European Rail Carriers Providing New Services, Negotiating Terms

Eurostar next year plans to negotiate for European rail services with U.S.-based travel buyers, while the recently launched Railteam alliance of several national rail lines is developing common reservation and booking systems, and planning to provide more inventory to global distribution systems, align schedules for cross-border travel and slash travel times. Buyers expect the new offerings to yield better discounts, particularly on routes where the rail lines are competitive with airlines.

Along with its Nov. 14 launch from new London terminal St. Pancras International, cross-border rail company Eurostar is aiming to negotiate with U.S. buyers by 2008 and increase its marketshare on top citypair routes, including London-Paris, where it has 71 percent marketshare, and London-Brussels, where it holds 64 percent marketshare, said Michael Davies, Eurostar head of international sales.

"We are very strong in the corporate market in core markets, and we have a lot of the larger U.S. corporations with European-based offices who travel with us already," said Davies. He added that business travel comprises about 35 percent of Eurostar's overall revenues. "We are looking to really move forward next year and see how we can work with corporates in the U.S market."

Eurostar already is preparing to harvest some of the U.S. corporate market and provide greater access to Eurostar inventory through GDSs. In June, the company transferred to a new global distribution system model in the United States through which travel management companies now can fulfill ticketing via the GDSs, Davies said. Previously, agents could book limited Eurostar inventory through GDSs, but fulfillment was then passed along to Eurostar. "One of things we wanted to make sure we had in place before we launch is e-ticketing, which going through the GDS allows us to do," Davies said.

Eurostar also is part of the new Railteam alliance, which encompasses national rail companies in Austria (ÖBB), Belgium (SNCB), France (SNCF), Germany (Deutsche Bahn), the Netherlands (NS) and Switzerland (SBB), and cross-border subsidiary networks Alleo, TGV Lyria and Thalys. Railteam plans by 2009 to have a common connection between its reservation and online booking systems, and align international schedules, according to Jean-Luc Chretien, director of international sales for SNCF, who said business travel comprises 20 percent of SNCF's revenue. Also in 2009, the alliance plans to have an integrated GDS connector system to load and display international and domestic rail inventory, Chretien said.

Rail Europe, a distribution subsidiary of SNCF and SBB, which represents more than 35 European rail companies, is the primary distributor of European rail tickets for the leisure market in the United States and will act as a vehicle for Railteam to target U.S. corporations, Chretien said.

Meanwhile, SNCF, which negotiates with European corporations on the basis of volume and marketshare, planned to roll out its new pricing model Oct. 6, which bundles services into a class aimed at business travelers that will include more flexibility to exchange or change tickets, meal service, priority access to stations and parking, and the ability to book ground transportation via SNCF.

"For us, it's already an important part of the SNCF strategy to position more on the business market than simply on the leisure traveler," said Chretien, who added that SNCF soon plans to launch an online portal to provide access to net fares and online booking capabilities for small businesses and unmanaged travelers.

Many buyers are interested in the possibility that the rail enhancements would foster more competitive pricing, particularly on routes that compete with airlines, such as London-Paris. "They have more or less the same approach as airlines when it comes to flights and seeing that rail does become a competitor," said senior sourcing specialist and director of Philips general purchasing Peter Sijbers. "On the other hand, rail companies do open up to the extent that airlines and other means of transportation are competitors. They are opening up and the initiatives that they are taking with commonality in platforms proves that they see a business benefit in that as well."

The ability to coordinate cross-border rail travel and provide a common back-end system also could help shift marketshare on top citypairs.

"Whether the prerequisites are there and have some commonality in platforms and a back-end platform, but also in the ordering piece, especially with the distribution of tickets and e-tickets together with credit card acceptance, is still an issue to a large extent," said Sijbers. Philips' rail expenditure, including human resources-related commuter reimbursement programs, comprises less than 4 percent of the company's current travel budget.

Buyer Jerome Drevon-Barreaux, Capgemini global travel manager and Association of Corporate Travel Executives Europe chair, has been negotiating with SNCF for travel within France.

"There are some routes where, because there is airline activity, you can alter the price, but it's not a big discount in most cases," he said.

Capgemini's total domestic tickets in France are split 50/50 between rail and air, but Drevon-Barreaux analyzes the total cost of a trip to determine the optimal method of travel on citypairs where rail is viable. "As corporates, we look at the total cost of the trips, including taxi and transportation to the airport and station on both departure and arrival. If I take the Paris to London citypair, train and air cost is more or less the same depending on where you are coming from. If you are going city center to city center, train is easier. If you are not downtown, airline may be easier."

Like Drevon-Barreaux, Philips' Sijbers weighs cost and time into the savings equation. "There are bigger benefits to driving traffic onto rail," Sijbers said. "If I look at the number of low-cost carriers, there is hardly anything and that tells me a lot. It tells me that rail is a viable option, especially on TGV. If I compare average prices of TGV versus a flight, there is still significant savings not only from a ticket point of view, but also from a time point of view."

As rail companies adopt some of the airlines' pricing and negotiating practices, Carlson Wagonlit Travel director of account management and program optimization for France Hervé Bellaïche said a 10-day advance purchase threshold is typical for optimal savings, but it can evolve according to the citypair and the competition.

"They want to stick to what the airlines are doing," Bellaïche said. "If there is a break-even at three days for the airlines on the citypair, they will try to stick in that timeframe."