René de Groot, managing director of international B2B rail distribution firm Save A Train, sets out what it will take if the modal shift from air and road to rail is to happen to meet environmental objectives and changing demands from travellers
Guest Post: It's time rail operators wake up to the new world of tech and customer expectations
I vividly remember what my travel colleagues wished some twenty years ago when I moved from a major corporate management travel company to the international railway world by taking up the position of managing director of the Eurail/InterRail Group: “Bloody good luck!”.
And ‘good luck’ was indeed badly needed, I quickly found out, when dealing with 32 European railways shareholders of which the majority were/are state owned incumbent monopolists in their respective countries.
And this with a strategic focus on operations and rolling stock mainly and zero focus on client service/customer happiness or effective rail distribution in general.
It indeed proved to be hard slog to try to change the often backward, out of date and client unfriendly image of the railways.
This especially compared to the airline and hospitality industry I was used to, with its better commissions, cross country cooperation logic and advanced and transparent distribution channels.
Some twenty years later and now working for the largest rail distributor/GDS that aims to digitise this old fashioned railway world by opening it up globally to anyone interested in travelling by rail, I can confirm that the challenges are still significant.
In a time when green rail travel is increasingly a ‘hot’ trend with many corporate companies forcing their business travellers to take the train instead of the plane, the number of cross-border connections across Europe increasing and European politicians finally backing rail from an environmental point of view not just in words but also in more strict railway policies, trying to become established and to survive a railway distributor is still a bloody hard slog.
Railway undertakings, as they call themselves, are simply not interested in appointing or embracing other distributors other than themselves.
They simply don’t understand the value of selling through third parties that bring in additional revenues in the tickets sales.
They still think they sell best through their own national online sales channels that only favour the monopolists themselves and is directly against the European Union demand for more transparency and competition in the European railway world, and simply ignore the facts:
- They have less than 70% occupancy due to distribution problems;
- Airlines and hotels generate 60% of ticket and room night sales through third party channels.
The market of international rail distribution is currently dominated by Save A Train on the B2B side, with tickets sales to most of the largest global travel organisations, while Trainline on the B2C side sells rail tickets to private customers.
In addition, there are smaller players like International Rail and Rail Europe which are also active in the distribution space.
As a newcomer in the rail distribution field it’s virtually impossible to obtain contractual distribution agreements with the railways.
And when you do, when you finally enter the very small, elite field of distributors for a particular country and railway, the commissions they pay are one third or less of what you can make selling an airline ticket or hotel room.
There is no international focus or strategy with any of the European railways. The main effort is to sell their own domestic tickets.
Yes, investment in high-speed rail across Europe is increasing, pushed by Brussels, and is very welcome. Yes, internal competition in countries like Italy and Spain is finally increasing - at last.
But the number of global distributors to sell these tickets is not increasing. High investment with low financial return but most of all, no recognition of the added value you offer as a distributor to a much wider, non-domestic, audience.
All this is true while we as third party distributors reduce their distribution and operational costs, appeal to a much wider international audience in a more modern way with better marketing that will bring them more happy and paying customers.
No data sharing, no standards, no free real-time data, no system access and minimal returns is the price you pay for wanting to distribute their products.
All European railways operators still think that they can make all their sales through their own app (there is no industry where this worked), if they have one, or their national online website.
There is no ‘beyond the border’ vision and minimal international thinking. Fair, open competition is simply not on their agenda and despite the green pressure of Brussels, liberalisation is stagnating.
Rail carriers should stop seeing themselves as THE retailers of rail tickets. They should run the train and leave the distribution to the experts with more knowledge and global distribution cloud.
Because of this, the current standing of passenger rail is smothering the full blossoming of the sector, which is not helping the travel sector to achieve the necessary modal shift.
On the one hand, the national incumbent European railways will keep offering expensive seats with sub-optimal frequencies and service quality.
On the other hand, new entrant railway operators are being prevented from fully entering the market, and thus from competing with these incumbents to drive prices down and frequencies and quality up.
Despite their added value to passenger rail, independent ticket vendors are not allowed to fully blossom to the level of their air sector counterparts such as Skyscanner or eDreams.
Several obstacles prevent them from offering passengers a stress-free and seamless way to book cheap train tickets between two destinations
What is needed to change this uneven situation which, in the end, is only detrimental to the National railways themselves?
Ensure that ticket retail becomes comprehensive, transparent and impartial
All ticket vendors (incumbent in-house – online and offline – and independent) must show and sell all transport offers from all railway operators (incumbent and new entrants).
This should be impartial, meaning that there is no self-preferencing of incumbent services and in-house incumbent ticket vendors, and no ranking by who pays the most commissions.
This should also take place in a transparent manner, meaning that transport offers should be ranked by objective criteria such as price and journey duration, rather than by the size of commission.
Strengthen the position of independent ticket vendors/rail distributors and aggregators
Independent ticket vendors create new rail journey opportunities for customers by combining the inventory of one or more carriers.
This helps rail to compete with other modes of transport, notably short-haul air and car, by creating viable connections between key origins and destinations. In short, ticket vendors attract more passengers for the benefit of the whole sector.
Create even commercial conditions for third party distributors when dealing with railway operators
Because of their dominant position both in rail transport and in ticket retail, incumbent operators have the upper hand when they negotiate commercial agreements with independent ticket vendors.
They propose agreements on a take it or leave it basis that are inconvenient. They do not comply with Fair, Reasonable and Non-Discriminatory (FRAND) principles.
First, commercial agreements between railway operators and independent ticket vendors are often unfair.
This means that they contain brand-bidding restrictions and marketing restrictions that hamper the ticket vendor from appropriately promoting their products, starting sales campaigns or selling some products that are exclusive to the incumbents’ in-house ticket vendor.
Second, such agreements are often unreasonable as railway operators pay very low commissions to ticket vendors even if they bring in new customers.
This makes the business model of ticket vendors unviable, and forces them to ask customers for service fees which is another nail in the coffin for their competitiveness.
Third, the agreements are discriminatory. Railway operators have the liberty to choose with whom to deal and on which terms to deal. There is often self-preferencing to the benefit of in-house ticket vendors.
Its high time the incumbent European railway companies woke up to the fact that we are living a new world with a changing customers demand and expectation level.
There are third party distributors with good intentions that will invent and implement better online technology booking options to widen their sales reach and provide a better service than they can offer themselves.
It’s time for them to get off their high horses and to wake up to the modern world where cooperation works better than desperately trying to remain an old-fashioned fossil.
In the end reality will overtake them anyway.