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For Business, Corporate Travel & Meeting Buyers & Arrangers

The relationship between business travel and premium rail

Rail tracks

TRAVELLING FIRST CLASS BY RAIL has become a ‘no no’ in recent years for business travellers. But with standard class becoming ever more crowded, and the economy improving, could we soon be seeing a revival in premium? And what do you get for your money?

The answer would seem to be that the revival isn’t happening just yet – for example, both Virgin Trains and First Great Western are converting some of their first class carriages to provide more standard class seating. But there has been a modest revival in first class travel by small- to medium-sized enterprises (SMEs), and according to the Voice of the Business Rail Traveller survey by the Guild of Travel Management Companies (GTMC), it is the younger generation who are keener to upgrade. As for what you get for your money, it all depends on the train operator, with no consistency, even on longer intercity routes.

Paul Wait, chief executive of the GTMC, says: “For TMCs [travel management companies] and train operators, the biggest challenge with first class is communicating its benefits, and shifting the perception so that it is regarded as an investment, rather than a cost. Often business travellers are travelling during working hours, and they should do so in an environment which facilitates productivity, with faster wifi connection and comfortable working areas.

“Otherwise business owners and managers run the risk of losing out, as the cost of a cheaper seat is offset by the cost of ‘dead’ working time for those employees travelling in carriages without wifi and power connections. Standard class, therefore, becomes a false economy.”

While the GTMC works with the industry to promote first class, Evolvi, supplier of rail ticketing systems to TMCs, is making first class travel more of a possibility. The latest enhancement to the Evolvi-ng system means companies can build in a travel policy tool allowing first class if it is actually cheaper than standard class, or to set a differential in fares at which first class is permitted. First class can actually be cheaper when the quota of standard class advance fares is sold out on a particular train, but usually, travel bookers have to opt for standard class even if they are paying more. Evolvi trade relations director Jon Reeve says: “In 2013, first class accounted for about 7 per cent of journeys booked through Evolvi, and so far in 2014 it hovers around the same figure. First class fell off a cliff in 2009 when the public sector banned it, but the availability of advance first class fares has improved, and the average transaction value in first class has gone down slightly from £103.50 to £102.” He says the first class policy tool has been “well received” by corporates.

There is some speculation that long-distance train operators might introduce an intermediate or ‘premium economy’ class in future. But converting existing carriages would be expensive, and this might only happen when new trains are ordered. The government’s £5.7 billion Intercity Express Programme will deliver new trains on the East Coast Main Line and Great Western Main Line routes within a few years.

Intermediate classes

An intermediate class might look like Chiltern Railways’ Business Zone, available on selected London Marylebone-Birmingham Snow Hill trains for a modest increase in the standard class price. With this, you get a roomy seat at a table, free wifi and access to a power point, with light meals and drinks available. But in Chiltern’s case this isn’t actually an intermediate class, as first class is not available on any of its trains. “Whether an intermediate class would succeed depends on how it is presented,” says Reeve. “Would it be standard class with better seating, or first class without the meals and extra service? What I value most about first class is space, the ability to work at a table, and functioning wifi.”

It’s generally considered that Virgin Trains offers the best first class service, with not only free wifi and comfortable seats at tables with power points, but also complimentary food and drinks (including alcohol). It also offers business lounges at most main stations.

But as anyone who has watched a Virgin Pendolino train roll in with four first class carriages and only five standard class – before joining the scrum to board the latter – first class provision would appear to be over-generous in these straitened times. Virgin, however, has already introduced two extra standard class carriages on many of its trains, and is now converting one first class carriage to standard class on the Pendolino trains that have not been lengthened. The focus is to increase standard class seating rather than cut back on first class.

Claire Walton, Virgin Trains’ corporate business development manager, says: “A few years back we were affected when the public sector mandated use of standard class, and quite a few key corporations followed, including the banking sector and the BBC. That’s freed up a lot of capacity, but there has been growth in SMEs using first class as they are more flexible.

“The comeback in first class has been slow, but we are encouraging it with more advance fares. More corporates are mixing-and-matching first and standard class in one return journey.”

First class menus are being refreshed, and wifi is being improved, although here it is reliant on infrastructure operator Network Rail introducing the necessary equipment. Virgin expects wifi to be much improved within a year, with 4G available later. The government, meanwhile, is using a £53 million fine levied on Network Rail for missing performance targets to improve wifi on commuter routes into London, Manchester, Leeds and Sheffield.

Some corporates will permit first class when journey times exceed two or three hours, and Virgin is certainly making inroads into airlines’ share on the London-Glasgow route, where city centre-to-city centre journey time is now typically four-and-a-half hours, with a further reduction to four hours being the aim. Its market share against airlines stood at 25 per cent in March on London-Glasgow compared to 20 per cent in March 2011 and only 4 per cent in March 2007, with an hourly service now being operated in each direction.

Class politics

East Coast – which re-launched first class three years ago – has also made inroads into airlines’ share on London-Edinburgh, while it dominates air competition to Newcastle and Leeds. East Coast is a subsidiary of Directly Operated Railways, formed by the Department for Transport in 2009, when National Express defaulted on its franchise payments for operating intercity train services on the East Coast Main Line. But a new private operator is due to take over in March 2015, with the winning bidder to be announced in November.

The East Coast scenario is highly political, with the Labour Party likely to make a manifesto pledge to allow the public sector to bid for franchises in future alongside private enterprises. It is an irony that Directly Operated Railways has not been allowed to bid for the new East Coast Main Line franchise when several existing franchises are owned, or part-owned, by publicly owned foreign rail operators. The three shortlisted bidders for East Coast Main Line are the Virgin/Stagecoach partnership, First Group, and a partnership between Eurostar and a French company called Keolis, which is 70 per cent owned by French public sector rail operator SNCF.

While East Coast currently offers the closest first class service to Virgin, other long-distance operators generally lag behind in provision of wifi, and catering included in first class prices. First class standards may even vary between trains operated by the same company, with the catering on Virgin’s Voyager diesel trains not as good as on the core Pendolino electric fleet. Turbo trains operating First Great Western servicesincluding some London-Worcester journeys, and Reading-Gatwick, offer only a few first class seats which are hardly any different to standard class. And on train operators such as Southern and Southeastern, first class is also very similar to standard class.

Business necessity

This lack of uniformity is one reason why many corporates are reluctant to sanction first class, but the main reason is, of course, cost. PWC (Pricewaterhouse Coopers), which books rail through KDS, configures its system to show the cheapest available fare but will allow first class to be booked if only £10 higher, or if there is a “business necessity”.

“It’s all about what is appropriate, and if you book first class then you will be challenged,” says PWC travel manager Will Hasler. “I approve of Virgin and First Great Western reducing first class seating, as even two first class carriages are a luxury. Whether first class is value for money depends on the train operator, and on routes such as Reading to Gatwick, it’s no better than a bus.

“Bearing in mind that the service differential between first and standard isn’t great on some train operators, it’s hard to imagine what an intermediate class might offer. If the product is worse than first class then we would struggle to sell it, and we don’t use Eurostar’s Standard Premier class.”

He adds: “When franchises are renewed, then I hope the government makes them for as long as possible, to attract decent investment by train operators. We don’t want another situation like National Express walking away from the East Coast Main Line franchise, but the publicly run East Coast service has done a pretty good job.”

Nicky Bees, travel co-ordinator of Bristol law firm Burges Salmon, is more supportive of an intermediate class and hopes that might be part of the specification when the Great Western franchise is re-let in the next few years. First class is generally out of policy at Burges Salmon, but with certain exceptions, such as if the client agrees, or if the first class fare is cheaper than standard. “The most valuable benefit is the opportunity to be more productive on the move through the better working environment, and increased privacy and confidentiality,” she says. “An intermediate class would be a good addition, and my only slight reservation is it would add another level of complexity to the fares offered, which bookers can sometimes find confusing now.”

She adds: “I believe that new electric trains on the Bristol-London route will enable cost savings to be made, so I would like to see this reflected in the fares. A less expensive option for the business traveller would be useful, such as similarly priced upgrades to first class on weekdays as at weekends. More uniform ticketing options should apply across all operators, and advance on-the-day fares bookable through TMCs.”

One of the biggest TMCs booking rail, Capita Travel and Events, lobbies for the business traveller to get a better deal from train operators generally, as well as negotiating first class upgrades and “soft benefits”, such as free wifi in standard class for its own customers.

Capita’s head of rail, Raj Sachdave, says: “First class is still flagged up by a red light in most travel policies, and although it can be cheaper than standard class when booked through our system, how do you tie that into a travel policy that also includes air and hotels? Procurement departments are interested in the total cost of the trip rather than an individual component, so first class can still be a problem. The take-up of the policy tool permitting first class when it’s cheaper has been good, but is not where we wanted it to be.

“Offers like East Coast’s Scottish Executive package, booked in standard class but automatically upgraded to first class, are a good idea that other train operators should look at. Demand is there for a product positioned between first and standard class, and if new trains are being designed, you could look at things like meeting rooms, which Eurostar will have on its new trains. The working environment is the main thing – service comes second.”

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