Return of tourists allows Legoland owner Merlin to build back to profit

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The return of international tourism has pushed Legoland owner Merlin Entertainments back into profit, returning Europe’s largest theme park operator to its pre-pandemic growth trajectory.

A total of 56.4mn visitors went to a Merlin park, hotel or holiday village over the course of last year, up from 35.2mn visitors in 2021. The rise in footfall boosted group revenues by 59 per cent to just over £2bn.

As a result, the group, which operates attractions in 25 countries, swung back to profit after incurring losses during the pandemic as travel restrictions hampered the business. Pre-tax profits were £136mn last year, compared with a loss of £94mn in 2021.

The bounce back continued in the first quarter of this year, with strong demand in London where Merlin runs the London Eye and Madame Tussauds, and an uplift in travel across Asia pushing revenues and visitor numbers to more than 30 per cent above the same period of 2022.

Merlin has three Legoland parks under construction, with the Shanghai park due to open in 2025. Two Peppa Pig park openings are also planned next year. Last year, the group opened a Legoland in South Korea and the first standalone Peppa Pig theme park in the US state of Florida.

Midway Attractions, which includes the Madame Tussauds, Sea Life and the Dungeons brands, was the group’s fastest-growing division, with revenues 83 per cent ahead of 2021. Revenues in Legoland parks were 72 per cent up compared with 2021.

Scott O’Neil, Merlin’s chief executive, told the Financial Times that Merlin’s brand partnerships gave it an advantage during a period of high inflation and economic slowdown.

“Guests are choosing more carefully where to spend their hard-earned money, and we are seeing a flight to quality as consumers focus on big brands like Lego, Peppa Pig and Ferrari,” said O’Neil.

He added that “although international tourism numbers are returning to pre-pandemic levels at different rates”, domestic travellers taking day trips remained a key part of Merlin’s target market.

Merlin was taken private in 2019 after six years as a listed company on the London Stock Exchange in one of the biggest European private equity-backed buyouts in recent history.

Kirkbi, an investment vehicle run by Lego’s founding family, teamed up with private equity group Blackstone and Canadian pension fund CPPIB on the £6bn takeover.

Private equity firms have poured billions of dollars into holiday parks and attractions operators in recent years. Blackstone bought Haven holiday parks operator Bourne Leisure for about £3bn in 2021. This year, Brookfield has started an auction process to sell UK holiday operator Center Parcs for between £4bn and £5bn, drawing interest from a number of private equity groups.