threats will not disappear anytime soon I'm afraid. Let's hope they can ride the storm.

 

 

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Unfortunately Merlin won't sell them. They represent a very large asset, valued in the hundreds of millions, which if sold share holders would panic and the share price would fall drastically. 

The only way they would consider selling them is if they had consecutive years of negative growth and financial losses. Even in that scenario no one is likely to buy them due to the high cost and poor looking balance sheet. 

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No other operator would buy all 3, too much investment would be required to get the parks up to standard, which is of course where the rub lies...

 

I dread to think how much infrastucture cost would be required to drag Chessie into the 21st century... Or how many gardeners they would need to hire to get the Towers Gardens back up to snuff... The problem is that Merlin don't seem to see that such provisions as landscaping and maintenance are the most important aspect to a park, yet they spend the least possible amount of it...

 

I'd love to see Plopsa get their hands on Chessie for example, it would suit them to the ground...

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Considering they don’t actually own the majority of their properties and simply have a lease I wouldn’t expect it’s that easy to offload them and the contracts for lease might have certain conditions attached for transfer etc.

 

In other news a letter doing the rounds from Merlin says they are also branching out on policing the internet

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  • 4 weeks later...

I don't see why you would want to visit during weekends in august seeing as you can go any point in the year but nonetheless it's another step of devaluing the standard pass.

 

Assuming you would buy tickets online (about £30) without a pass and the cheapest standard pass is £139 it still pays for itself in 5 visits. 

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To be fair, I understand the general displeasure from people being asked to pay the same but receive less, and something called an 'annual pass' not really being a pass for a whole anum. 

 

On the other hand, they still represent great value and it's going to be better for all visitors if the crowds are better spread.

 

Seems to be a bit of a marketing error really. Would make sense to offer something called an Off Peak annual pass, then premium and VIP.

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The pass system needs a complete overhaul. Starting from scratch with tiers. To remove parks during August is just odd. I get it adds value to the premium, I get Disney do it. But it's not like any of the Merlin parks are near capacity at August weekends that they're having to turn paying guests away on the day. There's easier ways to make the valuing better, just keep standard price rises on the standard pass and offer premium holders more. As all they've done here is rise the premium price and reasoning it as "well you can still visit August weekends so that's costing you another tenner." Just a bizarre way to go about it all.

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This change is purely nothing more than another incentive by Merlin to try and push more people to buy the more expensive premium/VIP passes, simple as.

The fact there's no price rise for the standard pass (for the time being) means I'm fine with this change, even though it's not a desirable one. But I can't blame people being disappointed by this, especially for big families.


The big issue I see building up is when people are paying more money for the other passes next year, the value-for-money expectation levels are naturally going to increase further from these customers. If further compromises on opening hours, ride availability and other factors occur across all the parks next year, some may question what are they paying extra for besides from SW8, which for the moment is the only proper new investment for 2018? I know I would.

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2 minutes ago, Martin.C said:


The fact there's no price rise for the standard pass (for the time being) means I'm fine with this change, even though it's not a desirable one. But I can't blame people being disappointed by this, especially if you bought a standard pass within these last 10.5 weeks thinking you were going to get unlimited access to the parks in August 2018 but now you aren't for half of the month.

Just to point out this change only affects passes purchased on or after November 28th. Passes purchased before then are not affected.

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I’m not thinking of renewing my pass next year as I don’t think I would get as much value out of it.

Thorpe which I’d mainly visit is not offering enough to keep me coming back as frequently next year. The entrance and getting in is worse than the previous season (I know not entirely their fault but I can’t see it being any better next year), the events I went to this season were completely disorganised and poorly managed, there are more sbno attractions at the end of this year than in the previous season and no signs that the recent announcement will be a new attraction or just a botched ride facelift. (Do NOT touch the Swarm! All it needs for next year is that out of place American dispatch voice to be deleted) Finally, either I’ve done recently or am not as interested in Merlins other attractions.

 

I can see how Merlin have balanced the price increase for premium with more value over peak season. Equally the price freeze for standard is also justified by excluding entry during this time. They could have just increased the price of both passes by a tenner but this will encourage those who can afford it to upgrade to premium while keeping the standard pass more affordable for families and individuals on a tight budget.

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It's a weird decision given that, perhaps Legoland aside, none of the parks are exactly heaving to the point of reaching capacity during August.  So, during their busiest prolonged period, they're stopping people from potentially turning up and spending money.  Instead, they're trying to encourage people to spend the extra £50 for a Premium Pass, when they could probably make a little bit more out of people by giving them the opportunity to visit more.  I guess the idea is to try and get passholders to visit during quieter times, but it just doesn't quite work that way.

 

Still, the Merlin passes do represent great value for money currently, and you can easily get a lot of worth out of it.  I agree with others that an overhaul and rebrand for them would be better though, as currently it's a bit of a mish-mash of ideas and tiers which don't truly reflect what Merlin are offering these days.

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