Merlin Entertainments: General Discussion

[NuttySquirrel]

...and every opinion is sacred, but Merlin do not have a theme park monopoly in this country, there are at least a dozen competitors in this small nation of ours.
A competetive market, with lots of options to avoid Merlin if you choose.

I would struggle to describe the UK theme park industry as a "competitive market". There aren't any other parks in this country I would classify in the same category as any of the Merlin parks in terms of ride line-up, theming and peripherals (on site hotels, water parks etc). Blackpool has some good classic coasters but theming is lacklustre and its seaside holiday sheen has long faded. Flamingoland has a lot of coasters but in my opinion the hardware is B-grade, with their "signature" attraction just a clone of an old ride at Thorpe Park. Paultons had the potential to start punching above their weight but chose to play it safe with a fairly standard Eurofighter. Merlin is the only group in the UK still daring to invest in cutting edge rides such as Hyperia and (if it ever materialises) Project Horizon.

Far too many parks in this country have abandoned the thrillseekers in favour of the family market. If you want to look for real competitors to Merlin you have to look further afield to mainland Europe.

 

[rob666]

But 90% of the UK theme park market simply doesn't go abroad to do theme parks.
There are dozens of uk parks, most small, but all competing against Merlin.
The market has a number of alternatives within the sector, they compete, realistically, and repeatedly.
Merlin mopped up the economy end of the scale with cheap passes off peak. but the market is still there, with a number of competitors.

 

[NuttySquirrel]

But 90% of the UK theme park market simply doesn't go abroad to do theme parks.
There are dozens of uk parks, most small, but all competing against Merlin.
The market has a number of alternatives within the sector, they compete, realistically, and repeatedly.
Merlin mopped up the economy end of the scale with cheap passes off peak. but the market is still there, with a number of competitors.

I think it depends how we are defining "competitors" here. Any leisure attraction could be considered a competitor to a theme park, in that you could choose to spend your money at a theme park or doing something completely different such as bowling or adventure golf. I was thinking however of direct competitors - attractions offering an equivalent experience - and of those I think we have very few indeed, possibly none in the strictest sense.

You are right that many people in the UK have no means to travel abroad to visit theme parks. This only makes the Merlin monopoly even more damaging to the industry.

 

[GooseOnTheLoose]

This only makes the Merlin monopoly even more damaging to the industry.

Aside from the fact that it's not a monopoly and doesn't come close to the definition of one.

A monopolist has so much power that they control the industry's price of the product, the servicing and production contracts around the product, and the consumer has no other choice.

Merlin doesn't have industry control over pricing. Entry prices have broadly stayed consistent for the past 20ish years of operations, increasing just under the inflation rate. Their product has got cheaper, not more expensive. Merlin's pricing also doesn't affect the pricing strategy of their competitors, with Paulton's, Blackpool and Drayton regularly being more expensive to visit than a Merlin park.

Merlin does not have exclusive contracts with suppliers, nor do they control how much that contract is worth. Other parks in the UK can, and do, go to the same attraction, food and beverage and entertainment providers as Merlin and pay the same price as everyone else. Merlin does not have purchasing power to bully their suppliers.

A monopoly means that you don't have another choice, there aren't any other parks one can visit. This isn't the same as not having any other parks of a similar and consistent high production quality.

Merlin isn't the only seller and there are close substitutes.

A monopoly ensures that there are high barriers to entry. Either the costs of starting up are too high, or government intervention makes it impossible, or the essential resources are controlled by the monopoly. Whilst there hasn't been a new park, of considerable note or size, opening in the UK during Merlin's existence, there have been expanding existing players and two new ones attempting to enter the market, with Universal and Puy Du Fou.

 

[rob666]

And further, if Merlin had a monopoly, a real one, do you think they would let the punters have season passes, let alone dirt cheap ones?

 

[Bowser]

I think it depends how we are defining "competitors" here. Any leisure attraction could be considered a competitor to a theme park, in that you could choose to spend your money at a theme park or doing something completely different such as bowling or adventure golf. I was thinking however of direct competitors - attractions offering an equivalent experience - and of those I think we have very few indeed, possibly none in the strictest sense.

You are right that many people in the UK have no means to travel abroad to visit theme parks. This only makes the Merlin monopoly even more damaging to the industry.

I think people are focusing on the dictionary definition of a monopoly when i expect the point being made is that Merlin dominate the UK theme park industry due to the multitude of attractions they own. It's not a picture we really see anywhere else in Europe and as a result (though of course not the only reason) they tend to have higher quality destinations whilst Merlin as a company benefit from competitors being unable to reach a comparable level, meaning they can maintain a lower standard.

Will Paultons get there? Other than Universal they're the only viable contender left imo but i expect they will always remain somewhat a niche park.

 

[GooseOnTheLoose]

I think people are focusing on the dictionary definition of a monopoly when i expect the point being made is that Merlin dominate the UK theme park industry due to the multitude of attractions they own.

In terms of pure visitor numbers alone, Merlin dominate the thrill end of UK attractions in the UK. Crucially, they still do not have a monopoly. They are also not the dominant operator in terms of locations.

Theme Parks

• Merlin Entertainments operates 4 UK theme parks: Alton Towers, Chessington World of Adventures, Thorpe Park and Legoland Windsor.
• Gulliver's operate 4 theme parks in the UK, equalling Merlin: Gulliver's Valley, Gulliver's World, Gulliver's Kingdom and Gulliver's Land.
• The Looping Group operate 21 leisure parks in Europe, they currently operate 3 in the UK: Drayton Manor Park & Zoo, West Midlands Safari Park and Pleasurewood Hills.
• There are many other single site, or duo site, operators.

Heritage Attractions

• Merlin Entertainments operates 1 castle, Warwick.
• English Heritage operates over 100 castles, forts, and defensive sites.
• National Trust operate 29 castles or forts.

Gateway / Midway attractions

• Merlin Entertainments operate 21 gateway / midway attractions in the UK: Madame Tussauds, London Eye, Shrek's Adventure Playground, Cadbury World, 2 x Legoland Discovery Centres, 4 x Dungeons, 11 x Sea Lifes.
• Escape Hunt operate 24 locations in the UK.
• Boom Battle Bar operate 30 locations in the UK.
• Mulligans operate 14 midway attractions in the UK.
• Hollywood Bowl operate 75 sites in the UK.
• Odeon operate 103 sites in the UK.

It's not a picture we really see anywhere else in Europe

• The Looping Group own and operate 10 parks in France alone, more than Merlin in the UK.
• Parques Reunidos operate 8 parks across Europe, all within Schengen.
• Compagnie des Alpes operate 9 theme parks across Europe, including 4 in France alone.

 

[Bowser]

I perhaps naively took it in good faith that people were discussing theme parks of a certain calibre rather than the likes of Gullivers which will not ever (nor are they trying to) compete at the higher level of the market in which Merlin operate. Perhaps there are equivalent borderline monopolies in the lower tiers.

Can't say i have an encyclopaedic knowledge of every European theme park but for the point being made you could perhaps cite Netherlands (Efteling, Walibi and Toverland), Germany (Europa, Phantasialand, Movie Park Germany, Legoland), France (DLP, Asterix, Puy du fou, Walibi, Futuroscope), Belgium (Plospa, Walibi, Bellewaerde) and Spain (Portaventura, Parque Warner, Isla Magica) as examples where the top parks are from a range of providers whilst the UK's top 4 are all Merlin. That's where i think the discussion point perception of them as a Monopoly stems from rather than legal definitions.

That was my interpretation of the conversation anyway. I think the non theme park attractions are only relevant in the sense that they bolster Merlins grip on the market through the value of the MAP.

 

[GooseOnTheLoose]

I perhaps naively took it in good faith that people were discussing theme parks of a certain calibre rather than the likes of Gullivers which will not ever (nor are they trying to) compete at the higher level of the market in which Merlin operate. Perhaps there are equivalent borderline monopolies in the lower tiers.

A good faith discussion would not feature several attempts at redefining an economic term, or shifting goal posts, to fit your chosen narrative. By all means use a different better fitting term, or phrase, to describe market dominance; monopoly just isn't appropriate.

I take your point about discussing parks of a "certain calibre," but to claim that Gulliver's doesn't compete with Merlin is a fallacy. Gulliver's operates four theme parks that are demographically laser focused on the exact same young family market as Chessington and Legoland. Whether they deliver the same quality of product can be debated, but they are competitors in much the same way as Aldi, Lidl and Waitrose compete against Tesco.

Can't say i have an encyclopaedic knowledge of every European theme park but for the point being made you could perhaps cite ... France (DLP, Asterix, Puy du fou, Walibi, Futuroscope), ... as examples where the top parks are from a range of providers whilst the UK's top 4 are all Merlin.

You make a good point about the European market, but it's worth noting that of the five French parks you listed, three (Parc Astérix, Futuroscope, and Walibi) are all operated by a single company, Compagnie des Alpes. That market is also highly consolidated, just not by Merlin. If you were to take Schengen as its own market, you would find high consolidation too by other multi-park operators.

I do not think that MAP should be discounted, however, as it creates the conditions for Merlin to be the dominant player in the UK market. The MAP is the real moat around their business. It creates an ecosystem that incentivises repeat visits and locks in the family market across their entire portfolio, from the theme parks to the Midway attractions. That is something no other UK operator, be it Gulliver's or Looping, can currently challenge.

 

[jon81uk]

Also I think Merlin being the dominant operator isn't a new thing, Tussauds was in the 90s as well with two theme parks, a castle and a waxworks museum, then they added Thorpe Park in 1998.
But the competition to those parks hasn't changed much since the 90s either except for the fact several parks made poor decisions, Drayton Manor and Blackpool Pleasure Beach were the main competition to Alton Towers 30 years ago and still are. Paulton's have also emerged as a major competitor to Chessington.

 

[havaska]

There’s definitely untapped theme park potential in the UK.

I live in the north west; if I want to visit a high quality theme park with some good thrill rides my option is basically Alton Towers, or potentially Thorpe Park if I’m up for a long drive.

But neither of these parks offer the AAA experience I’m looking for. And I know this is the same for my friends and family in my age group (I’m in my 40s).

So that leaves us with the options of having to travel abroad for Efteling, Europa Park, Disneyland etc.

Universal have clearly identified this gaping hole in the market.

If Merlin wanted to, they could have developed Alton Towers into a world class resort. But they didn’t, they simply offered a worse experience year on year, chased profits and left their parks to rot.

 

[rob666]

And Merlin competes directly with the likes of Gullivers', even at the Towers...with Cbeebies.
Only Thorpe is "out of sector".

 

[Thameslink Rail]

I think Merlin's position feels more dominant to us because we are mostly thrill seekers who wouldn't be seen dead in a Gullivers park.

 

[jon81uk]

I think Merlin's position feels more dominant to us because we are mostly thrill seekers who wouldn't be seen dead in a Gullivers park.

But I'm not even sure the thrill ride thing is directly "Merlin dominance", or just that other parks think family rides get far better returns on their investment. Except for Icon at Blackpool and Speed at Oakwood I think it is just that Alton Towers and Thorpe Park are the only parks building thrill coasters in the last twenty years really. Drayton Manor built G-Force in 2005 and I think it is clear that didn't get a great return on that investment. But even then the only extreme-thrill coaster Alton Towers built in twenty years is Smiler (classing Thirteen & Wickerman as family-thrill). Maybe if G-Force had done better for Drayton Manor they would have put in something more like Wickerman level at some point?

 

[havaska]

I think Merlin's position feels more dominant to us because we are mostly thrill seekers who wouldn't be seen dead in a Gullivers park.

Well you’re not allowed in to Gullivers unless you have a child with you, so I couldn’t go even if I wanted to!

 

[havaska]

But I'm not even sure the thrill ride thing is directly "Merlin dominance", or just that other parks think family rides get far better returns on their investment. Except for Icon at Blackpool and Speed at Oakwood I think it is just that Alton Towers and Thorpe Park are the only parks building thrill coasters in the last twenty years really. Drayton Manor built G-Force in 2005 and I think it is clear that didn't get a great return on that investment. But even then the only extreme-thrill coaster Alton Towers built in twenty years is Smiler (classing Thirteen & Wickerman as family-thrill). Maybe if G-Force had done better for Drayton Manor they would have put in something more like Wickerman level at some point?

Sik at Flamingoland?

 

[Thameslink Rail]

Looking at "extreme" coasters in the last 20 years
G Force - closed 2018
Kumali - still going
Speed - park closed 2024
Rage - still going
Mumbo Jumbo - still going
Hero - still going (unfortunately)
Icon - still going
Sik (edge case as it's second hand but never operated at it's original park) - still going
So Flamingo Land is probably in the best position in terms of purchasing new coasters
I have not included the many knackered Pinfaris that have been relocated in that time.

 

[GooseOnTheLoose]

The Times have published a far more detailed report on Merlin's credit down rating by Moody's:

A leading credit ratings agency has downgraded the owner of Alton Towers as the leisure operator grapples with a debt pile of more than £4 billion.
Moody’s cut the rating on Merlin Entertainments’ bonds further into junk territory, to Caa1 from B3, as it flagged “persistently challenging trading conditions”.

Its credit analysts said the outlook was “stable”, provided the company made progress with cost-cutting measures and was able to maintain a “disciplined approach” to capital expenditure. Moody’s also said the group had good liquidity levels with a cash balance of £100 million and an undrawn debt facility worth £428 million.

A spokesman for Merlin said the group was “taking decisive action to improve profitability and efficiency” through a programme that has delivered annual savings of £21 million.

He said: “Merlin has a clear strategy for long-term growth and we are confident in the strength of the experience economy. Supported by long-term fixed debt and strong operating cash flow, we are well positioned to invest in future opportunities.”

Merlin has a debt pile of more than £4 billion, inherited when it delisted from the stock market in a £6 billion deal in 2019 involving a consortium led by Blackstone, Denmark’s billionaire Kristiansen family that founded Lego, and the Canada Pension Plan Investment Board. The leisure operator had been floated at a valuation of £3 billion by Blackstone in 2013.

The company plans to refinance debt of £630 million over the next nine months and Moody’s stated that its credit metrics are likely to strengthen as it improves its operating performance before the debt falls due in November 2027.

Moody’s said: “We downgraded the ratings because the company’s weak credit metrics are unlikely to improve soon amidst persistent challenging trading conditions … We believe that maintaining a sustainable capital structure will be challenging without further asset disposal or shareholder support.

“We also anticipate the company will implement necessary cost control measures, preserve liquidity, and maintain a disciplined approach to capital expenditure.

“The company can comfortably manage its significant seasonal working capital fluctuations and capital expenditure programme over the next 18 months.”
Despite welcoming 62.8 million visitors to its 135 attractions in 2024, Merlin, the world’s second-largest attractions company, saw revenues slip and its pre-tax losses swell to £492 million following a £384 million write-down on the value of some of its brands, including a £163 million write-down related to Madame Tussauds.

The group has continued its expansion plans, however, investing £375 million on opening 24 new rides and attractions, including the 236ft Hyperia, the UK’s tallest rollercoaster, at Thorpe Park, in Surrey. Last month, Merlin said it will offload 29 of its Lego and Legoland-branded sites for £200 million.

The two principal shareholders, Blackstone and Kirkbi, said: “We have confidence in Merlin and its management team. This is a terrific business, and we believe the financial profile of the business will continue to strengthen.”

Source: https://www.thetimes.com/business-m...in-credit-rating-cut-junk-debt-pile-zvxllcfz2

Moody's also states the outlook is stable and that Merlin has "good liquidity" (over £500m in cash and undrawn credit) to manage its operations for the next 18 months.

The downgrade simply reflects the new, higher cost of servicing their existing debt (which is almost entirely as a result of taking it private again), and Moody's is stating the obvious that this will require disciplined capital expenditure.