Merlin Entertainments' focus on international balance

Nick Varney, chief executive of Merlin Entertainments, is clear that he wants an internationally balanced portfolio of entertainment attractions and parks.

The aim is for the company to have about a third of its business in Europe, Asia and the United States.

For Merlin, Legoland Dubai is one of four parks around the world that the company has identified as strategic mile stones to be completed by 2020.

The other sites are Nagoya in Japan, which opens in April next year, Chuncheon in South Korea, which also opens in 2017 and a fourth Legoland in the US, or a China site – whichever comes first.

China is a very important market in future, with the company scoping sites for several new Legoland parks there.

Meanwhile, in the UAE, the company’s collaboration extends beyond Legoland. Meraas, the owner of Legoland Dubai operator DXB Entertainments, invited Merlin to operate some of its other concepts and these are all coming to fruition.

First announced in 2008, Merlin Entertainments has confirmed that the long-delayed Madame Tussauds Dubai will open in autumn 2017.

The wax model museum in Dubai is based on the original London concept, which still has daily snaking queues down the capital’s Marylebone Road.

Next door to Dubai’s Madame Tussauds, the Merlin-operated Dubai Eye, the world’s tallest observation wheel at 210 metres high, is under construction. This will also open next year and is designed to carry three million visitors a year. Merlin’s experience of operating high-tech Ferris wheels – if they can be called this – now extends beyond London to Blackpool, Sydney and Orlando.

“We are here [in Dubai] because we have been invited by a strong partner [Meraas]. We think there is scope for one more investment in Dubai over the next 12 months, and an announcement is likely in the next six months,” says Mr Thompson.

Back at home, the past two years have been rocky for Merlin Entertainments. In 2015 one of the roller coasters at Alton Towers, its best-known British theme park, crashed causing horrific injuries to 16 people, including two young women who each lost a leg. Last month the company was fined £5 million (Dh 23.2) over the “catastrophic” safety failures that caused the crash.

The park’s visitor numbers dropped dramatically and have yet to recover to 2014 levels.

Elsewhere in the group, the company’s attractions in city centres have also seen visitor numbers falling, which it attributes to “wider security concerns” of domestic and international travellers – in other words the spate of terrorist attacks in key cities including Paris, Brussels, Nice and Munich.

Merlin’s also plans to open six Shrek-themed attractions around the world, in an agreement with DreamWorks are also now under review.

Meanwhile, the company’s share price has seen some benefit from the post-Brexit surge in UK stock markets. Analysts at Barclays have also said that Merlin could emerge a winner from the maelstrom caused by the UK’s decision to leave the EU.

As the pound fell to a 31-year low in the wake of the referendum result, analysts have suggested that the weak currency should be positive for Merlin, particularly if that leads Brits to stay home for “staycations”. The bank also pointed to what happened in 2009 when consumer confidence plunged as the global financial crisis took hold. Visits to theme parks actually rose by 5 per cent, said Vicki Stern, an analyst at Barclays.

While Merlin is actively expanding overseas, including in Dubai, London remains a significant part of its earnings stream.

Analysts at HSBC also like Merlin because of its global diversification and because its parks and attractions are “scalable”, in other words repeatable. They also expect the theme park operator to benefit from a recovery in tourism in London in 2017, partly because of the post-Brexit weaker pound.

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