Dominic Walsh
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Nick Varney is angry. He is at Madame Tussauds in London, but far from merely admiring the waxworks the chief executive of Merlin Entertainments Group is fuming about a survey suggesting that meals served at Britain's visitor attractions contain fat, salt and sugar well above recommended guidelines for children.
He is annoyed because, with Merlin being by some way the UK's biggest visitor attractions operator, people will automatically assume that the survey is pointing a finger at him and his team.
“We're really upset about this,” he says. “We robustly and aggressively rebut all of this. I would challenge you to go to Alton Towers, Legoland, Chessington World of Adventures or any of our attractions and tell me that you didn't think that we were right on the button with this. We've invested a huge amount in providing healthy eating options across all our attractions.”
The father of four is into his stride. “One of the ironies of all this, which these people forget, is that it's Mum and Dad that should be left alone to make their own decisions. What we've done is make healthy options available. We offer a free fruit salad and water with every kid's meal at Legoland Windsor and 50 per cent say they don't want it. But I don't look at them disapprovingly.
“For a lot of people, a day out at a theme park is a break from daily life. They're out for a memorable day out. I think people are fed up with being lectured about what they should do by government authorities and do-gooders. There is an agenda on healthy eating and we are doing our bit, but at the end of the day people should be left to make their own choices.”
The Merlin boss is just as unhappy with the Department for Culture, Media and Sport (DCMS) and, in particular with Margaret Hodge, the Tourism Minister. “At a recent event in the House of Commons, she criticised large visitor attractions for poor customer service,” he says. “Yet she had never been to any of our businesses and she had never asked to meet either me or anybody else from the industry. I don't know where she got that information from, but it was clearly not based on any knowledge, which is, unfortunately, the problem with tourism at DCMS. They don't understand what they are doing. If I had the chance to meet her, I would put in front of her our customer satisfaction scores. Then I'd ask her what on earth she was talking about.”
It will come as no surprise, then, that Mr Varley is rather pleased with Merlin's customer satisfaction scores, which leads to another subject that sets him in a rage: the perception that visitor attractions make a big hole in the family budget. Mr Varney points out that a family of four visiting a Sea Life Centre or the York Dungeon, where the average visiting time is an hour and a half, would have to pay no more than £40 to £50 to get in. At one of its theme parks, where the visiting time is six to eight hours, the same family of four would pay a little over £100.
At this point in the interview, Mr Varney breaks off to have his photograph taken at Madame Tussauds' Bollywood section. On his return, the issue of prices is clearly still grating with him.
“If I could just address that issue, because I hate leaving these things hanging in the air. I'm absolutely passionate about this business and we are totally focused on customer satisfaction.
“I really felt very uncomfortable just now [when the Bollywood section was cordoned off] holding back our customers from what they'd paid for. I hate it. It's the most depressing thing in the world when visitors are unhappy, and the most fantastic thing in the world when they're happy. We, I think more than any other company in the leisure market, measure visitor satisfaction endlessly.”
Mr Varney explains how the company runs a mystery shopper programme, in which every Merlin attraction - all 58 of them - is rated using a league-table system.
“They don't like being at the bottom of it, I can tell you,” he says. “We have a very high target. Disney have said publicly that they regard 80 per cent as their benchmark for customer satisfaction. Ours at Merlin is 90 per cent.
“When people say to me we are expensive - well, for six to eight hours of high-quality entertainment and education, a clean environment and great customer service, then I say: ‘Please tell me why that's expensive.'”
Another thing that makes Mr Varney unhappy is poor weather, and he reflects gloomily on the “coldest, nastiest early Easter that I've ever experienced”. Although the group's indoor attractions, such as Madame Tussauds, the Dungeons and Legoland Discovery Centres, are unaffected, he concedes that the weather is a big issue for theme parks such as Alton Towers and Chessington World of Adventures. Indeed, he believes that extremes of weather have more of an impact than economic black clouds.
“I've been in the business 18 years and my experience has been unequivocally that we do OK in a recession. We are not immune from it but we're quite resilient. People cut out foreign holidays, but they still have to take the kids out to do things. At the moment, it looks like we're heading for a good year.”
Although Mr Varney concedes that he might get hot under the collar about a lot of things, he insists that this is because he is so passionate about running Merlin. It is clearly a job he enjoys. “I feel like a kid who has been let loose in the biggest sweet-shop in the world.”
He holds a particular affection for the Dungeon brand, which Mr Varney considers the “naughty child” of the Merlin family. “We regularly get in hot water with the Church for doing a Satan's grotto at Christmas. We did a PR stunt last Christmas giving free entry to people with antisocial behaviour orders and got into lots of trouble. We see the Dungeons as being deliberately anti-establishment. It's a brand for teenagers and young adults, so it's irreverent. The humour is intrinsic.”
Even more contentious was the decision to include a waxwork figure of Hitler in the new Madame Tussauds in Berlin, an event that became even bigger news when the figure was almost immediately decapitated by a left-wing activist.
Mr Varney insists that he was surprised by all the fuss, pointing out that there has been a waxwork model of Hitler on display in Hamburg for the past 60 years. “I can honestly say we didn't set out to be controversial in Berlin.”
Mr Varney likes to compare Merlin's approach to that of Virgin, casting Walt Disney in the role of British Airways. Although Merlin is still a distant No2 behind the American giant in the visitor attractions league table, with 32.2million visitors to 107 million, Mr Varney believes that he can take over the lead. “I'm a great believer that if you're really passionate about something, why shouldn't you want to be No 1 and shoot to be the best? It's what Americans call a great big hairy-assed goal.”
Merlin's chief has achieved his goals thanks to backing from private equity. In 1999, Apax Partners backed the £47million buyout of the Vardon group's Sea Life and Dungeon businesses. In 2004 he persuaded Hermes Private Equity to back a secondary buyout, valuing the group at £72.5million.
“I wrote a paper for Hermes saying there was an opportunity to be a global leader, but Hermes said they didn't have the equity to back that scale of acquisition,” he says.
Hermes may not have been interested, but Jason Katz, then an investment banker at UBS, knew a man who was and introduced Mr Varney to Joe Baratta, a managing director at Blackstone.
“Joe took that leap of faith that this little company and its management team could deliver. The £102.5million cheque was the smallest they had signed.”
Since Blackstone wrote that cheque, Merlin has acquired Legoland for £258million, then in March last year it bought Tussauds Group from Dubai International Capital (DIC) for about £1.2billion. After the deal, Blackstone has just over 50 per cent of the equity and DIC and Lego each have about 20 per cent, with the balance of about 8 per cent held by Mr Varney and his management colleagues.
When the Tussauds deal was signed, the aim had been to float the enlarged business fairly quickly. The credit crunch has put paid to that for now, although it is still the company's preferred route.
“It remains a very strong option for us,” Mr Varney says. “We need the markets to recover, then we'll consider which options to go for. At the moment we have the great advantage of most of the big banks in London coming to us and proferring free advice, trying to get themselves into the running.”
Those same investments banks will also be hoping that Merlin becomes involved in the forthcoming auction of Anheuser-Busch's theme park business, which will be put up for sale after completion of the American brewer's $60billion takeover by InBev, of Belgium. “It's a quality portfolio,” Mr Varney admits, although with an estimated value of about £2billion for all ten parks he says it would be “a very big slug for anyone to swallow ... I think a couple of their parks are fantastic. I wouldn't rule anything out, but that would be a scarily big deal and in current markets, with the leverage situation, it would be difficult for anyone to do. But if it were to be formally put up for sale, then clearly we would have a look at it.”
Mr Varney claims that, for now, he is focusing on his target of opening five new attractions a year around the world - it has just opened Sea Life California, near San Diego, and the Legoland Discovery Centre in Chicago - while making its theme parks more destination-led by building hotels at the sites.
Given Merlin's growth record, it would not be a surprise if he secured at least some of Anheuser-Busch's parks as he closes in on his “hairy-assed goal” of overtaking Disney as the biggest attractions operator.
CV
Born: November 28, 1962
Education: Graduated from London School of Economics
Career: 1984-88 Brand marketing manager, Rowntree Mackintosh
1988-90 Brand marketing manager, Reckitt & Colman
1990-94 Marketing director, Alton Towers
1994-95 Head of group marketing, The Tussauds Group
1995-98 Managing director, Vardon Attractions. Appointed to Vardon Plc board in 1997
1999 Led management buyout of Vardon Attractions to form Merlin Entertainments
1999 to present Chief executive, Merlin Entertainments Group
Family: Lives in Dorset. Married with four children
Interests: Keeping pigs, watching rugby, mackerel fishing
Q&A
If you could change one thing in the financial and commercial environment, what would it be?
Get government to take tourism more seriously. More investment in overseas marketing (as against the cuts just announced) and a lower rate of VAT in line with France and Spain would help to address the UK's £20billion tourism balance of payments deficit
Who is or was your mentor?
I don't have a mentor, as such. However, Nick Irens (former chief executive of Vardon) always gives me strong support and guidance, which I very much appreciate
Does money motivate you?
Only in so far as it enables me and my family to live a comfortable life. Love of the job is what gets me out of bed in the morning
What was the most important event in your working life?
Deciding to take the Alton Towers marketing director job over a three-year assignment in Italy with Reckitt & Colman. Exchanging Milan for the West Midlands was a difficult call but the rest is history
What gadget must you have?
Totally, hopelessly, addicted to my BlackBerry
What does leadership mean to you?
Having clarity of vision and objectives, then assembling a world-class team to deliver them
Which business person do you most admire?
Sir Richard Branson. I love the original David v Goliath positioning of the Virgin brand
How do you relax?
Working our smallholding with my wife Liz. We have almost as many animals as Chessington zoo
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as far as i can tell all he is doing is buying up companies. thats nothing to do with disney, theyve built theme parks tv stations film companies etc etc, they continue to produce things. buying up companies is not the same as building them.
will, grimsby, uk
It sounds like Varney has his stuff together. It seems like he could buy up the Busch parks and join them with his existing empire.
Chris Kelishes, San Diego, CA, USA