At an off-the-record gathering of leading European online travel execs last summer the group was asked if rail was a priority in their mid to long term planning.
The short answer was a resounding “no”.
The group of representatives from mainly online travel agencies appeared to still be concentrating on the world of airlines as the primary mode of transport for intra-European journeys.
Some are arguing that this is the wrong strategy. But why?
In short, high-speed rail travel is growing at phenomenal rate in Europe, spearheaded by the French TGV system in the 1970s and 1980s, Eurostar’s launch and the German ICE in the 1990s, but more recently through services introduced in Spain and Italy and upgrading of existing networks.
Many suggest that if the 1990s and 2000s were the heady decades for low cost air carriers in Europe, then the next ten will be when rail travel comes to the fore.
So to see a collection of top folk representing many of the leading online intermediaries in Europe not considering rail is perhaps a little scary.
Here is some context.
Pre-Eurostar, London to Paris was one of the world’s busiest air routes – but since the high-speed line was completed between the two capitals the percentage of air travel has dropped to less than 20%.
Madrid to Barcelona then took over the mantle (with 971 scheduled flights per week in each direction), but since 2007, after the opening of the high-speed line, air now accounts for less than 40%.
There are now countless other routes being upgraded and various new builds across Europe and Asia, with journey times between major cities falling dramatically. Some estimates say around $200 billion of capital investment worldwide in high-speed rail.
This is obviously going to put further pressure on short haul carriers, but also why companies such as Amadeus and Travelport on the GDS side, and SilverRail Technologies [TLabs Showcase], are putting either a large focus on or have built an entire business on European rail growth, and to a lesser extent on North American rail evolving to high-speed status.
SilverRail VP of commercial Cameron Jones says when the journey time slips below 3.5 hours then rail is now becoming the preferred method of transport, illustrated here (the green line indicating the change to the Madrid-Barcelona route):
Here, for example, is a chart showing what happened on the Madrid-Seville route before and after a high-speed rail line was built:
But while SilverRail and the GDSs have a vested interest in talking up what is happening on the ground with the high-speed rail revolution, it is perhaps somewhat disconcerting that many travel companies are either ignoring or playing down the role of rail in the coming years.
It is not just point-to-point (and return) journeys. Some believe the traditional European package holidays will be transformed when high-speed rail connects northern European cities with the warmer climes of the Mediterranean resorts – a change which will also effect dynamic packaging, multi-city trips and consumer protection issues.
There is also the heady combination of rail+air combination fares (interlining and code shares) in the future.
Perhaps the biggest question mark is whether such a wholesale overhaul of transportation will actually be embraced by consumers (jumping on a plane for a foreign holiday, for example, is still synonymous for many with the annual holiday than the train).
A SilverRail consumer poll of around 300 saw three out of five say they would choose rail over air if the cost was same or better, while two-thirds say would add an hour of total travel time to a trip (by rail) if they could avoid airport security lines and baggage fees.
Unsurprisingly for a rail technology provider poll, but interesting nonetheless, 90% say they would like to see rail fares displayed alongside flights when searching for prices on travel sites (such as what metasearch engine Momondo is already doing).
So if consumer desire is there, the infrastructure is either there or coming, and data shows what happens to a route when high speed rail services kicks in, why are online travel agencies not putting rail as a high priority?
Perhaps the travel industry’s obsession with air needs cooling down…
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About Kevin May
Kevin,
Very interesting analysis. I agree that price will be a critical factor in long-term success. Very similarly to the high-growth bus system in the East Coast of the US (DC-NY and beyond). They have cut heavily into air traffic by offering a low-cost alternative to travelers who value low cost over time. Something to watch for sure..
Kevin,
How have airlines responded to the shift? Do you know if air capacity has remained when HS rail becomes available for a route? Have airlines had to pull back? Or have they dropped fares?
Douglas
@douglas – some brief comments:
Strong competition from rail has led airlines to close some routes when rail provides strong competition.
For example, in 2010, Lufthansa and Germanwings ended their service on the Stuttgart-Paris route, where rail has a more than 60 percent market share.
Rail continues to boast significant share on certain routes—for example, about 30% travel by rail on the Frankfurt-Paris route even though the cites are international hubs for Lufthansa and Air France and the rail trip takes more than 5 hours and a train change is required.
That’s as much as I have. Clearly with such a shift in share form air to rail one would assume that airlines would simply axe a particular route between two cities. But I do not have data from all the airlines.
Probably something PhoCusWright should look at, don’t ya think
Hmm… why didn’t I think of that?
They tried to do rail here in FL which would be awesome but it keeps getting voted down….:(
We sell a lot of train tickets to central and eastern european routes, so called online, but the rail infrastructure and ticketing system (which is in state hands) not makes our life easy.
But rail is a real alternative to airplanes within europe for sure.
Great analysis Kevin! We’ve been looking at ‘plane vs train’ model for years now (for example, see our analysis of the French air/rail market: http://www.whichbudget.com/blog/en/opinion/241-low-cost-carriers-trains-the-biggest-threat-france-case-study) and believe trains are becoming an increasingly important competitor to air travel. Indeed, we are working on adding the rail comparison module to our flight search results. While SilverRail poll may find that 90% would like to see rail next to flight, it will be interesting to see the actual usage.