Nick Varney’s Exit Interview
Nick Varney is known throughout the global attractions industry as the CEO who steered Merlin Entertainments for 23 years before handing over responsibilities to the company’s current captain, Scott O’Neil.
For Varney, the epic journey began with a “little fantasy of conquering the world” from Merlin’s headquarters in the historic port town of Poole on England’s south coast. By his retirement in November 2022, he and his team had transformed Merlin Entertainments into Europe’s biggest theme park and attractions operator, second only to Disney on the world stage in terms of visitor numbers. Pre-COVID, Merlin attractions were welcoming 67 million visitors annually.
When he stepped aside, Varney had grown Merlin into a £6 billion company with more than 140 attractions worldwide.
“In my time, we’ve built six new Legolands, the first Peppa Pig Theme Park, 5,000 hotel rooms, and I don’t know how many Sea Life Centers, Madame Tussauds, Dungeons, and Lego Discovery Centers. Over half the Merlin portfolio were new builds,” he says with pride.
“The Merlin team were, in my view, the most effective team in the whole attractions industry in terms of what they produced over that period.”
Brand New Mindset
Varney’s fascination with attractions began when he visited Walt Disney World as a child in 1973. “It was the most amazing place, and it was probably why I jumped for the job at Alton Towers,” he says. He was marketing director of Alton Towers from 1990-94 and then head of group marketing at the Tussauds Group until 1995, after starting out in fast-moving consumer goods marketing (FMCG). The FMCG experience shaped his outlook.
“I fell in love with brands and what they mean to people,” he says. “At Alton Towers, not only did you have a brand that combined emotional and physical values, but you could see your customers coming down Towers Street, loving your product, or occasionally not loving it.” He would get a buzz from knowing he was helping to give families and friends memorable, shared experiences.
Varney did a management buyout of Vardon Attractions, part of Vardon PLC, in 1999, backed by Apax. He recalls the steep learning curve and the fear of “putting all your life savings into the equity cheque when you’ve got two children and your wife’s pregnant.”
The newly renamed Merlin Entertainments Group had two chains, Sea Life Centers and Dungeons. The company grew steadily, thanks to a sound economic model focused on recouping investment within five years and financing capital expenditure from cash flows.
But Varney wanted more. “I’d written this precocious strategy paper, saying that if you put Merlin together with the Legoland parks, Madame Tussauds, and the London Eye, you could create a family entertainment company based on strong brands. You’d have a business with indoor and outdoor attractions and naturally synergistic brands with global expansion potential,” he says. “The strategy was about diversification.”
Varney hoped a well-balanced, well-managed portfolio of attraction brands would insulate Merlin against market volatility. “Until May 2020, we thought you’ll never have a situation where everywhere’s shut,” he says wryly, “but the strategy was successful in the end.”
He credits that clear strategic vision, luck, and a dedicated team–including Mark Fisher, who worked with Varney over the last 30 years and retired at the same time–for Merlin’s transformation.
Varney’s 2005 meeting with Joe Baratta, then senior partner in the Blackstone London office (now global head of private equity for Blackstone), was also pivotal. Blackstone acquired Merlin from Hermes Private Equity for £102.5 million. For Blackstone, it was a tiny deal financially, but “Joe saw the bigger picture” and “put Merlin into the big league,” Varney says.
Merlin positioned itself as a market consolidator, acquiring the four existing Legoland parks (Billund, Windsor, California, and Germany), along with Gardaland in Italy and the Tussauds Group.
When Merlin was taken private in 2019 by a consortium including Blackstone, Kirkbi (the Lego family’s private holding and investment company), and the Canada Pension Plan Investment Board (CPPIB), it seemed like the company was revisiting old friends.
Varney had felt for some time that the stock market was not “a great place for a capex-intensive company.” It was “a bizarre turnaround” from when he floated the company in November 2013. Then, the city and the public markets took the long-term view, and private capital took a short-term perspective. “It totally flipped on its head from 2010 to 2020,” he says. “Short-termism is not something you can do when you are building big capital projects. I don’t think the stock market understands that.”
Blackstone and Kirkbi are “perfect long-term investors,” Varney believes, because they recognize the capital investment cycles necessary for the next growth phase.
Having big shareholders was reassuring when Merlin faced COVID-19. “From the end of January , we could see what was coming and started to close down budgets. We made sure that we kept our liquidity,” Varney says. But even he didn’t expect to close 129 of 130 attractions by May.
“What was remarkable was that we didn’t stop. Around 150 Merlin managers kept the lights on and all those projects going. That’s always been one of the amazing things about Merlin. It’s not some huge corporate behemoth. It’s always retained a small-company culture.”
Merlin honed its operating model, improved revenue management and cost control, and became even more laser-focused on capex efficiency. “What emerged was a higher-margin, more efficient business. We opened key strategic projects like Peppa Pig Theme Park in Florida (2022), Legoland Korea (2022), Legoland New York (2021), and midway attractions.” Merlin has bounced back strongly. “I feel like I went out on a high,” Varney says.
Opportunities and Threats
During the pandemic, consumers shifted toward online channels, and Varney sees a “tremendous opportunity” for operators. “Technology has transformed the route to market. You know your customers and when they are coming. You can upsell and offer them a better visit.”
However, he warns about threats from intermediaries such as Booking.com, Expedia, and leisure pass products. Varney says attractions should never allow third-party ticket sellers to command more volume than the attraction. “Be very careful how much inventory you give these intermediaries,” Varney says.
He believes setbacks happen to all businesses; the key is how you respond. When unfavorable stock market conditions prevented Merlin’s planned flotation in 2010, the company diverted into the Asia-Pacific market. It made important acquisitions, including the Sydney Attractions Group and Living and Leisure Australia.
In June 2015, the unfathomable occurred: a harrowing accident on The Smiler roller coaster at Alton Towers.
“It was a fundamental shock, and it had a profound effect on everybody,” Varney says. “It should never have happened, but I think the company dealt with it as well as anybody could have done in such a difficult circumstance.” The incident knocked the business back. But Varney remembers how “the company felt like one big family in the darkest days after the accident. We drew strength from each other.”
There were many high points, too, from using popular intellectual properties such as “Peppa Pig” and “Jumanji” in imaginative ways to getting a foothold in Florida.
“We were able to buy Cypress Gardens, 150 acres, with all the infrastructure for $25 million. We then invested nothing like what you would normally invest in a big new theme park, and suddenly Legoland Florida’s there.”
“It was a great decision, but also a brave one because everybody said, ‘You’re 45 minutes to an hour away from central Orlando.’ But I used to say that if you were in Orlando, you were in the middle of a heavyweight boxing match between Disney and Universal. We were outside that ring in Winter Haven [Florida], but still able to get enough of the glory. It’s about understanding your economics.”
Whether it’s entering the competitive Florida market or running hotels, “I like to prove people wrong,” he says. Varney was convinced that themed accommodation was strategically vital for theme parks. “Merlin has consistently done that across the estate with 23 hotels and six holiday villages.”
Yet, even someone as strong-willed as him can feel the pressure of the public market. “I always said we will only open attractions where we’re going to get the right returns. But there came a moment when the share price was under pressure and I became convinced that I needed to say, ‘This is how many attractions we’re going to open per year.’ The minute you say that, you put the organization under pressure. You make calls you wouldn’t have made previously because you want to get to that target. I can’t blame anybody but myself. Fortunately, I realized the mistake early on.”
Leaving a Strong Legacy
Varney believes he and his team were driven to “catch the mouse” and be the world’s biggest and best location-based entertainment company. “By the time I retired, we were number two. The mouse was still out there, but you always feel admiration for Disney,” he says.
Varney wanted to give Merlin’s team members ownership. “We shared the shares,” he says. “From the outset, this was a business built on dreams. Merlin’s story is one of a whole group of people who have lived their dream.”
With the leisure industry in his DNA, Varney now helps Bath Rugby provide a great matchday experience as the club’s new non-executive chairman. He also sits on the board of pub company Marston’s.
Varney has always reached for the stars but kept his feet firmly on the ground. He says goodbye as he heads off to feed the donkeys, tend to the sheep, and spend the future with his wife of 33 years, Liz, and his four children.