Merlin Slashes Entertainment Jobs as Trump’s Tariffs Loom

Philip Hernandez (00:00.962)
This is Green Tag Theme Parking 30 and this week we're talking about Trump's new tariffs and how they could drive up costs for theme parks, Merlin cutting their entertainment departments across the US and the UK, and Comcast betting on Epic Universe despite their mid-year struggles. What does this all mean for the future of theme parks and guest experiences? I'm Philip and I'm joined by my co-host Scott Swenson and we're gonna dive in to discuss it.

Scott (00:22.166)
Absolutely, and we're going to discuss it from our points of view and hopefully try to inspire others to continue this discussion as opposed to just shut it down because we've used a buzzword that has upset somebody. hopefully this is designed to be the impetus for more discussion and not a turnoff because there's some phrase, verbiage that somebody doesn't like. That is not our purpose.

Philip Hernandez (00:50.23)
Yes, our purpose is always start the discussion. And our first topic is a great example of that because over the weekend, the Trump administration announced that they were going to put tariffs on China, Mexico and Canada. And that could mean higher costs for theme parks. This is a good place to start the discussion because we're, this is one of those things that's a complex topic and we're not ultimately sure where it's going to lead, which is why discussion is important about this thing.

And I want to share my perspective on with my company that does supply as a manufacturer. We do supply for theme parks directly. So I want to share my perspective. And I think that we need to have a discussion to help get us to answers as to what we should be doing like today, this week to prepare for this. But first, let me give some context. So Trump's latest tariffs on China, Mexico and Canada could mean higher parks for theme parks, delayed expansions and increased ticket prices.

As international partners retaliate, will this trigger a tourism shutdown? We're gonna talk about all that. So here are the facts. The Trump administration imposed tariffs on Mexico, Canada, and China on Saturday, and it hit Canada and Mexico with tariffs of 25 % on all goods with a carve out for Canadian energy and oil exports. Those would be taxed at only 10%. Mr. Trump also placed a 10 % tariff on all Chinese goods. So far, Mexico and Canada have immediately

announced their tariff retaliations and they have explanations about what those retaliations, their specific sectors for those retaliations. China said that it was going to launch a case against the United States and the World Trade Organization, and it also vowed corresponding countermeasures. So that's the background for this. I think

that it's probably gonna hit in multiple phases. So I think first we're gonna kind of see increased costs for a trashes development. And I do think that's gonna happen immediately because of mostly China is what I would say honestly, is mostly from coming from China, that 10%. I think after that increased costs, we're gonna potentially see delayed expansion because it just makes sense. If the projects are getting more expensive, then it's gonna have to come down to whether or not the attractions have the budget, you know, that they...

Philip Hernandez (03:07.566)
pre-allocated for that or not, because a lot of these are capital expenditures. And then I think potentially down the road, what that could result in is higher ticket prices for the end consumers. But in this first phase, I do think that the tariffs on China will drive up prices because it's ride components, lighting, animatronics, tech heavy installations, anything like that. Those construction costs will inflate because the materials are going to become more expensive. I think also merchandising.

You know, lot of the merchandising that a lot of the theme parks use are all stuff, honestly, the stuff coming from China or China materials in some way. And my, our personal situation with Gantem is we're already having these staff discussions now, as I mentioned on the previous episode, we're already having these discussions now about what we do with those tariffs. we, do we pass it all straightforward? Do we pass the entire thing on to the customer?

at what phase do we do that, how does that work. But I can tell you that a lot of the, customers already kind of knew it was coming because you saw a lot of them trying to push through big projects so that their lighting costs do not go up. And I can also tell you that talking to other manufacturers in the space, everyone I talked to is planning to add that 10 % directly onto what the customers of the theme park or the attraction is paying, especially lighting equipment. So,

You know, if you had a 10 % buffer on your budget, which is what Scott and I suggested you do, months ago we suggested you build 10 % in. If you have it, then you're fine. But if you don't have that 10 %…

Scott (04:42.926)
As long as you're only getting equipment from China, yes.

Philip Hernandez (04:45.846)
Yes, yes. And if you don't have that budget, then it's going to be a problem. especially stuff like fog fluid, fog machines, lighting gear, tech, components, types of steel, all that stuff. that's my kind of how I see it. think in the short term, we're going to see this increased cost, which will lead to delayed expansion and then at the end, potentially higher ticket prices.

Scott (05:12.152)
Well, and I think that one thing that we, so I will tell you right now, I am no expert when it comes to tariffs. Not at all. So I did a little research and then kind of formulated bits and pieces of opinions because it all makes sense to me. But in looking at it, one of the things that when I started digging in with like Forbes, for example, because they were very helpful,

online as far as explaining what this all means. One of the things that Forbes brought in was this is going to hit the smaller manufacturer significantly harder than it will hit the larger companies. Larger companies already have enough volume that this

Philip Hernandez (05:46.84)
Yeah, I agree with that.

Scott (05:54.08)
especially the 10 % from China, is not going to impact them significantly. They can, you know, yes, they will up their prices because the tariffs say they can. That's what it really boils down to. The tariffs say they can up their prices.

their profit margins are not going to be affected nearly as much as the smaller companies because they don't have the volume nor do they have the the well basically just the volume that's really the big the big issue. Another thing that I found very very interesting in just kind of bouncing off of what what Philip just brought up here is excuse me is and I alluded to it just a moment ago what I think is also going to happen is there are going to be

increases whether they are legitimate or not. In other words, this is no different than when the news media says gas prices are going to go up. Well, all of the gas companies, all of the gasoline companies and the oil companies inflate pricing and they will say, well, this is in fear that this is actually correct.

Philip Hernandez (06:42.541)
Yep.

Scott (06:59.182)
So it's kind of what we were talking about earlier. If you've got a 10 percent, if you can do a 10 percent buffer in your profit margin, then do it. Well, now that has been eaten up again from China. I also think that the powers that be are recognizing that. I mean, it seems very obvious to me and maybe I'm just oversimplifying, but doing 10 percent from China and 25 percent from Mexico and Canada is looking directly at, well, the big companies will survive and the small companies will go away.

This appears to be intentional to me. Now, I don't know. I do not know. But just the fact that so many large companies import not necessarily finished goods, although many do, but components from China. And one of the things that was coming up a lot in my research was what is the alternative? And when asked that,

Philip Hernandez (07:45.442)
Yep. Yep.

Scott (07:57.858)
the administration basically has said, members of the administration have said, well, just make things in the US. But Philip, I think you can probably talk to this more intelligently than I can. That's not reasonable, is it?

Philip Hernandez (08:05.102)
Yeah.

Wha-

Philip Hernandez (08:12.256)
Yeah. So I love that you brought up those points, especially about how it's unfairly impacted. And also I think it's a good opportunity that I have this perspective because I'm dealing with this directly in my day to day. This is literally my job. So, yeah. So I think the point about it unfairly impacting or disproportionately, maybe not unfairly is not the right word. disproportionately impacting that is

Scott (08:24.59)
directly. Yeah, I mean, this is is impacting your bread and butter. I get it.

Philip Hernandez (08:41.248)
so accurate because, you know, a smaller company like ours, we are a specialty manufacturer and we specifically manufacture for theme entertainment. That's our entire client base is theme parks and attractions, you know. There are a lot of folks that are around our size that do the same thing and we're considered small. And it's tough for us because, you know, we can't as easily diversify our supply chain.

you know, because it costs a lot of money to diversify. I've been trying for years, but I have to get the capital together to get a whole nother warehouse and a whole nother factory set up in a different country. And that is basically doubling the amount of expenditure that I have in goods to have to store them somewhere else and or move personnel over. I mean, it's a lot of capital to do that. And it's just it's not tenable. And I will tell you that I have tried and tried and tried to find a U.S. way to do this.

And it's just the costs are, it's not tenable because the expertise that you need to do what we're doing, it's like the staff just gets cost too much and it costs too much to train up staff or you have to move them over. And it's just, it's possible. We have looked into it, it is possible, but it would make the cost maybe double of what it is now for our stuff. And so 10.

Scott (10:03.726)
And that is for one company. Just imagine if that same, if that, so we're not getting cheaper eggs, kids, we're getting double prices on pretty much everything and certainly things that are involved with the attractions industry. Yeah.

Philip Hernandez (10:05.9)
That's for one,

Philip Hernandez (10:14.961)
Yeah. And also it takes time. know, you can't just slip on that for us, like for us, would need to, I mean, we've been looking for spaces and for talent already, but it would still take time to physically move the process over. So it takes time and it would double the, roughly double the cost. So for us, it really is a no brainer. It's like just 10 % versus a hundred percent. You know, it's the much better solution is just add 10%, you know, to everything right now. That's the better solution for us.

But to your point about smaller and larger companies, larger manufacturers could have supplies in other countries or multiple countries have a more robust supply chain. So they're able to kind of dodge around the tariffs in theory. So really, I think it's going to more hurt the smaller manufacturers or specialty, which I think is why we're talking about this on the show, because the theme park community does rely on a lot of specialty manufacturers.

for specialty components and those components, you know, definitely are gonna see this, some form of this. And also I liked your point about how people are gonna raise the prices anyway. And that's kind of what I'm hearing from the folks that we know in the industry that are in similar positions to ours is that it seems like everybody, regardless of how big the company is and regardless of whether it actually is 10 % more, they're just gonna raise their prices. That's what everyone that I'm hearing,

What they're hearing is this is an excuse for us to do a 10 % plus price hike.

Scott (11:48.75)
And in fairness, I'm just going to play devil's advocate here simply because we have said if you can build that into your profit margin. We've already suggested that. But you know, you could you could.

Philip Hernandez (11:54.978)
Mm-hmm.

Scott (11:59.307)
anything we're going to say in this show can be taken any fact any data can be used to represent one point or the other. I just want to make sure that we're we're being aware of the fact that this is a possibility. Another thing that I thought was really interesting because I actually watched a video of Justin Trudeau when he did his his I don't want to say retaliatory but kind of is when he announced the the tariffs back on the US and the thing that I found most

interesting is he seems to understand that the tariffs are going to impact Canadian businesses in a not so positive way, which is why some of the tariffs take place almost immediately and the rest of them take place later. And his justification was so that Canadian companies can find other supply chains and other they can adjust their business model accordingly. So he recognizes that the tariffs that

are being put on the US now are going to negatively impact his own companies. But he has no choice simply because it's going to impact the economy of North America and potentially South America.

Philip Hernandez (13:06.306)
Yep. Yep.

Philip Hernandez (13:19.202)
Yeah, and this is all interwoven, I believe, because I believe that, I believe that, you know, regardless of exactly the discussed point about this whole thing, it's going to impact, have all these shockwaves. And I think if you look, if you look at the wider picture, that's going to result in higher costs for essential items, know, gas, food, things like that. And that's kind of what Trudeau was talking about.

which is what it's going to do then is reduce the discretionary income that people have and make it, think, make it so they have less to spend on tourism. I mean, that's way down the road, but that's my working theory.

Scott (13:53.336)
Well, and less, it may be less down the road than we think. Again, one of the biggest things in the research, and again, I did not take the time before this show to get my doctorate in, know, in economy, but.

One of the things that keeps coming up over and over and over again is with these kinds of tariffs and with these, and I'm going to even go so far as these back and forth tariffs, I hesitate to call it a tariff war. Although that.

may apply. The biggest concern is what it does basically is because things cost more across the board and because you know the basics of gas and food will end up costing more as well, it actually negatively not only impacts discretionary spending, which is what the attractions industry relies upon, but

the overall state of the economy in general because people stop spending money you know we forget that when people stop spending money it negatively impacts our economy so i'd i think that you know this this lack of

this lack of discretionary spending means that your marketing teams better get on the ball because they're going to have to work much harder for every dollar that's brought into your park. You may even have to find ways to incentivize people, which may mean that, and this ties right back to your expansions as well, you may not have the boon years that you're anticipating here because

Philip Hernandez (15:18.552)
Yes.

Scott (15:36.302)
people just are afraid to, will be afraid to spend money because they go to the grocery store, they go to the liquor store, they go to the gas stations, they go to, their energy bills, their electric bills are going up by 25 % if the tariffs are just passed right on through.

And that means that they are going to be significantly less likely to say, look at all this money we have. Let's, let's invest in our annual pass again, or let's take, go on vacation. No, those things are going to get put to the, put to the side for a while. So.

Philip Hernandez (16:11.082)
No, that's an excellent point. think, and that's actually, I'm not sure we're gonna get to this. We might need to, or this story might need to do for our unhinged listeners, but that's something that Comcast actually talked about on their earnings call was the, yeah, yeah.

Scott (16:26.542)
Let's hold that for unhinged because I definitely want to get to some of the other stories that we've already kicked off and teased.

Philip Hernandez (16:36.376)
So, yeah, so what I wanna add to that is,

I think what our listeners can do right now, like the takeaways as I would say, is I would say exactly what Scott said, think about how you're gonna attract in visitors and think about, you know, how it might be more difficult. Cause we were already kind of on a post equalization hit, you know, where numbers were softer due to, you know, just after the post pandemic bubble, can already softer numbers and this could potentially make those numbers even softer. And so thinking about how you're gonna attract guests in, I think that's a good takeaway.

I also think, again, thinking about the cost of expansion, know, like, know, what's gonna be more expensive is building items or like those kind of anything that relies on technology that we're getting from abroad. But what's not gonna be more expensive is live entertainment, in theory, in theory, which we're gonna talk about in the next story. you know, I think those things, I also think just looking at your project budgets and...

examining you do you have the 10 % or how could you redesign something or you know, relight something thinking about those elements of all the projects you have planned for this year. I think that would be a great exercise for your teams to go through right now and look at those potential costs but

Scott (17:55.182)
I think that's a great idea. even something as foolish, and this is going to sound silly, but even something as foolish as going back with your culinary team to find what raw materials, what food stuffs are going to go up by 25 % most likely. Yes, get rid of avocados, tomatoes, grapes, wine, beer. So.

Philip Hernandez (18:03.672)
Yep. Yep. Yep. Redesign your menus. Yep.

Philip Hernandez (18:12.45)
Yeah, take out avocados. Like, get rid of avocados from your menu. Yeah.

Yeah. Yeah. So anyway, anyway, okay. Our next story here is one that was sent by several listeners. And what I did was, it's funny, because I think the listeners sent only one pieces of this story. And so I put multiple stories together. So this is a story like I'm making. It was not one that was set in this way, but I'm putting multiple pieces together. Because I think...

people were only looking at one individual park, they weren't looking at the larger story. So the larger story here is that Merlin Entertainment as a whole is trimming its staff in Florida, California and the UK. So Merlin Entertainment, the world's second largest tourist attraction operator is laying off staff in California, Florida and the UK. Legoland Florida will lay off 234 employees mostly from entertainment and the Legoland spokesperson for Florida said and I quote,

We are making operational changes to help us elevate the guest experience in 2025 and beyond. The decision to reduce the size of our entertainment team was undoubtedly difficult, but these changes will allow the resort to operate more flexibly and responsively in a competitive market. Good for them. Legoland California is also reducing its entertainment team by an undisclosed number. Although the theme park did confirm to local media outlets that it will be fewer than a hundred employees, but that's still a lot because the smaller park.

Meanwhile, in the UK, Merlin, which operates Legoland, Madame Tussauds, Sea Life and Warwick Castle, intends to merge all of its attractions into one united business, leading to staff reductions in marketing, finance, human resources, and of course, entertainment. So consolidation is one thing, you know, in the UK it seems like consolidation is one thing, but all these properties going without live entertainment doesn't seem likely because

Philip Hernandez (20:08.43)
Are they're all family institutions that kind of rely on live entertainment? I would think to kind of give them a little bit of differentiation. So that has led to a lot of folks assuming that somebody is going to take on that entertainment. And a lot of people are suggesting RWS because RWS has worked with Lego land properties before for the holiday seasons. They even put out like big press release last year about how they worked with them across the board. So

That part, we don't know. So like the first parts about all the layoffs is all confirmed. And it's just no one had put those stories together. But on the other end, what are like, you know, professionals in our industry is kind of like talking about is, are they gonna do live entertainment at all? Or how is this gonna work? And since they are still claiming to be doing live entertainment, but they don't have entertainment staff, then the kind of the only

solution would be to hire it out and everyone's like assuming that that's going to go to RWS, but it has not been confirmed that part. RWS has not said anything. Legoland has not said anything about how they're doing it. None of that has been confirmed. So I think my first thing is like, this kind of seems a little bit like the six flags model in a way, you know, where they're kind of like consolidating to lead to more efficient operations. know,

but is it really gonna be experience enhancement as they say, you know, or what? And then of course the risk of losing in-house creative, know, that's especially what I wanna talk to Scott about because Scott has worked intimately in this, but you know, the first thing when I thought when I read this is I was like, what they're really saying is they no longer have the talent to manage talent because it's not easy to manage talent and you need, like you need talent to manage talent, right?

But if they just have lost the capacity to do that, then it would make sense to hire out. But in my view, that's actually more expensive is to hire somebody else to do it rather than do it in house. But if you can't manage your talent internally, then maybe that's your only choice. I don't know, Scott, what do you think?

Scott (22:22.99)
So I have to be very careful in what I say in regards to this particular situation. I appreciate that. Simply because I knew this story was going to be a story long before it became a story. Simply because of who I've worked with, who I'm connected to in the industry, and who contacted me saying that they and their entire teams had been let go. When it comes to...

Philip Hernandez (22:27.49)
That's why I was doing so much talking.

Scott (22:49.582)
when it comes to they didn't have the internal talent, I don't believe that for a minute. I think this is a decision. This, and I could be wrong too, I don't have any further information from internal sources than that. And well, I do, but I can't talk about it. But that said, to me, this appears to be something that looks really good on paper.

We are going to and it's and the reason I say that is because I've seen this happen in theme parks in many other areas and it's a pendulum that swings back and forth it goes from Gosh, if we didn't if we got rid of all of our internal people for this area whether that is entertainment or culinary or merchandise or marketing or whatever and Hired a complete outside company then it would be significantly cheaper on paper They don't look at you know, what do they lose as far as?

Philip Hernandez (23:14.294)
Hmm.

Scott (23:42.019)
as far as building their own team, as far as being true and cohesive in their own branding, etc.

Then after that's gone on for several years, it swings back. It's like, why are we paying so much to have an outside company manage all this when we could spend significantly less and bring them back in-house? This is the way theme parks have always worked. You mentioned RWS. I have heard nothing about that, absolutely nothing. But I will say it does make sense because it has to, if they're going to make it so that it is indeed a global, a company that takes on this global contract, then it would have to be

Philip Hernandez (24:02.627)
Yeah.

Scott (24:21.648)
company the size of RWS, whether it is RWS or not. The other side of it is they may also find it is significantly more cost-effective to have a corporate brand team for their entertainment and then do smaller companies in each of the parks so that they can be a little bit more nimble and adapt more quickly and be able to take what the corporate brand book, and Lego has a huge one,

Philip Hernandez (24:39.181)
Yep.

Scott (24:51.52)
take the corporate brand book and disseminate that to smaller companies that are able to work quickly and elegantly within their own market. So I don't know, it could go any way. Anytime we see entertainment go by the wayside and when friends of mine in the industry are...

Restructured out of their out of their positions. Believe me. I have a great deal of empathy That's what happened to me ten years ago. I get it I will also say that it is It to me it kind of screams as a gosh, this looks really good. Let's do it and The pendulum will swing back. It has every other park I've ever seen every other park I've ever worked in

Philip Hernandez (25:35.843)
Yeah.

Scott (25:44.31)
And it keeps going back and forth because that institutional knowledge kind of goes away in this environment. they don't remember what the challenges, whichever way it's swinging, they don't remember what the challenges were before because nobody's still around to have those insights.

Yeah, I think this will be a long pendulum swing. It's not going to be something I'm not saying, oh yeah, this will change next year. Nope, not going to do it. My guess is five to 10, five to 10 years. And then it may swing back depending. But then again, that all depends on what happens with the global economy. That all depends on what happens with their profit margins. And of course, the parent company Lego.

Philip Hernandez (26:16.108)
Wow. Well.

Philip Hernandez (26:25.752)
Yep.

Philip Hernandez (26:29.742)
Well, I guess I have a few of many follow-up questions. Like, do you think that they're gonna keep the entertainment, you know, like, or are they cutting that back? I mean, will you, I mean...

Scott (26:42.35)
I think you'll see a and this is purely conjecture, but I think you'll see a I think you'll see a short pullback and just to regroup and get whoever or whatever entity is gonna come in and take over to get their feet on the ground. And then you'll, and then from a consumer standpoint, I think what you're going to see is less new and less diverse.

offerings, but I don't think the amount of live entertainment will be impacted long term. Short term, yes. Long term, I'm guessing not. But again, that is pure conjecture.

Philip Hernandez (27:18.904)
Yeah. Well, and I think again, on paper, just like you said, on paper, that looks like it would be something that, you know, like investors would like, it's like on paper, it's like something that people that don't know anything about operations would think is a good idea because you're like, well, we'll make a global entertainment team and they can run California and they can run Florida and they can run the UK and they can do like a cookie cutter, you know,

guidebook and then they can give it to someone and that person can hire and train all the actors and in each local area and whatever but we'll do one script for every park. Yeah, it doesn't work but but it looks good on paper.

Scott (27:56.118)
And that doesn't work. That doesn't work. It looks great on paper. It looks great on paper. It's funny because a lot of people forget that I have 20 plus years of experience as boots on the ground operationally in a theme park with entertainment. They forget the fact, they think of me now as the creative guy who comes up with stories and such. But part of the reason I'm able to do that is because I have that boots on the ground day in, day out.

Philip Hernandez (28:11.202)
Yep. Yep, yep.

Scott (28:25.486)
operational experience in working with a specific theme park and then even after that, you know, with SeaWorld Abu Dhabi and

WWE, the WWE experience, those were completely operational. Those were, I said zero creative in them at all. They were completely operational gigs. So I have a very strong working knowledge of how entertainment operations works within theme parks. And I like, that's why I can say with a great deal of confidence, this is a pendulum that will swing, but I think it's going to swing slowly simply because it's such a large company. Merlin is big.

Philip Hernandez (29:01.954)
Why do you think, well, it's slowly too, but why do you think it's happening now? I mean, do you think that this is like a post pandemic cost correction move, you know, like, or potentially preparing for economic downturn, like we just talked about, you know, or is it like a response maybe to Disney and Universal and their heavy expansions in literally all the same markets that are mentioned here? Like, are they playing defense or they're trying to control costs? Why, why now?

Scott (29:25.314)
Well, I.

Scott (29:30.144)
It could be any of those things. would, again, let me put on my mind reader hat here. I would prognosticate that, is that even, did I even use that word correctly? Anyway, I would imagine that it is to make certain that globally they are being lean and mean so that they can compete in all the markets, yes.

Philip Hernandez (29:44.514)
Anyway.

Scott (29:55.086)
I think it is more based on what the competition has already announced and is expanding into than a preemptive strike against an economic downturn. But again, that's a guess. That is a guess. But you know what else I guess? I guess we're out of time, because we are out of time.

Philip Hernandez (30:14.88)
We are out of time, but we're not gonna get to Comcast, so we're gonna have to talk about it on our unhinged Patreon show.

Scott (30:22.04)
But wait, Philip, how can people listen to our unhinged Patreon show?

Philip Hernandez (30:25.106)
Well, that's a great question. I'm glad you asked you. Anyone listening that wants to be part of this, they can go to Patreon and search for green tagged or just go to Patreon slash green tagged and you find us there, our show. we get, if you subscribe, you get access to a bonus episode every week. That's twice the content.

Scott (30:45.944)
Wow, that almost sounded like a commercial. Anyway, for those of you who are listening and won't be joining us for Unhinged, thank you. I'm glad you spent some time with us this week. We really do appreciate it. Those of you who are going to join us for Unhinged will continue to move forward. And as you know, we will get louder and significantly less politically correct in that show. But on behalf of Philip and myself, Scott Swenson, this is Green Tagged Theme Park in 30, and we will see you once again next week. Bye.

Philip Hernandez (30:47.842)
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