Corporate relationships with rail companies in Europe are blossoming as British rail companies have implemented their first meaningful corporate contracts, international rail giant Eurostar restructures its corporate deals and German national rail company Deutsche Bahn provides new automated booking and ticketing links.
A few pioneering British travel buyers established volume-based deals for domestic U.K. rail, prompted by new access to management data. Meanwhile, Eurostar has eliminated volume-based negotiations in favor of marketing agreements that require travel managers to promote the rail company to travelers.
These deals interest many European buyers, because rail is quickly growing as a transport option for business travelers. There were 3,260 kilometers of high-speed rail track in Europe in 2002, a number that is expected to more than double to 7,000 kilometers by 2010. The consulting firm UIC forecasts revenue passenger kilometers on high-speed lines to grow from 65 billion to 116 billion during the same period.
The impetus for the domestic U.K. deals comes from Thetrainline.com, an Internet rail booking site that includes a corporate version making rapid inroads among British travel buyers. About 10 percent of all domestic U.K. rail spending is booked through Thetrainline, but for inter-city rail travel—the core of the business market—the figure rises to 30 percent. Thetrainline said it has 350 corporate customers, of which 50 are actively managed, national accounts.
"This is significantly better data than anything that was around previously," said Adrian Watts, sales director for Thetrainline. "That puts corporate clients in a much better position to negotiate deals."
Toby Withnell, head of group travel for Barclays Bank, which has a deal with one U.K. rail company, endorses Watts' claims. "You have to have data," he said. "The rail companies won't listen to you without it. They also have to understand you can switch your business elsewhere. Thetrainline data has been very good. We get information like city pairs and types of tickets. It is far more sophisticated than it used to be."
Asked what buyers need most to see a rail deal through, Withnell said, "Patience. It's a struggle. The rail companies are not overly enthusiastic about giving out deals." However, by putting comparable rail and air data in front of the train operators for the first time, Withnell prevailed, especially when his data analysis revealed that—contrary to common perception—rail by no means always is cheaper than air.
Thetrainline has 10 clients with negotiated rail deals. According to Watts, about the same number had deals last year, but the nature of the agreements has profoundly changed. "Previously, when corporates approached train operating companies for a deal, the operator put in a token discount to keep the relationship," Watts said. "Now that clients have management information, and are showing how much more business the operator could win, they are getting much better deals." Watts would not comment on levels of discount, but said, "Rates are loaded that were not available a year ago."
Watts said buyers need to show they are willing and able to support the deal by implementing or amending their travel policy. The other imperative is to ensure they are driving all rail bookings through Thetrainline to maximize data consolidation. Given that many travelers usually buy their tickets on departure, this requires a significant cultural change.
Thetrainline has achieved high adoption rates very quickly—including 80 percent at the British Broadcasting Co. and 90 percent at Barclays—but preventive measures also are needed to stop leakage. Among the steps recommended by Watts were scrutinizing expense claims and card statements for evidence of purchases on departure and communicating to ensure travelers understand the value of buying through a single distribution channel.
Communication to travelers also plays a significant role in the new sales policy of Eurostar, which includes detailed marketing agreements with corporations. These agreements may comprise such initiatives as travel fairs on the client's premises, e-mail promotions by travel managers to travelers and the promotion of Eurostar leisure deals.
"It makes sense to be up-front about the marketing commitments," said Louisa Bell, Eurostar's head of business sales. "Otherwise, travel managers can say they haven't got the time to do it."
The Channel Tunnel passenger rail service has reconsidered corporate agreements, partly because of the landmark fine the European Commission imposed on British Airways in 1999
(BTN, July 19, 1999). BA incurred the fine for setting incremental sales targets in a market it dominates.
Since Eurostar now has a dominant share of combined air and rail sales for the London-Paris and London-Brussels markets, 66 percent and 57 percent respectively, Bell said this has given Eurostar "slight nervousness" about demanding spending targets.
Bell said a marketing-led approach works better. "If we can use a travel manager to promote to 1,000 travelers, then that is 1,000 fewer travelers we have to spend our time reaching," she said. On that basis, Eurostar gives net fares to "corporates that really want to work with us and have the volume."
Eurostar also has found a novel way to sell to smaller corporate clients. It has arranged what it calls "cluster deals" with one dozen travel management companies to sell net fares to an agreed selection of their customers. "There are a small number where it is not working, but the majority are giving us an improvement in volume and market share," Bell said. "In some cases, it is a phenomenal rise."
Corporate rail deals, where they exist, in the rest of Europe are much more limited and rigid because the operators are state-run monopolies. Competition from other modes of transport, however, especially low-cost carriers, is forcing a re-evaluation.
In Germany, Deutsche Bahn offers corporations discounts on a fixed volume scale, starting at 3 percent for expenditures over E5,000 and rising to a 10 percent rebate for expenditures over E5 million. Some of the biggest corporate spenders have privately negotiated discounts far in excess of that, according to informed sources, up to 30 percent in one case.
Deutsche Bahn also is opening up to deals because it is capturing more spending information and lowering transport costs through an online booking and ticketing system that has rolled out over the past year. It is giving its best deals to clients that commit to book through the Deutsche Bahn portal. Tickets can be collected from 3,000 ticket machines that have been installed at mainline stations.
Other benefits of automation include the ability to credit unused tickets to customer accounts. Some difficulties remain, however, including a continuing discrepancy between volume figures held by buyers and those held by Deutsche Bahn.