Merlin’s magic

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Kylie Minogue at Madame Tussauds.

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Guests interact with the rides at Legoland.

Growth drivers

As well as growth by major acquisitions - Legoland in 2005, Gardaland in 2006 and The Tussauds Group in 2007 - Merlin has grown its existing profit base by double digits for the last seven years, says Varney.

He says this is down to focusing on three main growth drivers while also taking advantage of opportunities such as Legoland Dubailand and its recent deal to operate the first observation wheel in the US -the Pepsi Globe.

The first growth driver is the rollout of the company's mid-way brands - Madame Tussauds, The Dungeons, Sea Life, Legoland Discovery Centres and observation attractions, explains Varney.

"At the moment we're rolling these out at five a year. We've got 120 sites identified around the world so I know we can keep doing this," he says.

Secondly, Merlin is working towards turning its nine theme parks, which includes the four Legolands, into destination attractions.

"We own and operate six hotels and two holiday villages and that's all about making our theme parks places people will stay for two to three days," says Varney.

"We're looking to build four more hotels in the next six years," he reveals.

As Merlin's theme parks move in this direction - an approach also taken by many attractions developers in this region - the plan is also to add "second gates" to them, such as a Sea Life centre on a piece of land Merlin owns near Gardaland in Italy. This adds both critical mass and an attraction in its own right, says Varney.

The third driver, he adds, is ensuring the company invests to very set capital expenditure cycles within its existing businesses.

"This year, Alton Towers and Gardaland have big new ride investments and we've got a rolling cycle on the four Legoland parks," he says.

For example, it is through "enlightened capital expenditure and marketing strategies" that Merlin has grown Legoland profits by more than 60% in the past three years.

Varney explains that Merlin is now trying to cluster its mid-way brands.

"For example, Madame Tussauds Berlin will open this summer and we already have a Sea Life centre and a Legoland Discovery Centre in Berlin, so you get marketing efficiencies," he says.

"One of the reasons we bought the London Aquarium in April is because we already have the London Eye, the London Madame Tussauds and the London Dungeon," he continues.

"If you go to any of our London attractions you'd be very lucky if you walked away without having bought a ticket to at least one of the other ones, preferably two of them," says Varney.

Merlin's future then is pretty well mapped out so far, with the scheduled opened of Legoland Dubailand in 2011 already highlighted on the company's website. Considering the growth elsewhere, it seems more than likely that this is just Merlin's first trick in the Middle East.

"We're very interested in working with Tatweer on more developments," confirms Varney.

We see it as a strategic partnership, we have good relationships with Tatweer and we have a common shareholder right at the top of the tree, so yes, we'd like to discuss with them observation attractions and Madame Tussauds," he says.

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