By Adrian Fisher

Nick Varney is driven by creatures and creativity, and as Chief Executive Officer of Merlin Entertainments Group, believes he has the best job in the world. We are near neighbours in Dorset, and his weekend relaxation is keeping Jacob Sheep which are black-faced, whilst my flock are white-faced Dorsets.

Also in Dorset at Poole is the world HQ of Merlin Entertainments, Europe’s largest entertainment group, and second only to Disney worldwide. Being #2 in the world is something that Nick considers to be only a transient position on Merlin’s upward growth path.

Merlin Entertainments is the world’s fastest growing entertainment group, in an industry that has steadily exceeded GNP growth for the past half century. It all started in 1999 with Sea Life Centres and Dungeons. “It started with a fish” says Nick. The group has achieved double-digit growth for each of the past 8 years. And that’s just the internal growth rate within existing operating divisions; acquisitions have caused Merlin to grow even faster. Nick Varney and his team started Merlin Entertainments with a buyout of Sea Life Centres, and the Dungeon brand. With venture capital from Blackstone, Merlin then acquired the 4 LEGOLAND parks, Gardaland and the Tussauds Group.

To maintain double-digit internal growth, Merlin is concentrating on rolling out its ‘Midway’ brands, is using capital expenditure to drive organic growth, and is planning to turn its theme parks into Destinations complete with accommodation.

In 2008, Merlin opened 2 Sea Life Centres (in Italy and California), 2 Legoland Discovery Centres (Chicago and Duisburg), Madame Tussauds in Berlin, and acquired the London Aquarium. “In terms of branding, we are more like a Unilever than a Cadburys in that we own a portfolio of strong individual brands rather than marketing them all under one global name.”

Growing management from within

“We cannot stand still,” says Varney. “To maintain growth, we need Money, People and Ideas – and it’s the People and the Ideas that are the most vital.” The strong equity backing comes from Blackstone and Kirkbi (owner of LEGO) which in current market conditions is a great source of strength.

The creation of 6 new businesses this year within the Merlin group creates 6 new senior positions. Keen to grow future management talent from within, Nick Varney is particularly proud of Merlin’s Graduate Programme, which takes 12 graduates each year, and puts them through a two-year program that includes Marketing, Human Resources, Finance and Operations.

Of this year’s graduates, 6 are based in the UK, 3 in the USA, and 3 in Germany (“which gives you an indication of the way we are taking the company at the
moment,” he said). The successful dozen were taken from 1,000 applicants, and the competition was intense. “Interestingly, we found that the sharpest graduates had degrees in traditional subjects, rather than options such as Leisure and Tourism,” says Nick. “We compete for the best graduates with leading banks, and with companies like Unilever. We are proud that so many graduates value a career with Merlin on an equal footing with these kinds of organisations.”

Nick is keen to get his message out to his ‘stakeholders’, and for this reason maintains strong relationships with business journalists. “It’s very important that we engage with the industry and potential investors, who may want to buy into Merlin”.

His recent IAAPA keynote address in Orlando in November 2008 was another part of this strategy. Being the world’s fastest-growing entertainment group, even using retained profits for much of its growth, is always going to be a cash-hungry activity, and Varney’s strong relationships with banks, institutions and investors is a vital part of the Merlin approach.

Varney’s management style is to create an inclusive culture, establishing shared values across the group. Unlike other entertainment groups, the core Merlin culture is neither corporate, nor centralist. In a recent company-wide staff survey, he was pleased that 88% of all staff filled in the survey forms, and that 89% felt “I like working here”.

One might expect such consistency within such longstanding divisions as Sea Life Centres and Dungeons. But these high percentages are all the more impressive when significant parts of the total headcount are in companies that have only been acquired in recent years, initially bringing with them a range of corporate cultures.

A unique range of world-class Internal Core Competences

This leads on to Merlin’s insatiable appetite for the finest ideas the entertainment industry can provide. Ideas come from creative people and processes. “Merlin needs excellence in every area of activity,” says Varney. Merlin works closely, directly and professionally with its external designers, contractors and suppliers, but again in a noncorporatist way.

“I want to focus on Compelling Propositions”, he says, “that are going to get Joe Public to visit.” Each new offering must sell itself off the leaflet as a single image. Then it must deliver the experience, with maximum capital efficiency, delivering at least a 20% return on investment.

Merlin’s three strongest forms of promotion are Word of Mouth, by TV advertising or publicity, and through point of sale leaflets. A lot of resource is put into its websites, and whilst the effect of the internet is increasing, it is not yet the largest factor. Merlin has a unique range of world-class Internal Core Competences, including Wax Figures, Lego Models, Marine displays, and in-house themeing. “Within Merlin Studios we now have creative Directors on the brands”, says Varney, “when previously they were designers.” Each Creative Director is expected to develop and champion the creative direction of their particular brand (whether Sea Life Centres, Dungeons, Legolands, and so on), using the finest creative ideas the world has to offer.

Varney’s distinction is crucial; he also values the contribution of external designers and creatives, whose broader experience of working outside the business is valuable, achieves a wider creativity, and brings cross-pollination from them working in different media and for different kinds of visitor destinations. “Merlin will never be totally reliant on internal resources,” says Varney. “There is too much to do, we want the widest range of innovation and innovative ideas, and we need external expertise.”

A significant number are members of the TEA, who already know each other through TEA activities, and thus are able to work closely and effectively together to high standards within tight timescales.

For years, it has been Nick Varney’s long-term aspiration for Merlin to have a Stock Market flotation, but obviously that is not going to happen any time soon due to the economic downturn.

Meanwhile, Merlin Entertainments continues to have its world headquarters in the old town of Poole, Dorset, in Southern England. Yet no one should underestimate its compact non-centralist management style, or confuse this style with the unbounded global ambitions of Merlin Entertainments and its visionary CEO Nick Varney.

Contact details:
Mark Oakley, Press Officer, Merlin Entertainments
Phone: +44 1202 666900
Email: mark.oakley@merlinentertainments.biz

Interview (c) 2009, ADRIAN FISHER
Image: courtesy Merlin Entertainments Group
This interview first appeared in the Feb '09 European newsletter of the TEA (teaconnect.org)

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