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"Fading magic takes shine off Merlin’s big attractions"

I presume that someone didn't sit down manually analysing 550,000 customer reviews. Does anyone know if there are any free programmes you can use to see how a business' Trip Advisor reviews have changed over time? It'd be interesting to see it in a graph.

Chessington and Legoland Windsor have been getting poor reviews for quite a while. Legoland Windsor seems to get significantly worse reviews than some of the other Legolands. Similarly Kidzania in London gets weaker reviews than most of the other Kidzanias (I know that's not Merlin, but it's interesting how some of the British versions of these attractions seem to get particularly weak satisfaction scores). I have noticed a downward trend in Thorpe Park's scores. I have also noticed that some of the accommodation doesn't do very well.

When it says 'analysts' are the analysts UBS? The article is very vague and if there has been some in depth study it'd be interesting see a few more of the details.

Edit: The more I think about this more it seems like sloppy journalism. I'm not disputing that there has been in a decline in feedback over the last 12 months and that shareholder shouldn't be concerned about it, but they're so vague about it all it does seem a bit meaningless. Trip Advisor and Google Reviews are the main source of attraction reviews so I'm presuming that this is what they analysed, but without a bit more about their methodology or any statistics the only thing that's really interesting about this is that it's made the mainstream media.
 
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As I didn't take Business Studies, I don't quite understand some of the terminology used in some of these articles, so I'd like to ask:
  • Does this basically mean that people are being encouraged to sell their shares in Merlin?
  • Does this mean that there will likely be a shakeup in management at Merlin or even possibly a sell off of part of or all of the company fairly soon?
  • I heard shareholder activism mentioned on the last page. Does this basically mean that the shareholders would try and take the company from the current management?
From what I can understand, I personally reckon the best thing for Merlin to do in this situation is to become a private company again. Then, they wouldn't have to give money to shareholders and they could invest more into the attractions themselves (not that they don't invest into the attractions now, but they could invest even more than they do now if they didn't have shareholders to answer to.)
 
Matt N said:
As I didn't take Business Studies, I don't quite understand some of the terminology used in some of these articles, so I'd like to ask:
  • Does this basically mean that people are being encouraged to sell their shares in Merlin?
  • Does this mean that there will likely be a shakeup in management at Merlin or even possibly a sell off of part of or all of the company fairly soon?
  • I heard shareholder activism mentioned on the last page. Does this basically mean that the shareholders would try and take the company from the current management?
From what I can understand, I personally reckon the best thing for Merlin to do in this situation is to become a private company again. Then, they wouldn't have to give money to shareholders and they could invest more into the attractions themselves (not that they don't invest into the attractions now, but they could invest even more than they do now if they didn't have shareholders to answer to.)
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Shareholder activism is the opposite of being a 'passive shareholder'.

It is about taking a more involved role in the company you have shares in. As the company are massively under-performing, having no involvement with the business, like usual, is not an option.

This method is usually exercised by high percentage shareholders. An example of this happening before was the case of GlaxoSmithKline (2003) where shareholders rejected remuneration increases for the CEO. In 2015, BP's CEO had a severe pay cut (of 40%+) after a shareholder revolt. Consequently, they resigned, and "mission accomplished".

Methods to attempt shareholder activism:

-Request private meetings with executive committee. If the AGM is 6 months away, this is too long away in the future.
-Vote at the AGM not to renew the CEO and CFO's license to operate.
-Vote against remuneration committee's proposal of CEO pay.
-Present proxy proposals at the AGM (e.g. notion of company no longer perusing cost saving measures across estate)
-Use the Institutional Shareholders Committee to intervene where necessary if dialogue breaks down (they must engage because they technically work for the shareholder).
-Create pacts with other institutional investors and high percentage shareholders to create cartel to force a hostile management turnover.

I could go on. These are usually never used if a business is trading in line with "good" expectations, and shareholders form no part or influence of the businesses day-to-day running. They are usually used to force a change of management if they are not willing to resign.

I hope this helps. :)
 
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WickerManiac said:
Shareholder activism is the opposite of being a 'passive shareholder'.

It is about taking a more involved role in the company you have shares in. As the company are massively under-performing, having no involvement with the business, like usual, is not an option.

This method is usually exercised by high percentage shareholders. An example of this happening before was the case of GlaxoSmithKline (2003) where shareholders rejected remuneration increases for the CEO. In 2015, BP's CEO had a severe pay cut (of 40%+) after a shareholder revolt. Consequently, they resigned, and "mission accomplished".

Methods to attempt shareholder activism:

-Request private meetings with executive committee. If the AGM is 6 months away, this is too long away in the future.
-Vote at the AGM not to renew the CEO and CEOs license to operate.
-Vote against remuneration committee's proposal of CEO pay.
-Present proxy proposals at the AGM (e.g. notion of company no longer perusing cost saving measures across estate)
-Use the Institutional Shareholders Committee to intervene where necessary if dialogue breaks down (they must engage because they technically work for the shareholder).
-Create pacts with other institutional investors and high percentage shareholders to create cartel to force a hostile management turnover.

I could go on. These are usually never used if a business is trading in line with "good" expectations, and shareholders form no part or influence of the businesses day-to-day running. They are usually used to force a change of management if they are not willing to resign.

I hope this helps. :)
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Thank you very much for your help @WickerManiac; I understand it much better now!
 
Merlin's business model can't sustain theme parks. Every investment as a public company has to prove immediate return, to shareholders who likely don't understand how the industry works at all, and wouldnt invest if they did know.

And also to create constant growth, which means Merlin are forced to find the easiest-repeatable formula for everything they do, in order to paste it all over the world in the cheapest way possible. No value investing, quality or creative risk. Existing success is bought and then repeated.

This means their only business interest is in opening cheap new attractions, not in reinvesting to maintain old ones – unless they can prove growth and instant return (hence only massive coasters get made, or cheap IPs). So there is no business case, for them, to invest to maintain quality and guest experience.

Experienced people know you have to invest to maintain visitor numbers at a park, and accumulate the yearly profits, but expecting constant linear growth is unsustainable.

The problem is, their current model is what Merlin have fiercely sought from day one. It was always Nick Varney's ambition for it to be a public company following this formula, which he says often in press. I think they'd still be doing things this way if they were still a private company with private investors.

I don't have the knowledge or experience to offer a realistic solution obviously, but it seems that the short-term growth model is both the root of Merlin's success story and the downfall of UK theme parks – hopefully Merlin's eventual downfall too.

I want the UK theme park industry to succeed, including the jobs and contractors that depend on the parks. But I don't want Merlin as a parent company to succeed this way, which is sucking it dry with their monopoly in my opinion.
 
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Unfortauntely I think Takeyourmedicine is right, that regardless of who's in charge it's unrealistic to expect to keep paying dividends to lots of shareholders and to sustain the quality required for the parks to have a long term success. Disney and Universals might be able to pay big dividends and to an extent maintain high standards by virture of how expensive their parks are. But I think it's difficult to do that for regional parks.

In a way it surprises me that out of all of these big coporations the only one (at least in the Western world) that's had a really big tumble is Six Flags. Cedar Fair looked like it could go that way after closing Geauga Lake, and Sea World aren't out of the woods yet. I'm amazed that Parques Reunidos manage to keep on expanding, because their management seems to be generally throwned upon more than Merlin's.
 
It is an interesting “what if” game to play, if Merlin’s situation deteriorated to the point of needing to dispose of some of their RTP assets in the UK (or at least the leases, since they’ve already milked the freehold). Would it result in an improvement in the UK’s offer?

When you look at the good work being done at some of the indies like Dreamland, Paulton’s, Blackpool, Pleasureland, Fantasy Island etc, it would certainly be an intriguing story to watch play out.
 
I think I can see where this one is going. Merlin will collapse and the people behind the London Resort Holding Company will buy Thorpe Park and turn it into a scaled down version of the Paramount project using a couple of second hand Pinfaris they'll be able to pick up cheaply when M&Ds closes down. Remember where you heard it first.
 
Merlin is a young company that hasn't been floated for very long. It's enevitable that every penny it spends is expected to be rigorously scrutinised and have a measure attached to it. Problem is, that's not how theme parks work.
 
Funcone said:
Disney and Universals might be able to pay big dividends and to an extent maintain high standards by virture of how expensive their parks are. But I think it's difficult to do that for regional parks.
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Also for Disney and Universal (Comcast) aren’t just theme parks. The parks sell the films and TV channels/shows and the IP sells the parks. There is a reason that Universal Florida have added a Jimmy Fallon tonight show attraction.
The Disney shareholders are more concerned about the performance of ESPN sports and the TV business at the moment.
 
Having reflected on this somewhat a little more since reading the original article, the aspect I find of this so amusing is how hard Merlin push their staff to drive Trip Advisor reviews and are particularly anal about it. We had so many incentives thrown at us for Trip Advisor and were given obnoxious cards to hand out to guests, yet it still hasn't been enough to deter an overwhelming wave of negative views being included in this report.
 
MakoMania said:
Maybe for Merlin, but not for all public companies.
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Exactly.

There are plenty of public companies that defer shareholder payments so they can make long term investments.

The problem is that Merlin have promised investors a fast return on investment for the last 15+ years. Adjusting from that might well be uncomfortable but clearly they are hitting the limits of the amount of margin that can be extracted now, particularly in Thorpe Park.

I've long felt that there isn't enough synergy between the Merlin midway attractions (where you can to some extent invest a set amount and expect a set return) and the theme parks. In my view the two entities would be better going their own ways.
 
Was on the easyJet back from amsterdam earlier and the guy next to us, was reading a telegraph magazine of some sort which had share tips. Whilst wondering about what type of guy flys easyJet solo home from Amsterdam reading the telegraph, while I’m still struggling to focus, I noticed that they are recommending buying Merlin!

Here’s an online version from 29/12
https://www.telegraph.co.uk/business/2018/12/29/shares-bring-cheer-2019-telegraphs-picks/
 
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