EU Rail Networks Pick Up The Pace On Corp. Deals

<B> EU Rail Networks Pick Up The Pace On Corp. Deals</B>

By Amon Cohen

"This is the age of the train," was the slogan used by British Rail in an advertising campaign many years ago, when it wasn't. Staff shortages, doddery old equipment and pointed jokes about the price of BR tea going up meant that travelers deserted the creaking rail system in droves in favor of their cars or aircraft.

Today, the United Kingdom still has significant problems with its network, but from Eurostar in the English Channel to Deutsche Bahn on the Danube River, the age of the train has truly arrived. A slick high-speed rail network that is once more giving air and road a run for their money now operates across 8,750 miles in Europe, with another 16,500 miles on the way.

Traveling at speeds of up to 186 mph, these trains often are faster, cheaper and less of a hassle than flying. Paris to Brussels, for instance, takes 85 minutes; the equivalent air journey, including transfers, takes about twice as long and costs well over double.

Germany's high-speed ICE network also has prompted business travelers to switch from air when traveling between cities such as Munich, Stuttgart, Frankfurt, Hanover and Hamburg.

Then, of course, there is Eurostar, the Channel Tunnel rail service from London to the capitals of France and Belgium. Eurostar has a market share of 60 percent on the London-Paris route and 50 percent on London-Brussels. There are also high-speed networks in Spain, Italy and Switzerland.

As well as becoming the age of the train it is also slowly becoming the age of the negotiated train deal. The extent to which European rail companies are able or willing to forge agreements with corporate clients varies enormously. Historically, these state-owned monoliths have not been interested in giving discounts of any kind, but a new commercial sensibility is emerging, especially where they find themselves in competition with the airlines.

Scandinavia is leading the way in European rail negotiations as it has done in so many areas of travel purchasing. Swedish Railways introduced a comprehensive corporate sales framework at the beginning of this year after extensive consultation with the Swedish Business Travel Association.

"Swedish Railways looked at the airlines and told us they wanted to give us the same frequent traveler programs and corporate agreements, but we said 'No, we can do much better than that!' and so we sat down with them and came up with a completely new program," said Cathrine Wickerts, SBTA chairman and travel manager for construction and real estate company Skanska.

There are three elements to the program. The first is network-wide pricing net of travel agency commission; the second is specific route deals on those traveled heavily by the client; and the third is a unique type of frequent traveler scheme. Corporate travelers enroll individually for the scheme but instead of accruing mileage for personal use, they earn a rising level of additional discounts for their employer based on the number of trips they make. These discounts are in addition to those negotiated on a company-wide basis.

It is too early to quantify exactly how valuable the Swedish Railways program is to corporates, but Wickerts is confident that Skanska has made "substantial savings" and has cut usage of private cars and car rental by employees. The greatest savings are to be made through the frequent traveler program, however, and Wickerts is not yet satisfied with the number of employees she has persuaded to sign up to it.

German rail system Deutsche Bahn also is beginning to take notice of corporate clients. It recently has set up a corporate sales structure, including a layer of corporate account managers who are empowered to negotiate.

Even SNCF, the French rail network, has changed its ways, embarking on a corporate sales program two years ago. Large clients have key account managers with whom they can agree on structured route deals to provide year-end rebates based on volume.

In addition, SNCF has just launched a frequent traveler program although, as usual, benefits are given to the passenger rather than the corporate client.

The United Kingom is rather more patchy. Institute of Travel Management chairman Ian Hall is disappointed by what he regards as a lackluster approach to corporate sales from Eurostar. "It is primarily selling through marketing and sponsorship," he said. "It is not coming to corporates and saying 'we want a piece of your business, how about it?' "

It has been a familiar refrain since Eurostar launched in 1994 that it seems strangely uninterested in corporate deals. One informed source points the finger at the revenue-sharing relationship between the service's three owners: Eurostar UK, SNCF and Belgian rail system SNCB. According to the source, the rail company that concludes a corporate agreement is paid 10 percent commission from a central pot, but out of that sum it is expected either to pay 9 percent commission to the corporate's travel agent or pay for alternative distribution, such as telephone sales staff. Consequently, there is little left over to fund the deal with the corporate. "It means you lose money if you offer a more generous deal, because the cost is borne by the company that tries to grow the business," said the source.

Adrian Watts, executive director of sales and distribution for Eurostar UK, denies this is the case. "Our revenue-sharing arrangements with the other operating companies have changed in the past 12 months, but even before that if it made good sense to do a corporate deal, then we would do it," he said. "Suffice to say that if a deal is made by Eurostar UK, it is financed by all the operating companies."

Watts also rejects the suggestion that he is uninterested in corporate sales. Instead he said, he is more discriminating than the airlines. "Our first class fare is below the airlines' business class fare and our standard plus fare is cheaper than the equivalent airline Eurobudget fare. Business travelers also save a lot of time by using us and they are saving on transfer costs to the airport, so there are already built-in savings in the Eurostar product," said Watts.

Eurostar will only do business with companies that are willing and able to enforce travel policy. Most are volume-related with a rebate paid retrospectively but rewards can take on novel forms, such as being given free use of an entire 700-passenger train for a day. Watts also is looking at net deals but only if the risk is shared, such as by imposing a penalty on the client if volume commitments are not met.

The United Kingdom has about two dozen rail companies following the privatization and breaking up of the British Rail network in the mid-1990s. ITM's Ian Hall believes the new companies have still not woken up to the potential of corporate negotiations. "I am not sure they have twigged yet that customers have a choice between air, rail and road," he said.

That said, it is probably no coincidence that the two companies Hall singles out for praise are Virgin Rail (a sister to Virgin Atlantic) and Great North Eastern Railway. They operate the services between London and Scotland along the West and East coasts of Britain, respectively, and are the ones that face the most competition from airlines. Virgin has about 100 corporate accounts and this number is likely to grow.

Historically, train operators have had a relationship with business travel agents rather than directly with the client. Like Eurostar, most of Virgin's deals are based on retrospective rebates. Executive commercial director Mark Furlong said the company also shortly will pilot a product, mainly aimed at smaller companies, whereby customers will be able to buy 10 tickets for the price of nine.