Park People
www.parkworld-online.com
places that can justify £100 million plus [$160m/€116m] of capital expenditure on a fixed capsule observation wheel. Where these are being built we see them as partnership projects.
Gardaland
Other than the ongoing Legoland projects, would you ever build a new theme park from scratch? I keep hearing rumours about a big park that someone is trying to get off the ground in the south east of England and, you know, I just scratch my head because the old saying is a fool and their money are easily parted. There is no evidence, anywhere in
Europe as far back as I can remember, of anyone making money by building a new theme park from scratch. It’s said that today the only people who can make money from mainstream theme parks are the ones that pick them up the second or third time round, and our acquisition of Cypress Gardens is a good example of that. Of course there are consultants out there who make their money from doing studies that will tell clients differently, and people from other sectors who think running a theme park can’t be that hard. So I guess they’ll continue to spend all their money, get it open
...and loose their shirt. You certainly won’t see Merlin building new resort theme parks from scratch. There’s too much benefit still to be gained from doing the other things we are doing. What’s more wise investors would never put money into building a green field site theme park.
Do independent parks have a future?
There is definitely room for independent parks, they are part of what add variety and colour to the business, and I might add that just because Alton Towers and Gardaland are owned by Merlin I hope they are just as strong and individual as they have ever been. But you need to know what your position in the market is, you’ve got to have some sort of edge and brand image that marks you out. If you have, it doesn’t matter if you are owned by a big corporate or you are a family or independent operation. Europa-Park and Efteling stand up as great examples of that.
You spoke recently of your belief that European theme parks are under priced. Why is this?
Right now the biggest lead price in continental Europe is €36, which is nothing for what they are offering. Theme parks and attractions deliver the best value for money of all location based entertainment and to prove it I’ve devised an ‘entertainment cost per hour’ analysis [see panel].
Value for money entertainment
Nick Varney believes that theme parks deliver the best value for money of all location-based entertainment. To prove it he has devised an ‘entertainment cost per hour’ analysis showing the cost compared to other popular attractions. Use this or a similar formula at your park next time you are challenged over pricing!
ATTRACTION Premier League football match Stadium concert West End musical Cinema
Theme park All figures based on UK attractions
ADULT TICKET £40 £70 £65 £10 £30
EXPERIENCE DURATION 2 hours 3 hours 3 hours 2 hours 8 hours
COST PER HOUR £20.00 £23.33 £21.66 £5.00 £3.75
Alton Towers 42
We are simply not charging prices that reflect the level of investment that goes into creating the experience. I’m not just talking about the rides, it’s about the cost of labour, marketing, maintenance, all those things that it takes to create a good theme park. If you can’t pass all that on to your customer then you are never going to get a good return. And if you don’t get good returns, you are going to find it difficult to get investment, whether you want to sell it, float it, or go to a bank for a loan.
I really had to discipline my own team on this because their natural reaction every time they were put under pressure by the media on the issue of pricing was to point out the discounts in the market, rather than defend the lead price. Of course there are discounts out there, that’s part of how we market, but the lead price reflects what we believe our product is worth.
What doesn’t help, at least in the UK, is the rate of VAT – 20% as opposed to say 5.5% in France and 8% in Spain. This puts the UK at a big disadvantage. Even Ireland, which has to be bailed out by the European Union, cut the rate of VAT on tourism services. It’s doing that because every time it’s ever lowered VAT it leads to a surge of tourism revenues and job creation – not something successive UK governments appear to understand!
When will be the right time to float the company? We were going to float last year but the stock markets were volatile, and I think you can say they haven’t continued to be any less volatile! That’s why we did the CVC deal, which secured our growth plans so we won’t be thinking about it for a few years because as a new investor they obviously want to see the company grow.
That said, we have grown our profits in double digits for 10 years in a
row, and we still think that Merlin’s ultimate destiny is to be a public company. We have got a couple of big things on our side, Midway and the Legoland parks. Without them we’d be just another theme park company, whereas everybody looks at Merlin and sees a very balanced portfolio.
Did you think you would end up creating the world’s second biggest attractions operator when you arrived at Alton Towers/Tussauds in 1990?
Certainly when we created Merlin Entertainments the ambition was to create a top 10 global player although we weren’t even on the radar at that time. We still have that same vision and strategy and, thanks to Blackstone’s backing, a fantastic team and a lot of luck, we have become the world number two. But there is still a lot to go for!
www.merlinentertainments.biz
NOVEMBER 2011
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