When I speak to Merlin Entertainments’ CEO Nick Varney, he has just returned from a trip to the US, where he visited the recently opened LEGOLAND New York Resort – just one of a string of new and forthcoming openings for the entertainment giant. Like everyone in the attractions industry, the group has been hit hard by the pandemic, but now it’s full steam ahead with highly ambitious global plans to grow the company, and Varney’s relief and excitement is clear.

“It’s easy to say ‘we’ve opened this, we’ve opened that’,” Varney tells me, speaking from Merlin’s head office in Poole, “But it doesn’t reflect the real experience of getting each and every new site open.”

“After all of the hassles you have to go through – the objectors, the financing, the design, the countless problems – that in the case of Legoland New York included record rainfall, an overheated construction market, local objectors, and then just for kicks, a global pandemic – nothing beats the buzz of finally getting a site open.

“Several years ago, I walked around a big hilly piece of woody scrap land about an hour out of Manhattan and tried to visualise whether there could ever be a Merlin Entertainments business on that site. Last week, I sat looking out of my hotel bedroom, hearing kids squealing with happiness, watching lines of excited people heading to the entry gate.

“You can finally see it was worth all that blood, sweat and tears, because you’ve got happy families having experiences that will last in their memories for years to come.

“Nothing in the business world can beat that.”

MAJOR PLANS
The Legoland New York Resort is just one of several major new projects for Merlin. This year has also seen the opening of Mythica, a new themed land at Legoland Windsor, UK; the first European Legoland Water Park in Gardaland, Italy; and the Legoland Discovery Centre in Hong Kong.

November is set to see the launch of Madame Tussauds Dubai, and openings planned for next year include Madame Tussauds Budapest in Hungary, Legoland Korea and the first standalone Peppa Pig Theme Park at the Legoland Florida Resort. Three new Legolands have been announced for China: the world’s largest Legoland Resort in Shenzhen; Legoland Sichuan Resort; and Legoland Shanghai Resort.

Other upcoming projects include the world’s first standalone Peppa Pig Resort in Sichuan, China, while scoping work is underway for another European Legoland Resort, potentially in Belgium.

“We have a clear growth strategy, and that hasn’t changed,” says Varney.

“When the world returns to normal, people will want more than ever to spend their leisure time on really immersive short breaks rather than big long holidays, and they will want to travel again.

“I’m extremely confident about the prospects for our industry. It will bounce back stronger than ever.”

COPING WITH COVID
The company has come a long way since Varney, along with Mark Fisher and the senior team of Vardon Attractions carried out a management buyout to form the Merlin Entertainments Group in 1999. Since then it has acquired The Tussauds Group – which brought with it Alton Towers, Madame Tussauds and the London Eye – as well as Gardaland, Italy; Sydney Attraction Group; Living and Leisure Australia and several smaller attractions.

It’s also developed four Legoland theme parks in the USA and Europe.

Today the group operates 135 attractions in 24 countries and is focused on continuing to forge a high-growth, high-return family entertainment company, based on strong brands and a diversified global portfolio.

This approach is working well, Varney explains – when the UK market was hit hard by the 2017 terrorist attacks, for example, the US and Asia Pacific markets performed very well, providing a balance.

Then COVID-19 hit, rewriting the rulebook for everyone. “If you’d said to me I’d wake up in May 2020 and find all but one of our global businesses shut at the same time I wouldn’t have believed you,” says Varney. “How could you conceive of that?

“It’s been traumatic, damaging, challenging; I’m proud of the way my team have come through it though. The first lockdown was the hardest I’ve ever worked. We furloughed around 95 per cent of our staff, and the rest really worked hard to save costs, push things back where they could, and most importantly not lose momentum on core projects.

“We made a conscious decision that key strategic projects were going to continue, so we would be in a good place when we were able to start reopening. Fortunately, we were taken private in November 2019 and our new shareholders backed us to continue to work on those big strategic projects.

“We continued to spend a lot of money against what was coming in, so it will take a while for us to rebuild balance sheets, but that’s true of the whole industry. Most importantly, Merlin is alive and kicking, it’s still opening new attractions, still looking to expand significantly and we have an excellent core team that wants to get on with it.”

RESORT THEME PARKS STRATEGY
Merlin’s attractions can be split into two categories – Resort Theme Parks and Midway Attractions – with the Resort Theme Parks overseen by two separate operating groups: Resort Theme Parks and Legoland Parks.

For the Resort Theme Parks, the group’s strategy is clear, says Varney. “Encourage people to come from further afield to stay two or three days. They have much richer experiences and they spend more.

“We develop our theme parks with the aim of adding themed hotel accommodation – we already have 22 hotels and six holiday villages, so we’re not an insignificant hotel operator in our own right.

“In a number of our Resort Theme Parks, we’re adding second gates – we’ve added Sea Life Centres at Gardaland, Legoland California, Legoland Japan, and Legoland Malaysia, for example. We’re currently building the first standalone Peppa Pig theme park next to Legoland Florida, with the clear objective of that being a second gate. It’s the same strategy with our six parks in Europe – we’re adding accommodation and second gates, as well as new rides and attractions.

“For our Midway Attractions, the big strategy is to focus on gateway cities and destination locations, and build a presence of multiple branded attractions so we can cross sell between them in the way we do in London. If you come to the London Eye, we say, why not visit the Sea Life aquarium if you’re a family, or the London Dungeons if you’re with a group of mates. It works really well.

“In the long run – once the dust has settled on the global pandemic – we’d like to own more resort theme parks. We won’t be building on any greenfield sites, other than for Legolands, so that would largely be an acquisition play.”

LEGOLAND RESORTS STRATEGY
“Legoland is a big growth driver for us,” says Varney. “We’re putting a lot of money into it – half a billion pounds of Merlin cashflow has gone into funding the Legoland New York Resort and Legoland Korea alone, and we’re currently building four more parks.

“With Legoland, as well as building out our existing estate, one of our key strategies is to build more Legoland resorts, either owned and operated by us, or under management contract,” he continues.

“We currently have three Chinese Legoland projects underway in Shenzhen, Sichuan and Shanghai – Shanghai is a joint venture between Merlin, China Media Capital, Kirkbi and the Jinshan Province, while the other two are management contracts.”

There are currently nine Legoland Resorts open worldwide – how many does the company ultimately see being built? I ask Varney. “John Jakobsen, who heads up our Legoland Resorts Group, believes there’s room for between 20 and 25 Legoland Resorts worldwide,” he says. “We believe North America could certainly take a couple more, and we know where we’d build them. China could definitely have more than three and we think there are still opportunities in Europe. We’re doing a partnership and feasibility study on a site in Belgium at the moment.

“We think there’s a lot of opportunity to expand Legoland – certainly into the 2030s if not the 2040s.”

THE CREATIVE JUICE
Now we’re up to date with the business strategies, our talk turns to the creative side of the business.

“Creativity operates on two levels at Merlin,” says Varney. “At the formal level, there’s Merlin Magic Making (MMM) – the creative heart of Merlin – which is headed up by Mark Fisher and Paul Moreton. As we speak, MMM is undertaking 80 individual projects worldwide, from the three Chinese Legoland theme parks to building an amazing new dark ride at Gardaland.

“More generally, we encourage everyone in the company to be creative, and to think laterally. There’s a dynamism, creativity and passion that runs through Merlin.”

What’s Varney’s role within the business, I ask. “My career started in brand marketing, so I have a laser beam focus on the end consumer,” he says. “My job is to make sure we’re always focused on our guests, what’s going to make them excited and want to keep visiting us. Also making sure that what I call the ‘corporate bollocks’ doesn’t get in the way of us doing that.

“When you start getting bigger, and particularly after you become a public company, you start having systems and protocols that you have to do that are the antithesis of entrepreneurism. As an entertainment company, I see my biggest job is to champion the end consumer and make sure that the sometimes necessary corporate processes don’t strangle that creativity.”

One thing is clear, Varney absolutely loves his job, and the pandemic hasn’t changed his positivity and optimism in relation to the future of the attractions industry.

“We’re not out of the woods, but those people who thought the pandemic would put a nail in the coffin of location-based entertainment were wrong – that’s absolutely not the case. People want to get out and have shared experiences in alternative immersive environments, which is what Merlin is all about.

“We love what we do and we’ll continue doing it. For a lot of us at Merlin, we feel like the luckiest kids in the world,” he concludes.

“It’s as though we’ve been let loose in our own toyshop.”

More: www.merlinentertainments.com