Global Rail Euro Monitor

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Global Rail Transportation Picking Up Speed

March 2010


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Euromonitor International

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Travel and Tourism: Rail

Introduction

Market Background

Competitive Environment

Regional Overview

Future Outlook
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Learn More

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Disclaimer

Much of the information in this briefing is of a statisticalnature and, while every attempt has been made to ensureaccuracy and reliability, Euromonitor International cannot beheld responsible for omissions or errors

Figures in tables and analyses are calculated fromunrounded data and may not sum. Analyses found in the

briefings may not totally reflect the companies opinions,reader discretion is advised

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Scope

Introduction

This reports sets out to examine the rail industry worldwide, and explores the many differences that exist inrail service provision across the globe. The effect of the recent worldwide recession upon the industry is

examined, as well as investigating the differences between private and nationalised rail services. Thecompetitive environment operating within the industry and developments across regions are observed, aswell as the future direction of rail technology and its operators.

Rail transportation refers to travel by passenger train, excluding freight and car transport for both businessand leisure purposes.
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Travel and Tourism: RailIntroduction

Decline inpassenger numbersand value

The worldwide economic crisis has caused a reduction in the number of rail passengers in mostcountries, both international and domestic. This has been accompanied by a slight loss in railvalue in many countries in 2009, notable exceptions being Japan and China.

Strong greencredentials butneeds promotion

Rail travel is one of the greenest forms of transport, with a significantly lower energyconsumption per passenger km and substantially lower than air travel. The fragmented natureof the industry means there is very little marketing and promotion of rail travel as a whole, andoften the green credentials are somewhat understated and not fully appreciated.

Private and nationalfunding

The nature of rail travel has resulted in the existence of successful private and national railservices, with countries often possessing a mixture of the two. Governments usually maintain ahigh level of involvement in rail services.

Point-to-pointviability forcompeting with air

The development of dedicated lines between key cities has enabled some rail services tocompete directly with short-haul flights or road services.

Cross border highspeed trains forgrowth

International tourism will benefit from the increasing number of cross border high speed raillinks. In Europe, the Schengen area enables seamless train journeys, with pre-boardingformalities significantly shorter than the equivalent at airports.

Increasing focus on

business passenger

Train services are increasingly targeting business travellers, many of whom have returned to

domestic train travel in order to save costs during the economic crisis. Loyalty programmes andpartnerships with hotels and car rentals have assisted.

Governments keento give priority torail

January 2010 saw a U$5 billion grant from the US government for high speed rail within theUSA. This follows other commitments to continue rail development by many countries, often asan attempt to alleviate significant road congestion, as well as enabling rail services to competedirectly with short-haul air journeys.

How fast can wego?

The future of rail travel appears to be heading in the direction of high speed links. Argentina,the USA, Morocco, Russia, China and Spain are among the many countries which have plans

to start or build further high speed rail links in the next five years.

Key Findings


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Golden age of the train

Rail transport systems began in the UK in the 19th century, with initial use focusing on the transportation of goods,

before turning towards passenger transportation. Significant tracks were laid across Europe at this time, with railtravel quickly becoming the fastest method of transportation.

Swift development also occurred in Russia and the USA, with rail travel ideal for traversing sections of these largecountries. Improvements in speed occurred with the advancements of diesel and electric-powered engines, and bythe mid 20th century railways were found in all continents of the world, except Antarctica. The advancement of airand road transportation in the latter half of the 20th century reduced the popularity of train travel, except thetechnological advances of the Japanese bullet train launched in 1964.

Transition drives development

Over the last two decades, the rail industry worldwide has undergone substantial changes. Eastern and CentralEurope has seen a transition from centrally-planned economies to industries based on market forces andmanagement competencies. Over 20 new independent national railway companies were created across thecontinent.

Private sector participation has increased in the UK, Estonia, Australia, New Zealand, Canada, Latin America andsub-Saharan Africa.

Public ownership remains the norm in the rest of the EU, but there has been increasing separation between trainoperators and railway infrastructure, prompted by an EU directive in 2001.

China has the highest average rail density in the world, despite a relatively sparse network of track. The governmenthas launched a network enhancement programme to extend the network to more remote communities throughoutthe country.

A resurgence has been seen in train transportation throughout the world, in part due to its strong environmentalcredentials, as well as growing disenchantment with air travel among many passengers.

Historical Background

Market Background
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Key Countries With Substantial Rail Networks

Market Background

Rail Track Worldwide perCountry:60,000km30,000km, < 59,999km20,000km < 29,999km15,000km < 19,999km10,000km < 14,999km

5,000km < 9,999km 0km < 4,999km Source: World Bank Railways Database 2008


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StrengthsOpportunities

WeaknessesThreats

Rail travel is alsoconsidered the greenestform of transportation, withfar lower levels of energyconsumption per passengerkm than either road or airtransportation. The slowtravel movement is also

supportive of train journeys.

Green credentials

Rail travel is one of thesafest methods of landtravel. Accidents involvingfatalities to passengers areextremely rare, with the vastmajority of incidentsinvolving rail personnelworking on the track.

Strong safety record

Rail travel is restricted bythe placements of its tracksand stations. Often journeysneed to be supplementedby road use in order toreach more remotedestinations. The cost ofconstruction and

maintenance of rail servicesis often prohibitively high forsmaller population centres.

Lack of accessibilty

Trains and their necessarytrain tracks limit the reach ofrail services. Landboundaries also preventtrains from travellingglobally, and whileunderwater tunnels are anoption, they are extremely

costly and time consumingto build and maintain.

Limited geographiccoverage

The new developments intrain technologies areenabling modern trains totravel at ever-increasingspeeds and therebyshortening journey timesand enabling train travel totruly compete with short-

haul air services.

Getting faster

There are a number ofexciting high speed railprojects ongoing in manycountries. While some ofthese are sufferinginevitable delays due to theworldwide recession, manymanufacturers are showing

record profits.

Continued growth inmanufacturing

Many rail services survivedue to the existence ofgovernment subsidies asrunning costs wouldotherwise be too high forrail operators. As prioritiesor governments change,railways are vulnerable to

cuts in funding and thusservices may be cut.

Need for subsidies

The arrival of low costcarriers in many countrieshas caused significantcompetition for domesticand international rail

journeys. Depending uponthe country of departure,rail travel can prove more

expensive than a low costflight.

Competition

SWOT

Market Background


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Dependence on demographics and domestic tourism

Domestic tourism by train involves many more passengers than international train travel. The USA is by far thedominant country for business travel, with approaching 33 million passengers in 2009 using the train for a businesstrip involving at least one overnight stay. For leisure travel, China recorded an amazing 361 million passengerstravelling by train in 2009, with India in second place with 104 million. Both these countries have populations of overone billion people, with train travel being the only travel option for much of the population.

Many of the countries featured in these top 10 lists are developing countries, with large populations who cannotafford to travel overseas. As a result, domestic travel is often the only option for many. Additionally for island nationssuch as Japan and Indonesia, it is not possible to travel internationally by train.

Rail Passenger Profiles Who and Why?

Market Background

Top 10 Countries for Domestic BusinessTourism by Rail in 2009

Rank CountryPassenger Numbers,

million

1 USA 32.5

2 China 27.4

3 Japan 16.6

4 India 11.7

5 Indonesia 6.9

6 Russia 4.8

7 Italy 4.5

8 Spain 4.5

9 Germany 3.7

10 Ukraine 3.7

Top 10 Countries for Domestic Leisure Tourismby Rail in 2009

Rank CountryPassenger Numbers,

million

1 China 361.3

2 India 104.2

3 Japan 84.6

4 USA 62.8

5 Russia 30.5

6 Indonesia 29.4

7 France 28.4

8 Germany 21.6

9 Egypt 20.6

10 Ukraine 15.0


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Tradition dies hard

In contrast to domestic train travel, the leading marketsfor international rail tourism remain in Europe.Historically strong due to long-established networks andwell-linked population centres, rail remains an importanttransportation method. Competitive pricing enablesmany journeys to be cheaper by train, even against lowcost carriers.

2009 saw international passenger numbers declining inmost countries, largely as a result of the economic crisis

worldwide.

International Rail Travel in the Shade

Market Background

Top 10 Countries for Inbound Tourism by Rail in2009

Rank CountryPassengers,

million% change2008/2009

1 Ukraine 12.6 -15%

2 France 11.8 -8%

3 Russia 10.1 -9%4 Hong Kong 4.8 -3%

5 Hungary 2.9 -2%

6 UK 2.7 -1%

7 Belarus 2.5 3%

8 Austria 2.3 -4%

9 Italy 2.0 -2%

10 Belgium 1.8 -9%

Top 10 Countries for Outbound Tourism by Rail in2009

Rank Country Passengers,million

% change2008/2009

1 Russia 10.2 -12%

2 Hong Kong 9.6 0%

3 Ukraine 6.5 -15%

4 Belarus 4.8 0%

5 China 3.4 1%6 UK 3.2 -14%

7 Germany 3.1 -5%

8 Hungary 2.4 1%

9 Switzerland 2.3 -2%

10 France 2.2 -5%

Russian travellers tend to travel to neighbouring CISstates, such as Ukraine and Belarus, which have long-established rail links. Many cultural and linguistic linksremain between these countries, making them populardestinations for holidays.

Hong Kong and China are the only Asian countriespresent in the top 10 for rail travel with significant growth

occurring in the last 10 years, doubling the number ofpassengers.


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Economic Crisis Affects Passenger Numbers

Market Background

-20 -15 -10 -5 0 5

Ukraine

France

Russia

Hong Kong

Spain

UK

China

Germany

Hungary

USA

% growth in passenger numbers 2008/2009

Rail Passengers % Volume Growth 2008/2009 by Key Country

Domestic

Outbound

Inbound

T l d T i R ilM k B k d


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The rail industry has received significant boosts from various governments around the globe to attempt to stimulatelocal tourism markets. An added bonus for many governments under pressure to maintain commitments to loweringemissions are the strong environmental credentials of the rail industry.

Train manufacturers are also benefiting from the recession, as governments maintain orders, and policies remainfocused on expanding rail networks. Passenger numbers declined in most countries in 2009, with many countriessuffering under the worldwide recession as travellers reduced journeys and holidays.

Canada C$407 million was allocated for improvements to passenger rail service in the Montreal to Toronto corridoroperated by VIA Rail.

Norway the government increased the budget to undertake maintenance and investments in railways, roads andharbours nationwide.

UK development of the Cross Rail link, a high frequency rail link, crossing London. This is currently the largest civilengineering project in the UK.

Italy the governments U$114 billion stimulus package included investment in the national rail network, particularlyfocused on the first phase of the high speed rail link between Milan and Genoa.

China in 2008 the Chinese government issued a U$586 billion economic stimulus, with 38% of this total fundingbeing allocated to public infrastructure. This includes significant railway development with the existing Mid-to-LongTerm Railway Network Plan being altered to now include over 40,000km of new track to expand the network intoWestern China.

US a last minute addition to the economic stimulus package issued by the US government in February 2009 wasU$8 billion for investment in high speed rail. However, it is to be divided among the 11 regions across the countrydesignated as high speed corridors and as a result is likely to be used in funding long-awaited improvements topassenger lines. The current fastest train in the USA is the Acela which can attain 150 mph, but averages only 84mph between New York and Washington.

Government Stimulus Grows During Crisis

Market Background

E i I i lT l d T i R ilM k t B k d


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Greenest mode of travel?

Rail travel is widely accepted as the least polluting method of mass transportation. Travelling by train produces onaverage three to 10 times less CO2 emissions compared to road or air transport.

For short domestic trips, a full train is twice as energy efficient as a full car, which substantially reduces the carboncost per passenger mile.

Europe leading the way

May 2008 saw an voluntary agreement by European Railways to cut its 1990s levels of specific emissions by 30%.They are also funding research to improve environmental performance by developing more standardisedtechnologies within the industry. An EU survey in 2007 found that railways only account for 1.6% of transportationsCO2 emissions, compared to 12% for aviation, and 72% for road.

80% of European trains are also run by electricity, as opposed to diesel, enabling a seamless switch to cleanelectricity when it becomes available through national grid supplies. Sweden has already taken this step with SJ, thegovernment-owned train operator only purchasing renewable electricity from wind and hydro-powered sources.Modern trains are also increasingly equipped with regenerative systems that can reclaim energy used whenbreaking.

Japan also involved

Kawasaki Heavy Industries, one of the countrys leading train manufacturers, is developing the Environmentally

Friendly Super Fast Train, known as EfSet. The design is set to be finalised by March 2010, with the train reaching atop speed of 217mph, and will use regenerative braking to capture kinetic energy.

Passenger choice

For travellers, there are an increasing number of tools available to help them determine the greenest mode oftransport for their journey. Internet sites such as EcoPassenger can help passengers to work out the environmentalcosts of their journey.

Environmental Credentials

Market Background

E it I t ti lT l d T i R ilM k t B k d


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Old favourite for children

Trains are well-known as a favourite pastime for many children, with train sets, classic books, and films andtelevision shows remaining ever popular among children. This popularity has resulted in a growing number of train-themed tourist attractions aimed at children and the young at heart. Model railway villages were one of the initialattractions within this genre and are still popular, with key sites across the world including Miniature France,Wunderland in Germany, Toggenburg in Switzerland and at Northlandz in New Jersey, USA.

Films and books such as JK Rownlings Harry Potter continue to captivate the minds of children. West CoastRailways operates The Jacobite Steam Train Trip from Fort William to Mallaig (Scotland) that features as theHogwarts Express and it was named Top Railway Journey in the World 2009 by Wanderlust Magazine.

Thomas the Tank Engine

Thomas the Tank Engine is probably the best known of childrens train characters, originally introduced to children ina series of books published in the 1940s. In 1984 an animated television series was created and this has resulted inan enormous resurgence in Thomas popularity.

As a result, HIT Entertainment, the TV productioncompany, licenses Day out with Thomas events atrailway heritage sites all over the world. The UK,Australia, New Zealand and the USA all host theseevents, with the USA having seven replica Thomas

the Tank Engines travelling at one time.Thomas Land

The success and continued popularity of Thomashas led to the creation of two theme parks, located inJapan and the UK. Known as Thomas Land, theparks feature themed rides for young visitors, as wellas indoor play areas. In both the UK and Japan,Thomas Land is located within an established theme

park in order to attract families of all ages.

The Young Demographic and Train Tourism

Market Background

E m it I t ti lTravel and Tourism: RailMarket Background


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Region Operator Route

North America Canadian Toronto to Jasper

Royal Canadian Pacific Canadian Rockies

Rocky Mountaineer Banff to Vancouver

South America Andean Explorer Puno to Cuzco

Hiram Bingham Puno to Machu Picchu

Africa Blue Train Pretoria to Cape Town

Pride of Africa Cape Town to Dar es Salaam

Asia Palace on Wheels Circular journey from Delhi

Eastern & Oriental Express Bangkok to Singapore

Shangri-La Express Various journeys to Russia, China and Tibet

Toy Train Darjeeling

Deccan Odyssey Mumbai to Siliguri

Source: Society of International Rail Travelers

Favourite Rail Journeys 2009

Market Background

Euromonitor InternationalTravel and Tourism: RailMarket Background


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Favourite Routes

Market Background

Region Operator Route

Europe Danube Express Berlin to Budapest/Istanbul

British Pullman London to Whistable

El Transcantabrico Santiago de Compostela to Len

Golden Eagle Trans-Siberian Express Moscow-Vladivstok/Beijing/Arctic Circle

Venice Simplon-Orient-Express Various between Paris and Istanbul

Glacier Express Zermatt to Chur

Bernina Express Chur/St Moritz/Davos to Tirano

Royal Scotsman Scotland

Flm Railway Flm to Myrdal

Bergen Railway Oslo to Bergen

Australasia Ghan Adelaide to Darwin

Indian Pacific Sydney to Perth

Sunlander Brisbane to Cairns

Source: Society of International Rail Travelers

Euromonitor InternationalTravel and Tourism: RailMarket Background


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-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

000p

eople

Backpacker Arrivals in Europe

2005

2009

InterRail is the world-famous flexible rail pass that allows travellers of all age groups, in particular backpackers,young people, students and babyboomers to enjoy travelling by train in Europe.

The Global InterRail pass allows for travel in 30 European countries, with adult prices starting from EUR399 for 15days. Bookings can be made directly at InterRailNet.com or from other rail operators such as SNCF.

The InterRail One Country enables travellers to explore a single country in-depth from EUR33. According to thecompany, the top destinations to explore are Italy, Spain, Benelux, France and Germany.

With tips for how to make the most of a low budget, InterRail is a low cost option that strikes a chord with time rich,but cash poor travellers, especially in times of economic crisis.

To boost its budget appeal, the company withheld price increases on its youth and adult fares in 2010. Seniors

receive a 10% discount for certain products. Discounts on ferries for all travellers are also offered through crossindustry partnerships.

InterRailing Backpacker Heaven

Market Background

Euromonitor InternationalTravel and Tourism: Rail


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Introduction

Market Background


Regional Overview

Future Outlook

Euromonitor InternationalTravel and Tourism: RailCompetitive Environment


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Operators


Traditionally the railway infrastructure and the train services of a country have been operated by the same companywhich was often a national railway. For some countries such as Germany, this nationalisation took place to jointogether the initial private railways operating within the country.

Over the last 30 years, there has been a separation of these two entities, particularly in Europe where the lawrequires separate ownership of stock and infrastructure.

Global Division of Nationalised and Private Rail Operator

Advantages Disadvantages

Nationalised operator Centralised service one company in

charge Government tourism strategies canbenefit rail development

Monopoly status could encourage

complacency Potential for poor quality of service

Private operator Increased investment opportunities Improved customer service

Need for profit could compromisesafety and raise fares

Services can be fragmented withmore than one operator

Often private railways remain relianton state subsidies



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State-owned railways State-owned and private railways Private railways

China Canada UK

Egypt Germany Mexico

France Sweden US

India Japan Australia

Italy Poland Argentina

New Zealand Switzerland BrazilRussia Spain Hong Kong

South Africa

Nowadays, countries are divided between those that have a national rail operator and those that are privatised.However, some of the privatised rail operators remain monopoly institutions, with significant government subsidies.Nationalised operators may benefit from government tourism incentives; however, the nature of the projects often

leads to a long implementation time. Totally privatised services do exist such as UK-based Virgin Trains, which is part of the Virgin Group which also

offers air transportation, and Air France has recently investigated the establishment of its own cross channel railservice.

Types of Railway System Operators




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Value on a downwards slide

The value of the rail industry has declined in most countries with the notable exceptions of China, Japan, and Spain.Russia suffered a drop of 25% in the value of its rail services, which was reflected in a marked decline in passengernumbers, exacerbated by economic turmoil and instability.

However, Chinese and Japanese operators showed an increase for 2009, due to strong domestic markets wheremany travellers rely on train services, particularly during holiday periods. Chinese authorities often raise ticket pricesduring peak holiday times when millions of passengers travel to their home regions.

Operators Significant Change in Value


Comparison of Rail Value in Key Countries 2008/2009

Rank Country Rail Value Sales in US$billion 2008

Rail Value Sales in US$billion 2009

% value change2008/2009

1 China 35.5 37.5 5.6%

2 France 17.7 16.4 -7.1%

3 Japan 14.5 15.1 4.5%

4 Germany 15.0 13.6 -9.4%

5 Russia 6.4 4.9 -24.6%

6 India 4.6 4.6 0%

7 UK 5.3 4.6 -12.3%

8 Italy 3.2 3.0 -6.2%

9 Spain 2.4 2.5 5.1%

10 Netherlands 2.5 2.4 -5.5%



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Rail travel differs significantly from air transportation in that there is generally little competition between operators onroutes. If there are a number of different operating companies working in a country, often there will only be oneoperator providing the service for a particular route and the passenger has little or no choice in selecting which

company they choose to travel with. This may change in Europe with the liberalisation of international rail routes fromJanuary 2010, but the impact of this is as yet uncertain. Nevertheless despite this lack of competition, there remain anumber of iconic train operators, often due to the routes they serve, or the type of trains used.

Japan Bullet Train (Shinkansen)

The Shinkansen is run by four Japanese Railways Group companies and offers a network of high speed railway linesin Japan. The service caters mainly to long distance travellers, although there are some commuter trains.Characterised by speeds of up to 300kph, the train offers an extremely punctual and efficient service due to its trackswhich are totally separate from other lines.

World Famous Rail Travel Brands




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Eurostar - is the high speed train service linking the UK to continental Europe, and travel from London to Brusselsand Paris. Created in 1994 after the building of the Channel Tunnel, Eurostar carried 9.2 million passengers in 2009,with sales of 675.5 million, up 1.2% and 1.7% respectively on the previous year. Using GDS player, Amadeus,

Eurostar offers a tiered pricing system similar to low cost airlines, with cheap price tickets, available in advance andat off-peak times. In 2009 the London-Brussels link grew by 6%, with London-Paris showing smaller year-on-yeargrowth of 1%.

Eurostar, however, continued to suffer operational difficulties, including the much publicised failure of trains over theChristmas period 2009, with thousands of trapped passengers and further suspension of services UK to Brusselsfollowing a major train accident in Belgium in February 2010.

Amtrak - is the US government-owned train operator providing passenger rail services in the USA in 46 states. Thebusy North East Corridor connecting Boston, New York, Philadelphia and Washington DC accounted for almost halfof Amtraks passengers in 2009. Due to funding given to air and road at the expense of rail travel, the company hasalways struggled and remains tied to public funding for survival. However, passenger numbers have increased in thelast six years, in part due to high petrol prices with hope for high speed developments if funding is obtained.

Iconic Rail Brands




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Mainstream travel retailers do not tend to offer transportation by rail. There are a number of specialised retailerswhich offer luxury journeys by rail, including many of the worlds classic rail journeys such as the Blue Train, SimplonOrient Express and the Rocky Mountaineer routes. These holidays are also offered by many luxury travel retailers.

Holidaymakers seeking these types of journeys traditionally fall into older age groups, with the average age oftravellers being over 60 years old.

These agents are supplemented by numerous small tour operators which organise train travel on specific routes,usually restricted to their home countries.

GW Travel

Founded in the UK in 1989, GW Travel is a leading provider of luxury long distance train travel, and charters andoperates luxury trains throughout the world. Its focus is largely on rail journeys in Russia and its former Republics,

China, India and Canada. The average age of passengers is 66 years old, and the agency also provides tours withcelebrity guest speakers.

Great Rail Journeys

Another UK-based rail specialist, Great Rail Journeys offers over 130 journeys to more than 40 countries. Focusingon escorted journeys by train, the vast majority of journeys are in Europe including trips in Germany, Switzerland,France and Austria.

Rail platforms slow to appear on GDS

The slow development within travel retail has been due in part to the lack of GDS provision. However, leading GDSproviders Amadeus, Sabre and Galileo all launched new rail booking platforms in 2007, enabling travel retailers tobecome more active in the selling of rail services to customers.

Travel Retailers and Train Travel




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Trans-Siberian Railway (Russia)

The trip between Moscow and Vladivostok on the Sea of Japan has long been a classic train journey, taking aminimum of six days and travelling over 9,000km. Tickets are available on Russia National Railways, with pricesstarting from US$450 for a one way journey. More luxurious journeys can be taken aboard charter trains, with UKtravel retailer train specialist GW Travel operating its own private train, the Golden Eagle Trans-Siberian Expressfrom 2007.

Swiss Alps (Switzerland)

Long known for the efficiency of its rail services, Switzerland is home to a number of classic train journeys, whichtraverse its lakes and mountainous regions. The Glacier Express runs between Zermatt and St Moritz, two of thecountrys well-known Alpine resorts. The Bernina Express, connects Chur with Tirano in northern Italy and crosses

the Swiss Alps directly from North to South. Four hours of the journey on the Bernina line were declared a WorldHeritage Site in 2008.

Beijing to Lhasa (China)

2006 saw the opening of the rail link between Beijing, and Lhasa, the capital of Tibet. Part of Chinese Railwaysstrategy to open up the Western provinces of China, the rail link is the highest in the world as it traverses theTanggula Pass at 5,072m altitude. Extra oxygen is provided in the carriages as passengers can suffer from altitudesickness. Part of the track is built on permafrost, with the Bombardier trains developed specially for operations athigh altitude.

Rocky Mountains Railroad (Canada)

This daylight trip through the Canadian Rocky Mountains takes in the spectacular scenery of the Kicking Horseroute, passing through the dramatic landscape of the Banff National Park and across the Continental Divide. Thereare four routes running from Vancouver on Canadas west coast to the towns of Banff, Calgary, Jasper and Whistler,with overnight stops in Kamloops.

Case Studies Classic Journeys

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Luxury train journeys tend to be taken by more mature holidaymakers, who typically have more time and money ontheir hands. The nature of many trips is similar to cruising, with stops during the day for visiting destinations with thebulk of the travel undertaken at night. Costs for these types of holiday are high, with prices often starting from at least

US$500 per day, not including transport to the train.Blue Train (South Africa)

The Blue Train travels between Cape Town and Pretoria in South Africa. The service is promoted as a magnificentmoving 5-star hotel by its operators, Luxrail, a division of the Spoornet, the state-owned national rail company.

The Orient Express

The Orient Express was originally the name of a long distance passenger train, with the initial starting and finishingpoints of Paris and Istanbul. The official Orient Express last ran in December 2009, an apparent victim of low cost

airlines and high speed trains. However, the service is maintained by a private company, the Venice-Simplon OrientExpress which runs trains between a number of European destinations, and operates during March to November.The company also offers train services in Singapore, Malaysia, Thailand and Laos, under the name Eastern andOriental Express, as well as a London to Inverness train in the UK, among other departures.

Palace on Wheels (Rajasthan, India)

The Palace on Wheels was Indias first luxury train, created by Indian Railways to promote tourism in Rajasthan. Ittravels from New Delhi, visiting the classic golden triangle towns of Jaipur, Jodhpur and Jaisalmer, and continuesonto Udaipur and Agra, the home of the Taj Mahal. The service was launched in 1982, being available only for

foreign nationals. However, nowadays Indians are allowed to travel on the train but prices are still quoted in dollars.

Case Studies Luxury Journeys

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Short haul air travel under pressure

The extensive rail network in Europe has enabled some high speed services to compete directly against short-haulflights. The improvements to the service between Paris and Brussels which has an average journey time of 1 hr 22

mins, has resulted in airline services withdrawing flights between these two cities, with Air France-KLM passengersencouraged to use the Thalys train service.

The Eurostar London-Brussels service has 80% of travellers on this route, with airlines finding it extremely difficult tocompete on journey times. Additionally flights to some domestic destinations have been reduced by Air France dueto the popularity of TGV services, such as the Paris-Lyon route. The Virgin Group was a pioneer in offering both railand air transportation in the UK, with the final destination being the key importance, and not the mode of transport.However, following the service disruption over the Christmas period in 2009, when Eurostar trains broke down in thesevere cold weather, the company will need to work to limit the damage to its reputation for reliability, safety andcustomer care.

AVE steals air share

In Spain, the shuttle flight linking Madrid with Barcelona, which is one of the busiest routes in the world, was used by3.7 million passengers in 2008, down by nearly 25% on the previous year as it struggled to compete with the openingof the Madrid-Barcelona AVE route in that year.

These journeys where air and rail are actively competing are characterised by relatively short journey times, whichwhen coupled with city centre railway stations can prove significant when the total travelling time is compared. The

increased security at airports, and noticeably longer check-in times, also boost rail services over air travel. Anincreasing number of passengers are keen to keep their carbon footprints low, which is encouraging more toconsider travelling by train.

Competition with Air

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Road transportation benefits from rising fuel prices

The rise in oil prices in 2008 had an impact for many travellers who switched to the train where possible, withdomestic train travel in the USA rising by 14% However, it is generally difficult for train travel to compete directly withroad transportation. Rail travel tends to be more expensive compared to a full car travelling on the same journey, andthere is no need for supplementary travel at the start and end of a journey. However, with improving facilities such asWi-Fi becoming available on an increasing number of trains worldwide, business travellers are choosing to take thetrain as they can continue working during the journey.

However, the competition between road and rail is not straightforward as many road users will drive in order to havethe use of a car at their destination. While car rental firms can fill this gap at railway stations, the extra cost isprohibitive for many rail users.

Competition with Road



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Not up to speed

Often ignored by traditional travel retailers, passengers seeking to purchase rail travel online are not served muchbetter by online travel retailers. Big names such as Expedia and Orbitz do not provide booking services for rail, andtend to only offer a link to national rail companies websites where they exist. Travelocity in the UK, however, offersEurostar booking, but not general rail services. The fragmented nature of many privatised rail services do notfacilitate an easy online experience for many consumers, but there is much room for growth in online services.Where journeys are straightforward, such as Eurostar, with only a few destinations to choose from, online servicestend to offer a much superior level of service.

The Man in Seat 61

As a direct response to the lack of co-ordinated rail information online, a former railway station manager from the UK

has set up The Man in Seat 61 (www.seat61.com), a website which aims to help travellers who wish to travel bytrain or ferry. The site offers information on train travel worldwide, and while it is not possible to buy tickets directlythough this site, links are provided along with hints and tips for making these purchases using complicated foreignlanguage sites. Fares, train times and tourist information are all available through the site, which has won numeroustravel awards since its creation in 2001.

Rail Online Shows Slower Uptake



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Introduction

Market Background


Regional Overview

Future Outlook

Euromonitor InternationalTravel and Tourism: RailRegional Overview


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Often regarded as the home of railway services, rail transportation in Western Europe remains popular, and offerssignificant competition to short-haul air services across the region. The geography of the region facilitates train travelas there are many large population centres in relatively close proximity. As of January 2010, the EU railways market

was liberalised for international passenger services, enabling any licensed, certified rail operator in the EU to offerinternational rail services.

France

A new rail link between Lyon and Turin is one of the EUs priority transportation projects, and will comprise a 50kmunderground tunnel crossing the mountainous border in the Alps. A new TGV link between Paris and Strasbourg wasopened in 2007, cutting the journey time from four hours to two hours 20 mins. Phase 2 is expected to be completedin 2014, cutting a further 30 minutes off the journey.

Eurostars catalogue of incidents Despite Eurostar services reaching record levels for passenger numbers in 2009, with a total of 9.2 million

passengers. 2009 also saw fire and bad weather disrupt services significantly. In 2010 a fatal rail accident in Belgiumlead to further line closures affecting the UK to Brussels route.

Eurostar results for 2009 pointed to a resilient performance from the leisure segment, with sales up 15.6% and thecompany reported that demand had bottomed out in the second half of the year.

Following an independent review of the service disruption in December 2009, the company announced a further 30billion investment to improve its operational reliability, passenger care and communication. The company also

announced its move to a single, unified management structure.

Western Europes Rail Heritage

Our duty now is to ensure that we quickly regain the trust of our customers. Myimmediate priority is to implement the plan to deliver on the Review recommendations and

drive the new corporate structure through to completion.Richard Brown, Chief Executive, Eurostar



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Spain storms ahead

The development of AVE, Spains high speedtrains has been a success story, and despite only

starting operations in 1992 its development willcause it to overtake world leaders France andJapan in terms of the number of kilometres ofhigh speed line.

AVE trains currently transport 40,000 passengersa day and have created significant competition todomestic air transportation. Fares for identical railand air journeys are similar, but the train servicetends to be faster door to door, with many of theservices targeting business travellers.

The Spanish high-speed train expanded itsnetwork in February 2008 to link Madrid withBarcelona in 2hr 40min. The train line has erodedthe share of the Madrid-Barcelona air shuttle, andalready accounts for 42% of all travellers withinthe corridor.

The Spanish government has allocated EUR120billion for high speed development over theforthcoming 10 years, with a proposed increase intrack to reach 10,000km.

The recent economic downturn has hit Spainhard, and the country is suffering from recordlevels of unemployment at 20%. However, high

speed rail remains a priority for governmentinvestment.

Point to point

AVE trains already connect Madrid with Barcelona, Malagaand Zaragoza, at speeds of up to 350km/h, and will connect

Valencia in 2010. By the end of 2010, the AVE Madrid-Valencia train will

connect the cities in 1hr 35min.

The expansion of the high-speed rail network is expected toreach Galicia and Asturias in 2013. The Lisbon-Madrid AVEline is also expected to be completed by 2013.

Case Study: Spain and the AVE



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Train most popular but under threat

Train travel has long been the most popular form of transport in Eastern Europe. With large sections of thepopulation not having access to cars during much of the communist era, rail travel was the only option for many

consumers, and the network across the region remains strong. Maintenance and investment in new technology iscrucial however, with most countries relying on old-fashioned, slow and uncomfortable trains. The growth of low costflights and an increased number of cars are also hindering the prosperity of rail travel.

Russia

Russian Railways is the state-owned monopoly company running the rail industry in Russia. The company accountsfor 3% of the countrys GDP, and handles 80% of all transportation in Russia. December 2009 saw the introduction ofthe new high speed Sapsan train, developed in conjunction with Siemens. Capable of travelling at speeds of up to

250kph, the Sapsan provides a link between Moscow and St Petersburg, with a reduction in average journey timefrom eight hours to three hours and 45 mins. This high speed linkage between Russias two most important citiesshould be a potential boost to the tourist industry. Future links to Helsinki and Nizhny Novgorod are planned for2010.

Bulgaria

In 2009, the National Railways (BDZ) saw a slight increase in passenger numbers, the first positive growth figuresseen for 10 years. Most of the existing railway track in the country is unsuitable for high speed trains and thegovernment has plans for new high speed links. Currently journey times for bus and train travel are approximately

the same when connecting between key destinations such as Sofia and Plovdiv. The completion of a second bridgeover the river Danube in the northwest of the country will also facilitate the integration of the rail network into theEuropean transportation network.

Old Habits Die Hard in Eastern Europe



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The three leading countries for rail travel in Asia Pacific are China, India and Japan, with the latter also leading theway for much new rail carriage and high speed development across the world.

Japan and its iconic bullet train

Rail continued to see an increase in value in 2009, benefiting from the turbulent airline industry within the country,particularly with the recent bankruptcy of the national carrier JAL . Rail transportation was worth U$14.8 billion, whichis entirely domestic travel. The home of the Shinkansen, more commonly known as The Bullet Train, Japan has anextensive network and although fares are considered relatively expensive, the reliability and speed of theSkinkansen encourages many Japanese to travel by train.

Approximately 33% of leisure trips and 25% of business trips are taken by train. A new series of trains, the E5 Series,are set to be launched in 2011 with speeds of 320kph beating the current top speed of 300kph.

Chinas commitment China has pledged to build 7,000km of high speed lines in the next decade, as well as a plan for significant metro

and freight expansion. December 2009 saw the opening of a line connecting Wuhan and Guangzhou, reducing thejourney time from 10 hours to only three hours. It was hoped that the high speed link between Beijing and Shanghaiwould be finished in time for the Shanghai Expo, to be held between May and October 2010. Unfortunately,completion of the dedicated line is now predicted to be in 2012.

India faces intense competition

India is planning to invest US$9 billion in its railway network over the next five to eight years. However, the agendaregarding the improvements has yet to be declared by the Railways Minister, Mamata Banerjee. Indian railways areincreasingly facing competition from the low cost airlines and improving roads. As a result, the ministry of railways isattempting to modernise its services, and aims to leapfrog from the existing basic technology to the latest electroniccontrols.

Asia Pacific Leads the Charge



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The USA and Canada have significant railway services with a strong tourist focus existing for many rail services. TheUSA is the country with the largest amount of rail track in the world, although short distance journeys tend to be morepopular with passengers as speeds remain low. However freight transportation is significantly more important than

passenger travel, with many lines only open to cargo.Good use of US bailout money

In January 2010, Amtrak, the national passenger rail operator, announced plans to replace its ageing train fleet. Thedetails of the plan will be released in February 2010, but are expected to include the purchase of several hundredcoaches and over 100 locomotives. January 2010 also saw President Obama announcing a US$5 billion in grants forhigh speed rail.

High speed Canada

2009 saw VIA Rail (the independent rail operator of Canada, formerly a national entity) boosted by governmentfunding. The company received close to US$1 billion from the federal government to rebuild locomotives andpassenger cars, improve track and construct new stations. Passenger numbers had been increasing before a slumpin 2009, and a recent survey by the Railway Association of Canada found that 86% of Canadians would support theintroduction of high speed trains in the country.

Brazils sports vision

The planned high speed rail link between Rio de Janeiro and Sao Paulo, which was hoped to be opened in 2014, intime for the Football World Cup, has been delayed. Bidding for the US$19 billion project is expected to start in the

first quarter of 2010, with the tender being awarded in May 2010. Japanese, South Korean and Europeanconsortiums are expected to make bids for the project. The project is expected to last for five years and as such isunlikely to be finished by 2014 but may be ready in time for the Olympic Games in 2016.

The Americas Plough Further Investment



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Rail transportation has a long history in the Middle East and Africa, but has suffered from a lack of funding andmaintenance, and has been pushed out of prominence by land and air transportation. However, there is now aresurgence within the region, with many new rail projects in Africa occurring as a result of foreign investment within

various countries, as well as an ambitious link in the Middle East.Launch of the Dubai Metro in 2009

2009 saw the successful opening of the Dubai Metro, the first metro project in the GCC region. While the main usersare low income commuters, tourists have also benefited by avoiding the extensive traffic jams common to the city.

Qatar gets a makeover

In November 2009, the Gulf state of Qatar signed a US$25 billion rail contract with Deutsche Bahn to develop ametro system for the capital Doha, with construction starting in 2011 and the first stage opening in 2016. The

company has also been contracted to build a 180km high speed rail link to neighbouring island kingdom of Bahrain.GCC link

Tenders for the proposed GCC rail link are expected in the first quarter of 2010. The six GCC states will be linked bya 2,117km network, with construction aiming to be started by 2017. Transport ministers have also discussed a widerplan, with the potential of linking the GCC network with Jordan, Syria and Turkey to provide access to Europe andAsia.

Middle East and Africa Play Catch-up



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Progress in Saudi Arabia

There are a number of substantial rail projects on the go within Saudi Arabia, although the prestigious Saudilandbridge which would connect the Red Sea and the Arabian Gulf appears to have stalled somewhat due to the

financial crisis. However, the high speed link between Jeddah and the holy cities of Mecca and Medina isprogressing, with British firm Scott Wilson Group being awarded management of the project in January 2010.

Morocco TGV-style

An agreement has been signed to build a high speed train service between Casablanca and Tangiers. Led by theFrench company Alstom, which developed the TGV in France, the project will reduce the journey time between thetwo cities to two hours and 10 mins, which currently takes almost six hours.

The Casablanca-Tangiers link is expected to be operational by 2013, with plans for a second link connecting

Casablanca and Marrakesh by 2015, and a third line connecting to Agadir by 2020.

High Speed Chase



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Introduction

Market Background


Regional Overview

Future Outlook

Euromonitor InternationalTravel and Tourism: RailFuture Outlook


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Global Sales Keep Up the Pace

In 2009, global rail transportation sales fell, but at a lower rate than overall transportation, as airtransportation in particular was curtailed by consumers and price erosion further exacerbated the downwardslide. In 2009 overall transportation value sales dropped almost 13% compared to rails 3% decline. This also

demonstrates rails resilience in times of economic crisis, but also its growing position as a greeneralternative to air travel.

Over the forecast period, Western Europe and Asia Pacific will continue to account for the lions share ofglobal rail transportation sales, with 43% (US$57 billion) and 49% (US$ 64 billion) by 2014. Growth inWestern Europe will outperform the global market due to continued investment in rail infrastructure, as furtherintegration is driven by pan-regional groups such as Railteam. North America will see the fastest growthalbeit from a low base, to account for US$2.5 billion by 2014.

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The growth and increasing demand for high speed rail services across the world has been extremely profitable forthe engineering companies that construct trains and tracks. Despite the harsh economic conditions of 2009, trainmanufacturing companies have shown surprising resilience as orders have continued throughout this time. With high

speed rail increasingly becoming a viable competitor to short-haul air flights, the future of these industrial giantsremains bright.

Introducing the new TGV

The design of the replacement for the TGV, the AGV (Automotrice Grande Vitesse) by TGV Alstom France waslaunched in 2008 and differs from the TGV by having motors under each carriage. The target top commercial speedwill be 360kph, some 60kph faster than the TGV. The Italian company NTV, Italys first private rail operator, plans tobe the first user of the AGV, and has ordered 25 trains, with 11 carriages each. Operations are planned to start in2011, with key lines being Turin to Salerno, Rome to Venice and Rome to Bari.

Customisation from Siemens

Velaro is Siemens high speed train, which revolutionised the high speed market as it is not a locomotive-based trainand instead has small motors on wheel sets. This significantly reduced the weight of the train, increased availablepassenger space and resulted in faster acceleration. As a result, the latest incarnation of the Velaro has receivedmajor contracts from Spain, Russia, China and Germany, which are tailored to meet country specifications. Russia,for example, requires trains which can withstand temperatures lower than -50 Celsius

Bombardier ahead

The Montreal-based company, Bombardier, has seen an impressive rise in revenues of US$254 million to reachUS$2.5 billion for Q3 2009. Recent contracts include the provision of trains for Italian operator Trenitalia, GermanysBVG as well as a US$4 billion deal with the Chinese Ministry of Railways. The latter forms part of a joint venture tosupply 80 trains capable of travelling up to 380kph.

Technological Developments



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Joint network

Railteam is an alliance set up between six ofEuropes main train operators (DB Germany;

SNCF France; Eurostar UK, France andBelgium; NS Hispeed the Netherlands; BBAustria; SBB Switzerland; and NMBS Belgium).

Operating in a similar fashion to the well-establishedairline alliances, Railteam aims to establish a jointnetwork to connect Europes capitals by high speedtrains and thereby offer a credible alternative to carsand planes for journeys of less than six hours.Tickets systems will be integrated, and access topassenger lounges at stations offered to first classpassengers. Reductions on car rental will also beoffered through Holiday Cars broker services.

In-train services

Wi-Fi availability is increasingly becoming a featureon many trains available for free Usually restricted

to longer journeys, Internet access is particularlyenticing to business travellers. Further investment inonboard facilities such as more sophisticatedfoodservice continues to be key to buildingcustomer demand, from famous chefs, caf style tofull-service all being explored.

Integrated Offer



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Collaborative and Creative Efforts

Slow trains

While high speed seems to be the current buzzword surrounding train travel, a small but growing group ofholidaymakers are seeking a more sedate pace for their trips, with a similar basis as the slow food movement. Slow

travel is based around the concept of slowing a holiday down by staying in one place for at least a week, and visitingwhat is near at hand. Local train travel is ideally suited to this form of holiday. Slow travel is popular in Europe,particularly in Italy, with key websites slowtravtours.com and sloweurope.com assisting travellers to book a slowholiday.

Train and hotel

Following in the footsteps of booking flights and hotels together, French chain Accor has linked up with Rail Europe,the continental representative of SNCF. Travellers using Rail Europe tickets are guaranteed low rates and special

offers on selected Accor hotel brands throughout Europe.Miles better

Rail loyalty programmes, an emerging segment, may allow rail operators to gain advantage as competition for repeatpassengers intensifies, and competition with airlines especially LCCs increases. With hotels and airlines looking fornew ways of point redemption, rail operators may be a new avenue to investigate further. Sweden Rail, Eurostar andSNCF are some of the few rail operators to offer passengers a loyalty programme, with lounges and discountedtickets offered as rewards for frequent journeys.

Farmers markets

The first produce market to be located in a UK railway station, the daily farmers market at Londons St Pancrasstation, UK home of the Eurostar service, offers passengers locally-sourced fresh seasonal produce, offering aunique experience to travellers, typical of the destination. The market is open seven days a week and offers a rangeof food including cheese, ham, fruit and vegetables.

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Inbound tourism measures international arrivals or travellers visiting another country for a minimum of 24 hours andmaximum of 12 months.

Outbound tourism is measured by departures, i.e. the number of national residents that travel abroad from their

country of residence to another destination country. Domestic tourism refers to stays by residents within their normal country of residence and is measured in terms of

the number of trips.

Travel accommodation used by incoming tourist arrivals and domestic tourists encompasses hotels and other formsof accommodation used by tourists such as campsites, hotels, motels, self-catering, chalets, guesthouses, hostels,private accommodation and other.

Transportation covers all modes of transport used by incoming, outgoing and domestic tourists: air (including charter,

low cost carrier and schedule); bus/coach; chauffeur-driven car; cruise; ferry; and rail. Car rental refers to the hire of passenger vehicles for business and leisure visitors, including insurance replacement.

Travel retail is defined by the sale of travel retail products by travel agents, tour operators and online travel agentsdirect to the consumer, predominantly outbound and domestic in focus. Typical products sold include cruise,accommodation only, flight only, fly-drive, package holidays, spa packages, travellers cheques and other.

Health and wellness tourism incorporates hotel/resort spas, destination spas and others, such as medical tourism.

Tourist attractions covers sites visited by tourists, including art galleries, casinos, historic buildings/sites, museums,national parks, theatres, theme/amusement parks and zoos/aquariums.

Definitions



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