Going to Legoland only in autumn and in the rain? The owner decided to implement dynamic pricing

Entertainment empire Merlin Entertainments, which owns Legoland parks, the Sea Life aquarium chain and London’s famous Madame Tussauds museum, plans to change prices based on how many visitors it expects. For you, it can mean unpredictable price increases.

During peak summer weekends, said businesses will charge visitors higher admission fees than on rainy weekdays in the off-season. Their owner is thus trying to compensate for the lower number of visitors compared to the period before the coronavirus pandemic.

Very intuitive system

Merlin Entertainments boss Scott O’Neil said the company is creating a dynamic pricing model that it will implement at its top twenty global attractions by the end of 2024. According to him, the main attractions in the USA should be completed within the next year.

The new model will allow Europe’s largest theme park operator to flexibly change prices in response to changes in supply and demand. It will use artificial intelligence and machine learning to do this. According to O’Neil, it’s a “very intuitive” system. However, he did not specify what that intuitiveness consists of. The basic system of dual pricing in the main and off season has been a common part of pricing in many sectors for years even without artificial intelligence.

“If the attraction is in Britain, for example, and it’s the peak holiday season in August, it’s sunny and it’s a Saturday, you expect to pay more than if it’s a rainy Tuesday in March,” O’Neil told the Financial Times. Even from this statement, however, nothing concrete emerges about the way artificial intelligence is involved.

An important piece of information, which O’Neil did not share with the paper, could be an indication of how far in advance and how often Merlin intends to change prices in its entertainment businesses.

The dynamic hamburger did not please

While hotels and airlines have used dynamic pricing for decades, restaurants and entertainment venues are also increasingly adopting it recently. This is not always met with public understanding.

In February, American fast food chain Wendy’s made headlines when it announced that next year it would “test dynamic pricing for hamburgers during peak demand.” Later, in the face of criticism, he issued a statement clarifying that he “will not raise prices during our busiest times” but will lower prices at less busy times of the day.

Just from the dosage of this information, it should be clear what kind of system to expect. The chain will likely set the base price high (and then actually “not raise it”), while giving “discounts” during other hours.

Merlin’s pricing plan comes at a time when it has seen mixed results. This week the firm said it was on track to achieve record sales of £2.1bn in 2023, up eight per cent year-on-year. But it also posted a pre-tax loss of £214m as it wrote down the value of Legolands built during the pandemic in New York and South Korea.

Higher revenues benefit foreign tourists in key cities such as London. Almost one in four visitors to the city visited one of Merlin’s attractions, according to a company statement. “Guests seem to be choosing fewer attractions but spending more,” O’Neil said

A six billion dollar transaction

“As an operator, you’re trying to optimize the volume and price of what you’re doing, and it’s about how you manage that,” O’Neil was quoted as saying by the Financial Times. This is doubly true when you’re up to your ears in debt, which is Merlin’s situation.

The company was taken over by a consortium of private equity firms in 2019. It is headed by the investment company Kirkbi, managed by the family of the Lego founders. Kirkbi teamed up with US private equity group Blackstone and Canadian pension fund CPPIB in the £6bn takeover. The takeover of Merlin was one of the largest European private equity-backed buyouts in European business history.

The term “private equity-backed buyout” is a de facto euphemism for a transaction in which a takeover company (usually in distress) is taken over by a financial investor (private and therefore subject to less scrutiny than it would have to undergo as a publicly traded company). while he puts only a fraction of the purchase price into the purchase; they borrow most.

Then this investor sells the business again, pocketing the difference between the purchase and sale price, while the debt remains – assumed and resold – with the business. Such a company then has to earn not only for its existence, but also for the repayment of (usually high) debt.

The number of visitors to businesses operated by Merlin has not yet returned to pre-pandemic levels. Last year, approximately 62.1 million customers visited its 141 attractions in 23 countries. This is 13 percent more than the previous year, but still less than 67 million visitors from 2019.