Merlin Entertainments Group CEO, Nick Varney talked openly to Blooloop about a wide range of issues. These included China, Merlin’s continued international growth, belugas and the challenges of creating successful attractions: “It’s not easy to make money out of theme parks.”
Merlin Entertainments Group is the world’s second biggest attractions operator after Disney in terms of visitation. The UK-based company owns and operates over a hundred and twenty attractions worldwide. Its portfolio includes 18 hotels and six holiday villages together with major theme parks such as Thorpe Park, Alton Towers and Heide Park.
Merlin’s trademark Midway city attractions encompass Madame Tussauds, Dungeons, SEA LIFE, and newcomer Little BIG City. It also operates LEGOLAND theme parks and LEGOLAND Discovery Centres. Back in March Merlin hit a record 66 million visitors across its attractions globally.
Nick Varney, CEO, Merlin Entertainments Group
CEO Nick Varney led a management buyout of Merlin Entertainments. He then floated the company to expand Merlin into a global giant. In 2013 he was awarded an honorary doctorate by Staffordshire University. This was, “in recognition of his considerable business success on a global scale.”
Renowned for his business sense and marketing skills (he once said, “If you can get out of our attractions without buying tickets for the others, well, good luck.”) he is equally respected for his humanity.
He and his team founded Merlin’s Magic Wand to help seriously ill, disabled and disadvantaged children, while Merlin’s SEA LIFE Trust is a charity that works globally to protect the world’s oceans.
Blooloop’s Charles Read sat down with him for a wide-ranging interview. He discussed everything from brand strategy to the impact of terrorism; from Brexit to belugas.
He shared his thoughts on technology and China – its trade war with the US, its government clampdown and, above all, the phenomenal opportunities the Chinese market offers for the attractions industry.
“Something about theme parks”
Nick Varney visited his first theme park in 1973. “It was a childhood visit to Disneyworld,” he says. It left a lasting impression: “There was just something about theme parks”.
However his career took some twists and turns before he returned to that childhood fascination. By the time he left school his passions were politics and economics. He went on to study at the renowned LSE (London School of Economics).
“I went to university thinking I wanted to be prime minister and came out marketing chocolate bars,” he says. He started at Rowntree Mackintosh as an assistant brand manager in 1984. He then became senior brand manager before being headhunted by cleaning products brand Reckitt and Colman.
In 1990 he was on the verge of going to Italy to work with Reckitt when he was approached by a head-hunter for the Tussauds Group. The Group had just bought Alton Towers and was looking for an FMCG marketer. “The approach came out of the blue,” Varney says. He had recently married and was looking to relocate near Milan with his wife.
However, remembering that childhood Disney experience, he said he’d “take a look” and joined Alton Towers as Marketing Director in September 1990. Once there he progressed to become Head of Group Marketing and Corporate Strategy.
The birth of Merlin Entertainments Group
In 1995 Varney moved to Vardon Attractions as Managing Director. He joined the board of parent company Vardon plc two years later. It was a difficult time. “When I started in 95/6 every single SEA LIFECentre was in decline,” he says. “This is one of the things that, all over the world, people who open aquariums consistently forget. Aquariums do really well for the first 18 months and then (the visitation) drops off. So many people base their projections on the expectation that numbers will continue growing. You have to work your economics on what is really going to happen. But we stopped the decline, and turned it around.”
In the latter part of 90s Vardon plc started putting all their money into health and fitness. “It was a bit like a cuckoo in a nest, elbowing out the others,” says Varney. “We weren’t getting any capex, so it was a good thing to go up for sale. However it was an uncertain process and we could have been bought by a trade buyer, and then Merlin would never have come into existence.”
In 1999, he led the management buyout of Vardon Attractions to form Merlin Entertainments. “A lot of luck was involved,” he says. “Apax came along and said they would back us on a management buyout. The management team and I had to sign over nearly all our wealth (which wasn’t a lot at the time) to do the equity check in order to persuade the venture capital company that we ‘had skin in the game’. I had a mortgage and two children, and my wife was pregnant with our third. All our savings went into this underwriting of equity, so it certainly focused the mind!”
Clustering midway attractions in large gateway cities
Varney says Merlin’s first year was challenging: “Everything that could go wrong did go wrong.” First the company received a compulsory purchase order on the London Dungeon. Next came issues with various SEA LIFE centres (including flooding from Lake Constance in Germany, the first time it had flooded in 100 years). Landlord works at the Brighton SEA LIFE centre were so extensive that they virtually closed the attraction. “These were our biggest businesses at the time, and this all happened in one run.”
A preposterous strategy paper
He admits it was hugely stressful. “But we got though it and then, from 2000, we just set off doing what we said we’d do. We divested non-core businesses in the UK. We also expanded on the continent, with a focus on Germany, rolling out SEA LIFE and Dungeons.”
In 2004/5 the market was consolidating. Merlin had gone from seven million Pounds EBITDA to £14.5 million in five years. “We had doubled the size of the company but we were still relatively small,” says Varney. His response was to write what he calls a ‘preposterous’ strategy paper, saying that if the company could acquire LEGOLAND and Madame Tussauds, it could build a global player of significant scale and natural synergies.
More international, more diversified
His vision was to cluster midway attractions in large gateway cities. In addition there would be a balance between indoor and outdoor attractions, so businesses would not be weather-dependent. The aim was to become more international and more diversified. “These were all parts of our original founding strategy, and they are still what drives us today,” he says.
The next step came when a contact put Varney in touch with Joseph Baratta, who had recently come to London to take over the London office of Blackstone, the New York based global asset management giant. The market was ripe for consolidation and Merlin was sold to the Blackstone Group in 2005 for £110 million.
Theme parks and a new stage of expansion
“Joe went out on a limb to do it,” says Varney. “But it gave us the fantastic financial expertise and leverage of Blackstone.” The company successfully bought control of four LEGOLAND parks in July 2005, followed by Gardaland, Italy’s largest theme park, in 2006 and the Tussauds Group in 2007.
In 2010 Varney was on the verge of floating the company when the stock market crashed. “We then had CVC in, along with Blackstone and Kirkbi [The family trust that owns the LEGO company],” he says. “This heralded a new stage of expansion as we opened our first two new LEGOLAND theme parks, Florida and Malaysia, in 2011 and 2012 respectively.
By then we had a good base in North America, so we expanded more seriously into Asia Pacific with the acquisition of The Sydney Attraction Group in 2011 and Living & Leisure Australia in 2012.”
Being public is a “double-edged sword”
At the end of 2013 the company was finally floated on the London Stock Exchange. A year later Merlin announced another year of double digit growth with progress across all strategic growth drivers.
Varney says going public was partly about Merlin’s desire to develop future projects. Although Blackstone, CVC and Apax had always been incredibly supportive, there was no way a private equity company would be able to do what Merlin wanted to achieve.
“Take LEGOLAND New York,” says Varney. “We’re putting $350million out the door but over quite a long period, and it won’t be until 2021 that we start to see the return. There is no way a private equity company would ever be able to sign that off. However it’s something you can do as a public company. We are very cash-generative, so we are funding this out of our own cash flow. If we wanted to raise more money we could always issue new shares. We haven’t needed to do that because we generate good cash flow but it’s another option that being public gives you.”
Staff participation in share ownership
However he points out that being public does come with downsides. “Everybody and his brother can see what you are doing: you are held to account. If you have a bad year you have analysts writing all kinds of stuff, people drawing wrong conclusions and you are in the spotlight a lot more than if you’re private.”
We have one of the highest levels of staff participation in share ownership amongst the world’s public companies
He admits he does look back with some nostalgia on the days of private equity. “If we were having a bad time, I’d just pick up the phone to Joe (Baratta). Now you’ve got to go round shareholders and analysts and explain yourself in the media. It’s different. Being public is definitely a double-edged sword.”
Alongside the need to expand with new LEGOLAND parks, Varney also wanted to get more staff involved in share ownership. “We have one of the highest levels of staff participation in share ownership amongst the world’s public companies. I’m very proud of that.” Nearly 80% of permanent employees are engaged in a bonus plan and 33% participate in one or more of the company’s sharesave schemes.
The question of branding
Merlin as a brand is promoted to certain audiences – current and future employees, shareholders, trade partners and community stakeholders. However the brand takes a back seat when it comes to consumers.
“I don’t ever see a day where there would be “Alton Towers by Merlin” – that’s not our strategy. We are more like Diageo, where they have their brands like Guinness and Johnnie Walker. Ultimately we are about our brands. I don’t want consumers to buy them simply because they are Merlin brands.
“However, for our most loyal customers there are things like the Merlin Annual Pass which is a loyalty programme where we leverage the critical mass we have in a particular market. Over time, if that gets to be known as an endorsement of quality, a consistency of delivery, that’s great but it isn’t front and centre of our consumer strategy. However it is front and centre of our trade strategy. So when we sit down in China to discuss deals with Ctrip, we sit down as Merlin, not as LEGOLAND or Madame Tussauds. It all depends on the constituency.”
How can technology be best harnessed in the industry?
It’s commonly touted that VR, AI, simulation and other technology will replace the attractions industry. Does Varney think that’s valid? “I remember being told this way back in ’95 but I don’t agree. The whole essence of our business is that people don’t want to spend all day at home staring at their screens. They want to come out to other places – safe, clean, immersive environments – and have fun with their friends and family. It’s about shared experiences and that’s what we do. So I don’t fear technology will replace our industry.
“The real question is how do you best harness and work with the technology? The industry has always been incredibly dynamic and adaptive of new technology. Merlin was one of the first to put VR headsets on a coaster – we did it with Air at Alton Towers. It can add fresh new life to an older piece of inventory or ride hardware and give it new legs. So in this instance Air became Galactica – an amazing new experience.”
He points out that, while customers like the VR experience, they also like to be able to see their friends on a ride. “There’s a time and a place for tech,” he says. “For example, VR can be an isolating experience. So technology needs to be embraced but we must never forget that people come to us for shared, immersive experiences.”
Pirates of the Caribbean and Ratatouille
So, is there any technology which really impresses Varney? “I went to Shanghai Disneyland the other week and tried Pirates of the Caribbean: Battle for the Sunken Treasure. The original classic boat ride was the one that made me fall in love with the industry back in the early seventies – I’d never seen anything like it.
“The park operations director in Shanghai said that, in his view, it’s the best in the world. The projection works with the ride transit system and I just spent the whole ride with my jaw open, thinking this is fantastic!”
Innovation and a caveat
He also rates highly Ratatouille at Disneyland Paris. “It’s another good example of a blend of classic 3D theming with modern amazing hi-definition projection equipment and a new trackless system. We’re going to be introducing a similar system into the star attractions at our LEGOLAND parks going forward.”
When the tech works well, it can offer the chance to create “even more mind-blowing immersive experiences”, he says. However there is a caveat. “A lot of suppliers out there are not delivering on their promises. You create demand, customers queue up, rides break down, and equipment doesn’t work: you end up disappointing a lot of people. It was a point I raised at the IAAPA GM’s breakfast.”
“We’ve quite had a lot of issues with this. You want to be innovative but you always have to balance it with how certain you can be of a high level of delivery operationally with new rides and attractions.”
The mobile revolution
Varney says the biggest revolution in his time in the industry is how people access and buy the product. “When I started almost everyone turned up on the door on the day. There were very few pre-bookings. So, you didn’t know if you were going to get 10,000 or 20,000 on the day. It was mainly dependent on the weather forecast.”
In contrast, in 2018 well over 50 percent of Merlin’s visitors find out information about attractions and buy and download their tickets online – increasingly from their phones. The transformation happened very quickly, says Varney, just two to three years from desktop to mobile.
“Today’s visitor expects a seamless purchase journey. They expect to have apps that help them better use the park. In Shanghai today no one turns up with cash. Everyone has mobile and everything is scanned and paid for by contactless on their phone. Cash is outdated in certain Asian markets, and it is heading that way in others. We know our presales much further in advance now. We can monitor the guest journey, both during and after the visit.”
“It’s almost a hygiene factor that you have a good website and seamless ways of purchasing the ticket. If not, people drop away and you lose the demand you have generated. Amazon, Facebook, Twitter, Fliggy, OTAs such as Ctrip – it all put a big onus on attractions operators. You have to be there. It has been the biggest transformation for me and it’s both an opportunity and a challenge if you don’t stay at least on the curve.”
Opportunities in China are “phenomenal”
LEGOLAND continues to be an area of major expansion for Merlin and Varney says he thinks there will be 20 parks worldwide over time. He cites the construction of LEGOLAND New York and “strong live projects” in Korea and China. “We think there could be at least five LEGOLAND theme parks in China eventually.”
China, inevitably, is a huge growth market for the company. “This year we will have virtually doubled our estate in China in a short period of time. We’re opening a Shanghai Dungeon this summer, as well as Little BIG City in Beijing this month, and both a Lego Discovery Centre and a SEA LIFE Centre in Shenyang. Shenyang is the capital and largest city of China’s Liaoning Province, in the northeast of the country. “Not many people have heard of it but it’s about the size of London with skyscrapers as far as the eye can see.”
A better balanced market will emerge
He says the opportunities in China are “phenomenal”, and that by the early 2020s, half of the world’s largest cities will be in China.
A better balanced business with international brands as well as strong local players
However, although the opportunities are huge, Varney says the attractions industry needs to keep its head. “Right now, the theme park and attraction market is overheated: there are too many people piling in. I laugh when I read about new parks in China and the projected market growth because 80 percent are not making any money. It’s not unlike the Middle East. So there are going to be some serious car crashes – it always happens when a market overheats.
“What will emerge from it as a result will be a better balanced business with international brands as well as strong local players. We intend to be one of these. The LEGOLAND Discovery Centre (LDC) in Shanghai has gone very well but we think there is room for more of them and more parks.”
Chinese clampdown only affecting “lose-lose scenarios”
So how does Varney view the clampdown from the Chinese government, in which China’s National Development and Reform Commission (NDRC) has targeted what it dubs “mega theme parks” in an attempt to rein in excessive debt risk?
“The clampdown targets exactly the type of project they have recognised as not being good for the tourism and service economy they want to build,” he says. “They know there are people out there basically building concrete parking lots: loads of rides, no brand equity, no customer appeal and, potentially, not quite as safe as they should be. They are being built because people are making a play on the surrounding land development. It’s not a terrible thing but, if the original investment doesn’t do what it’s meant to do for the tourism infrastructure it’s a ‘lose-lose’ scenario.”
A Chinese Government committed to the service sector
Merlin’s experience, to date, is quite different. Varney says they have seen no fall off in interest from senior levels of government sponsorship for LEGOLAND in China. “Just recently we had the party secretary of a major Chinese province in London at County Hall to meet us. He’s on the politburo of the Chinese government. Also, don’t forget that President Xi was present when we signed the agreement for LEGOLAND Shanghai with China Media Capital at Lancaster House.
“So we see a Chinese government that, on the one hand, is really committed to developing the service sector, particularly tourism, recognising it wants strong international brands. On the other hand, with some home grown product, it is very suspicious of developments that may flatter to deceive. It’s not easy to make money out of theme parks and especially so if you are the first investor in. If you say you’ll take on Disney, build a bunch of theme parks, and invent your own IP… we all know where that goes.”
“Not easy to make money out of theme parks”
“Even Disney say that Shanghai is the first park they ever opened that was EBITDA neutral, because all the others have lost money in the initial years,” says Varney. “You need to spend a phenomenal amount of time and money up front to get all the licenses; the land; the infrastructure to build a theme park; all the pre-opening costs to get it open. It’s an unknown proposition, particularly if it’s external new brand.
He says there is a lot of what he calls “hopeless naiveté” surrounding many projects. “People think it’s easy to open attractions and then are surprised when no one turns up.” He cites the example of Dickens World at Chatham Dockyard in Kent. The attraction cost £62 million but closed abruptly in 2016. “They said it’s going to do gangbuster numbers for a retelling of Dickensian London, yet it wasn’t even in the centre of London. And people wondered why they lost their shirts on it.”
Varney says that Merlin have launched and opened more attractions than “any other company on the planet”. He admits that they don’t always get it right but says their greatest achievement is that they’ve launched more that have been successful than those that haven’t – by a wide margin. “It’s not easy and it’s not an exact science,” he says.
New brands for new markets
Merlin is in the process of rolling out a range of new brand concepts, created to access new growth markets. This includes Little BIG City, an innovative midway product that tells the history of its resident city.
“Little BIG City is doing well in Berlin, and we’re about to launch a second in Beijing. We’ve always said we’d do a Western and an Asian capital city. It is designed not so much as a stand-alone attraction, but as part of a gateway city centre where we can upsell.
“Our whole strategy with clusters in gateway cities is to sell at least two of our attractions to as many people as possible. So if you’re going to Madame Tussauds in Beijing, then the natural upsell is to go in and experience the history of the city told in miniature and with special effects. Ditto Berlin. It’s a combination, and has been developed completely with that in mind.
“We got the product mostly right in Berlin. There were a few things that didn’t come off but we think we’ve corrected them for Beijing and will correct retrospectively in Berlin. We expect it to be a bit like Dungeons or Madame Tussauds, a brand that takes a while for people to understand and the trade to buy into.”
Varney says one of his current aims is to fill in parts of Merlin’s profile. The Peppa Pig play centres are at the heart of this, with five of the pre-school adventure play centres being rolled out from the end of the year.
“We are covered for families with younger children, families with older children and, to some degree, teenagers and young adults,” says Varney. Peppa Pig plugs a gap with regard to pre-school visitors. “The first one is in Shanghai. They are designed to be lower capex, cookie-cutter, rapid roll-out attractions aimed at the pre-school market. Peppa was an obvious choice. “We saw how successful CBeebies was at Alton Towers but CBeebies isn’t as global as Peppa Pig. Peppa Pig is in the top three pre-school IPs in China.”
A trend for adventure
Merlin is also watching emerging trends around the millennial market. “There is a market for real physical and mental challenges, aimed predominantly at millennials. Escape rooms and challenges such as Tough Mudders point the way.”
The company’s first Bear Grylls Adventure attraction set to open at the NEC in Birmingham this year. Aimed at the late teen and young adult market, it taps into the growth of interest in adventure activities. If successful, more Bear Grylls attractions will be rolled out overseas.
Varney has ambitions for Merlin’s geographical footprint. “The aim is to be a third Americas, a third Europe and a third Asia-Pacific,” he says. However, the major current focus is on the USA and China, the group’s big growth markets for the future. “We believe the emerging middle classes of countries such as India and China will fuel a continued expansion of city centre tourism .”
The impact of terrorism on city centre tourism
City centre attractions are vulnerable to tourist concerns over terrorism. Merlin’s attractions, like all others, suffered from the London terror attacks.
Varney is pragmatic about it. “We’ve seen a downturn in city centre tourism wherever there has been a terrorist attack,” he says. “And also more long term wherever the foreign exchange moves. So, for example, we’ve seen New York trend down last year because the dollar was strong against the pound, the Canadian dollar and the Brazilian real. If it’s expensive for people to come from those countries, guess what? The numbers fall off. That’s what was happening in London from the end of 2015.”
The exchange rate
He points out that the exchange rate between the pound and the euro and dollar made the UK a highly expensive destination. “After the referendum, the pound dropped. There was a lag and then, three months later at the end of 2016, numbers came back up. Then the terrorist attacks at Westminster, London Bridge and Manchester happened. Again, there was a three month lag followed by a cataclysmic drop off through summer 2017.”
He says the pattern is always the same. There’s a three to four month drop off after a one-off incident. After six months, numbers start to rise again. However, if there is another incident, the market stays deflated for 12-18 months. “This happened in Paris after Charlie Hebdo, the Brussels bombings and the Bataclan attack. As long as no other incidents occur, London tourism should hopefully start coming back later this year.”
How will Brexit affect the attractions industry?
“As long as the pound stays where it is, Brexit is good for us in the long run,” Varney claims. “It makes going abroad more expensive for UK people but it makes the UK much cheaper for foreign visitors.”
He says the key thing the industry needs to do is make sure government doesn’t put visa restrictions on either the employees needed for tourist industries or, more importantly, for the customers the UK needs to attract.
“It’s delicate because it’s about free movement, but the worst thing that could happen to UK tourism would be visas being put in place that put people off coming here for work or for leisure.”
Varney believes there are huge opportunities but that the UK needs to follow the lead of the Republic of Ireland. “The DUP, along with the Scottish Nationalists and Plaid Cymru, all had reduced VAT on accommodation and attractions in their manifestos. Because the Republic of Ireland has always been a believer in lower VAT on tourism, they see the benefit to the balance of payments.”
The worst thing that could happen to UK tourism would be visas being put in place that put people off coming here for work or for leisure
He points out the huge disparity between the nine percent rate in the Republic of Ireland and the 20 percent rate in Northern Ireland. “The DUP quite rightly says you need to equalise that, otherwise tourism businesses in Northern Ireland are at a huge disadvantage.” If that happens in Northern Ireland, he thinks there is considerable pressure to adopt it in the rest of the UK.
“We should raise our voices”
“So we should raise our voices,” he says. “We need that VAT cut. We need it to make our industry more competitive so that the economy will benefit and we need it to create jobs.”
He is frank about the UK government’s performance over the last two years. “Basically they have screwed us over,” he says. He points out the government has put up the living wage without consultation, driving up labour costs for what is a very labour-intensive industry. They also increased business rates, in some cases by 50 percent, also without consultation, and removed transitional relief.
“You’ve dropped in apprenticeship levies on big players and put in auto enrolment,” he says. “You’ve put taxes on infrastructure and utilities that have meant all our underlying costs are going up. You’re making it very hard to do business in the UK. You need to give us something back.”
VAT cut and National Insurance
He believes that first and foremost the government should offer a cut in VAT. “This is in the long term interest of the economy, which we’ve proven from the Cut Tourism VAT campaign through the Treasury’s own fiscal model.”
Second, he believes the threshold on employers’ National Insurance should be raised. “This would mean we would be incentivised to employ young people,” he says. “The Government seriously risks a return to youth unemployment if this is not thought through properly.”
The big opportunities are in North America, Asia, China and India
As to the Brexit debate, Varney says, “It’s pathetic. Everyone is myopically focused on trade with Belgium, Germany, France, etc. when actually the big opportunities are in North America, Asia, China and India.” His advice to the UK government is to look outwards and be confident.
So how does he view China’s trade war with the US? Varney says that, providing the UK doesn’t get drawn into the conflict, it has the potential to be a huge opportunity for the country. “I saw a presentation recently. It said the Chinese see the UK as an open economy and a big economy, not necessarily aligned to either the EU or the US. If we want, they will embrace the UK with open arms and do business with us. Given the scale and size and opportunity of China, that is a huge opportunity for the UK.”
“Cetaceans belong in the ocean”
SEA LIFE has over forty aquariums worldwide. Merlin also set up The SEA LIFE Trust. This is a registered charity which campaigns to protect the marine environment. It also educates the public about issues concerning the welfare of marine life. “We’ve always had the conviction that we don’t want to keep cetaceans, namely whales and dolphins in captivity,” says Varney. “We think they belong in the ocean.”
He says he is really proud of SEA LIFE’s strong track record in protecting cetaceans. “Between SEA LIFE and Merlin, we have probably closed down more dolphin shows and attractions than any NGO has.”
He points out that the Brighton SEA LIFE centre was originally a dolphinarium. “The two dolphins there were released back into the ocean. We closed down the dolphin and sea lion show at Heide Park when we acquired it. It was the same with the dolphin show at Gardaland when we acquired that.”
In 2012 Merlin acquired Changfeng Ocean World in Shanghai as part of the Living and Leisure Australia Group deal. “Two belugas were a key part of the product. So we stopped the parts of the show that were not the normal behaviours of the whales. Then, with the advice of vets and whale experts, we focused on environmental enrichment and education. It was painful because the Chinese public hated what we were doing: they liked the shows.”
Back to the sea
Finding sanctuary for the belugas proved difficult. “All the time we were working to find a place to put the belugas. Eventually our partners at Whale and Dolphin Conservation (WDC) found a sanctuary on the coast in Russia. However, it turned out that the people running that were the same people who were catching belugas and selling them back to China, so that quickly ended that avenue!
“In the end we went for most expensive option. This was to find a sanctuary in the more natural sub-Arctic environment of the belugas, in a bay on an island off southern Iceland. We invested a significant amount of money – multi-million pounds – in through our SEA LIFE Trust charity.
“We are proud of this because it is true to our convictions. There is no profit for this for Merlin at all. It is the result of a lot of work from people who feel very passionate about this subject both within Merlin and within Whale and Dolphin Conservation. We’ve worked together to make it happen.”
China is “still moving in the wrong direction”
Despite worldwide concern, China is still keeping cetaceans and other marine animals in captivity. Wuxi Changqiao Ocean Kingdom features orca (killer whales), beluga (white whales), pilot whales, polar bears and emperor penguins. Meanwhile the Chimelong Group has opened an orca breeding centre at Chimelong Ocean Kingdom.
“Some Chinese companies are currently still moving in the wrong direction,” says Varney. “It’s interesting though that Ocean Park Hong Kong, which was going to have belugas, was dissuaded from it. Also the S.E.A. Aquarium on Sentosa Island in Singapore was going to have dolphin shows and, again, they were persuaded not to. And we all know the pressures SeaWorld have been under.”
A changing climate
He firmly believes the climate is changing. “It’s going to be untenable for people to focus location based entertainment on the unnatural exploitation of sentient whales and dolphins. Because it’s not right and it’s not what modern consumers want to see.”
China will come around, he says, mainly due to generational differences. “We’re already seeing signs. Millennials in China are saying ‘we shouldn’t really be watching this’ whereas the older generations say ‘no, these animals are here for my enjoyment’. It’s a complete difference of opinion. Obviously the one that will win out will be the younger generation. The change could be slow or it could be more quickly as with the reaction to the Blackfish documentary.
As to the future of Chinese parks that stick to the old ways he cites the example of Shanghai Polar Ocean World. “Full of polar bears, walruses and killers whales, it will be interesting to see how long they’ve got.”
Merlin Entertainments’ future
So, what lies in the future for Merlin? “The last three years have been interesting,” says Varney. “The Alton Towers accident knocked us back and more recently the shocks to the London and wider UK market have been challenging. ” Although terrorism hit the market last year, the company is buoyant. “Underlying all that, we grew EBITDA nine and a half percent and we delivered record visit numbers of 66 million. It’s a long way from where we started and it’s important to keep things in perspective.”
“Obviously we have a very big focus on Asia, and China in particular.”
Back in February Theresa May announced Merlin was introducing two of its brands to China. This was part of a £300m package of projects to deepen cultural ties between the UK and China.
Varney says the group is always keen to look at potential theme park assets. “We’re always on the lookout, always in the market,” he says. They are not looking for small businesses. They are looking for resort theme park attractions that could be turned into successful national short break destinations. “It’s the reason we were in the market for Busch Gardens in Williamsburg and Tampa. They are assets that would fit very well in our group.
A natural partner for global IPs
“Our purpose is to deliver memorable experiences to our many guests around the world. We believe we have an unrivalled track record in bringing this to life through our unique range of world-class brands and our amazing people. Merlin is therefore a natural partner for a whole load of global IPs and have attracted some great partners in delivering some outstanding products in location-based entertainment. We have linked up with Disney, Marvel and Star Wars IPs in Madame Tussauds. Our partnership with eOne and Peppa Pig is like that; Bear Grylls is about that; and, fundamentally, LEGO is about that too.
“That’s our view of the world. It’s what we think we are good at and what we can do better than anyone else. It’s what our value proposition is to partners as well as to the customer. Overall I feel very positive about the future.”
All images kind courtesy Merlin Entertainments unless stated otherwise