cross-channel opportunities for britain: 1994 and beyond

Current issues

Cross-Channel opportunities for Britain

1994 and beyond

Alan Jefferson

The Channel Tunnel will be open for business in 1994 and even now the popular misconception of it as an opportunity for traffic to drive through from one side of the Channel to the other persists. This paper considers the services which are planned to operate through the tunnel. It discus- ses the alternative ways of crossing the Channel and the ways in which these will be trying to counter the new competition from the tunnel Finally, the paper considers briefly the potential market opportunities and threats which will be created by this new era in cross-Channel travel.

Alan Jefferson is International Marketing Director, British Tourist Authority, Thames Tower, Black's Road, London W6 9EL, UK.

Originally scheduled for a June 1993 opening, the Channel Tunnel is now due to open on 6 May 1994 - accord- ing to a recent announcement by Eurotunnel ' s Chairman. On opening, both Le Shuttle and Eurotunnel ' s freight shuttle will operate, although Le Shuttle will not carry coaches until (probably) the early autumn. The national railways operat ion both sides of the Channel will start in the sum- mer of 1994 when the inter-capital services between London and Paris and London and Brussels begin. The full service, including day and night services beyond London, will start - on present estimates - in 1995.

The Channel Tunnel will offer a railways system connecting terminals at Coquelles , near Calais, and Folke- stone in Kent. It will carry three types of traffic:

• Le Shuttle, operated by Eurotun- nel, whereby cars and coaches are loaded onto shuttles and conveyed on a rail loop to the terminals at Calais and Folkestone;

• separate Eurotunnel freight shuttles for heavy goods vehicles;

• passenger trains and freight operated by the national railways of Britain (BR), France (SNCF) and Belgium (SNCB).

Shuttles will be double-decked for car carrying and single-decked for coaches

and heavy goods vehicles. Thc only provision for foot passengers will be via high-speed train, and not on Le Shuttle itself. Yet in a recent survey undertaken on behalf of the Auto- mobile Association (AA) , nearly a third of those interviewed were una- ware of how the system will operate (38% of the motorists interviewed had travelled abroad with a car in the previous three years). Many people on both sides of the Channel believe that it will be possible to drive through.

Eurotunnel ' s target is a 35-minutc run, terminal to terminal. The esti- mated time between leaving one motorway and joining the next is just over an hour. Service frequencies have not been finalized yet, but it seems probable that Le Shutth" will operate four trains an hour at peak periods and there will be services 24 hours a day, every day of thc year. Fares are likely to be pitched at a similar level to those of the ferry con> panies: an announcement on this was expected in October 1993. The terminals will "process" cars with the minimum of delay.

While Eurotunnel ' s strategy is geared to capturing 50% of all cross- Channel passengers as well as freight business, the ferry companies arc already gearing themselves up for this new competi t ion and the airlines too will not willingly allow the tunnel to

424 T O U R I S M M A N A G E M E N T December 1993

(/urrelll iS.~II('S

Source: British Tourist Authority.

Table 1. Mode of travel between the UK and European countries 1991 : incoming versus outgoing.

Total Air Sea No. of visits ('000s) % ('000s) % ('000s) %

UK France Visits to UK by French residents 2292 24 875 34 1417 20 Visits to France by UK residents 7386 76 1715 66 5671 80

UK-Germany Visits to UK by German residents 2080 55 1029 50 1051 61 Visits to Germany by UK residents 1713 45 1032 50 681 39

UK-Belgium/Lux Visits to UK by Belg/Lux residents 681 41 241 44 440 40 Visits to Belg/Lux by UK residents 975 59 308 56 668 60

UK-Netherlands Visits to UK by Netherlands residents 1070 43 509 43 561 43 Visits to Netherlands by UK residents 1400 57 668 57 732 57

'Today's Channel ferries are more akin to mini cruise liners'

~See J. Manning-Shaw, 'The Channel Tunnel', Tourism Management, Vol 12, No 1, 1991, pp 5 -8 . 2For more details of the planned services see A. Heslop, 'A new age of travel between Britain and the European mainland' in this issue.

syphon off the i r business travellers. t tow do these potent ia l t ravel lers see the new link? The A A survey was conduc ted only among its m e m b e r s h i p in the UK, but the UK accounts fl)r the ma jo r percen tage of the passengers carr ied by the ferries now (see Table 1) find will cont inue to be the main source marke t for all cross- Channe l traffic, so it can be taken as at least representa t ive . The A A survey found that more than 50% of motor - ists who have recently t aken thei r car ab road say they fire unlikely to use the tunnel , mainly giving c laus t rophobia or the fear of being unde rwa te r as the reason. Almost one- th i rd said that they woukt prefer to use the tunnel if they were taking thei r car abroad . This figure may well rise as awareness increases and drivers using the tunnel will clearly talk to fr iends lind rela- fives. Ear l ier research on Con t inen ta l percept ions of c ross -Channel travel was carr ied out joint ly by BTA and Euro tunne l in 1989. I

The M20 motorway link from Lon- don to Fo lkes tone te rmina l was com- pleted in March 1991 and motorways are ready on the French side. Work is progressing on the railway links, but is not yet complete . A full t rain service will not begin until the s u m m e r of 1994 at the earliest , x Half -hour ly services will leave from the new £140 million Wate r loo In te rna t iona l terminal (which was comple ted , on sche- dule, earl ier this year) th rough the tunnel and on to Paris lind Brussels. Each train, opera t ing under the mnne Euros tar , will he capable of carrying almost 80(1 passengers. New high- speed rail links are being built between Calais, Lille and Paris and

Brussels which, when comple ted , will cut jou rney t imes Par is / l ,ondon to three hours and Brusse ls /London to a little under three hours when the Lille/ Brussels link is comple ted in 1995. Ul t imate ly French railways (SNCF) will have a T G V line a round Paris connec t ing the new Lille/Paris line with Char les de Gaul le Ai rpor t , Euro- Disney, Lyons and Tours . Brit ish Rail is also commi t t ed to a h igh-speed link but the t imescale for deve lopmen t will he much hmger: it is not likely to be ready before the end of the century. G o v e r n m e n t a n n o u n c e d that its pre- ferred route will be th rough south-east Kent via Stra t ford to St Pancras , a l though the benef i ts of St Pancras in compar ison with King's Cross are still, lit the t ime of writing, being eva lua ted (Figure 1).

The ferry operators Inc rea sed capac i ty , s ignif icant im- p r o v e m e n t s in o n - h o a r d faci l i t ies , easier board ing systems, fare incen- tives and special p romot ions tire just some of the responses of the ferry o p e r a t o r s to the new c o m p e t i t i o n posed by the tunnel . Today ' s Channe l ferries are more akin to mini cruise liners. The product is increasingly de- signed to meet the needs of an increasingly sophis t icated marke t - lei- surc find bus iness t rave l le rs alike. P & O E u r o p e a n Ferr ies and Stena Sealink have invested many millions of pounds on new super ferries, re- servat ion and t icket ing systems. P&O European Ferries added a new super ferry, the 28 500 ton Pride of Burgun- dy, in spring 1993 enabl ing it to operate a service every 45 minutcs tit peak

T O U R I S M M A N A G E M E N T D e c e m b e r 1 9 9 3 4 2 5

('urrent issues

KING'S CROSS

Greater

London

illlll illlllllil t

Illililllliil I DEILING

I M A I D S T O N E ~ III I

I ltllllllm~lllm'll ......... * , . m , , . . . , , , , . , ~ ............................................................................................................. -~ImASItFOR D

Kent

CANq~RBURY

DOVE,~

................... Existing main route to be used by Channel Tunnel trains until the high-speed rail link is built. Proposed Route: Union Railways March 1993 Above Ground Tunnel

- - Major Road Routes

Figure 1. Proposed route from the Channel Tunnel to London.

times on the Dover/Calais run with up to 25 sailings a day. The bulk of the traffic passes through Dover , which handled 17.9 million passengers in 1992 and has spent £65 million in improving its facilities for ferry users. Day-trippers are an important source of revenue for the ferry companies, especially .at off-peak times. One of the attractions of such trips is the duty-free shopping and when this is abolished these trips will lose some of their appeal. However EC Finance Ministers have agreed 'duty free ' will be phased out gradually and will not disappear until mid-1999. Duty-free sales are a major source of revenue for the ferry companies - especially between the UK and France and are an important incentive for many day- trippers. Eurotunnel has also decided to operate duty-free shops in its terminal buildings. P&O and Stena Sea- link have sought to pool operat ions and provide a coordinated service on the Dover/Calais route, but Eurotun- nel opposed this. The Office of Fair

Trading has so far maintained that such a coordinated service would be anti-competit ive.

Speed of travel and speed of proces- sing are the tunnel ' s main selling points but P&O European Ferries, with the addition of the Pride of Bur- gundy, offer a turn-up-and-go service to Calais from Dover and, with a journey time of 75 minutes, passengers can be rolling off in Calais a little over 90 minutes after checking in at Dover , where 95% of all passengers are cleared, and out of the port within 15 minutes of the ship berthing. Simi- larly, Hoverspeed has been marketing the SeaCat on speed and style. The majori ty of car travellers to Britain come for a holiday or to visit friends and r e l a t i v e s and o n e w o n d e r s whether speed is so vital. Indeed a particular strength of the ferries has always lain in the leisure travel market. where speed of travel is less important and where the crossing is itself seen as an integral part of the holiday experience.

426 TOURISM MANAGEMENT December 1993

'Prospects of a price war between the various

transport modes are real'

The third choice: air travel

On journeys of up to three hours SNCF claims that its T G V can capture 85% of the m a r k e t against 15% travelling by air. Over three hours there is a reducing appeal. So Paris/ London and Brussels/London traffic could well switch to rail via the Chan- nel tunnel, which will provide a com- for tab le , hassle-free ci ty-centre- to- city-centre journey in all weathers in about three hours. For the business travel segment, speed and a "guaran- teed ' journey which is not weather- dependent will be powerful motiwt- tots. It is possible that as much as 50% of the existing air traffic on these two routes will be diverted to the direct rail link.

During the recent years of reces- sion, business travel costs have come under close scrutiny and companies are unlikely to revert to the extraw> gance of business travel trips of previous years. On 1 January 1993 the EC's airline deregulation came into effect, whereby member states agreed the following in principle:

• the introduction of a simple, more market-motivated system for set- ting fares;

• the ending of discr iminat ion in favour of the national flag carriers through the introduction of uni- form licensing criteria;

• the ending of bilateral capacity sharing, which has artifically res- tricted the services which any indi- vidual carrier could offer.

E u r o p e ' s air l ines were not forced overnight out of their cartels or into reduced air fares. Congested airports and over-stretched air traffic control systems will make it difficult for deregulation to be put into practice exten- sively. Liberal izat ion t reat ies have already been signed by the UK Gov- e rnment with Germany (1984), The N e t h e r l a n d s (1984), L u x e m b o u r g (1985), Belgium (1985) and Ireland (1988). Where bilateral agreements have been reached, fares have come down but it still remains a matter of the commercial judgement of the airline. The important fact is that the EC has created the climate for more flex- ibility.

Cltrr('tll iA'SllC5

The prices which will exist in 1994 for the four transport modes rail, shuttle, sea and air are not known but there seems little doubt that the airlines will have the ability to create attractive off-peak and excursion fares and could even use airports such as Luton or Lydd (in Kent) where land- ing fees and other airport charges are not nearly so high as t lcathrow and Gatwick. The prospects of a price war between the various transport modes are very real. Price of travel will be a key determinant and the consumer, at least in the short t e rm, will undoubtedly benefit from the competition and tourism traffic will increase. Fur thermore , new traffic will be created through major marketing campaigns. Eurotunnel is said to be spend- ing £25 million on its promotional campaigns in the first year of opera- tion. The ferry companies will have to compete on equal terms and it is perhaps significant that towards the end of 1992 P&O Ferries, Stena Sea- link Line and Hoverspeed all changed their advertising agencies within a matter of weeks. Advert ising approp- riations will be significantly increased and the airlines will need to match campaigns by the ferry companies and Eurotunnel if they are to hang on to their business. The advertising spend by the key players could collectively be as much as five times the current level.

Ult imately the ability to compete will depend on fares, frequency, quali- ty of service and the provision of an adequate connecting transport infras- tructure. Usually dominance in any two of these factors will guarantee success. The route, however , is a means to an end. The attraction and satisfaction of the destination remains the key element in the decision to make a journey. Results and success will depend on destination marketing in its widest sense.

Destination Britain: the potential markets

Europe will undoubtedly continue to dominate the international travel pic- ture in the foreseeable future. West- ern Europeans enjoy above average standards of living. By the end of the

TOURISM MANAGEMENT December 1993 427

( UFY('?I[ iSSlt(},~

'The tunnel will win France a bigger share of the international tourism market'

3A. Viant, 'Enticing the elderly to travel - an exercise in Euro-management' , Tour- ism Management, Vol 14, No 1, 1993, pp 52-60.

century one in four Europeans will be aged over 55. They are living longer and retiring earlier. ~ Europeans have much longer holiday enti t lement than either the Americans or Japanese - in many cases as much as six weeks. Time, the desire to travel and income levels are the prerequisites of travel and the European market has these in abundance. Rapid political changes in Eastern Europe are creating a large new market with a pent-up desire for foreign travel, though in the short term the balance of traffic will be in favour of western tourists visiting Eastern Europe.

Many American and Canadian visitors to Britain already cross the Chan- nel by ferry as part of the European tour (fl)r example, in 1991, nearly 10% of all North American visitors left Britain over short sea routes) and, undoubtedly, improved services will encourage these leisure travellers to make additional use of ferry and tunnel routes. Segments offering potential include:

• f i rs t - t ime visi tors on E u r o p e a n coach tours;

• senior citizens on extended coach tours;

• i n d e p e n d e n t you th and sen ior citizen travellers;

• the French-Canadian market.

Many Australians and New Zealan- ders are long-stay visitors who often under take independen t tours. The average length of stay for this market is around 30 days and over a third of all visitors are on independent holiday visits (1991 figures). The changing composit ion of the Australian popula- tion (a much lower propor t ion of British/Irish stock than even 20 years ago) has resulted in many more visits to other European destinations. Inde- pendent youth travellers are encouraged to make Britain their first stop on a European tour, but easier Channel crossings could possibly be to the de- t r iment of the young Australians" length of stay in Britain.

Round-Europe capital city tours by coach or air will continue to be popular for the long-haul travellers from the burgeoning markets of Asia. The tunnel will benefit coach tour travel and the availability of a rail link will

reduce the psychological bah icr ol th , Channel for some of these travellers. In the longer term thc Japanese will rent cars and Britain, with its language and same side of the road driving, i~ likely to be the first European countr,, for driving holidays. Go-as-you-please Japanese motorists will be encouraged to make Britain their first stop and they will almost certainly increase their length of stay, but in the longer term there will be leakage of demand from Britain.

It will be Europe, though, which offers the greatest potential. Over the past decade there has been a decline in average length of stay on single holidays but a greater frequency of travel - o v e r a third have two or more breaks a year and Britain is very often seen as a second holiday destination. Almost 8()% of all leisure travellers to Britain are repeat visitors. It is reasonable to assume, therefore, that by targeting the first t ime visitors on ' taster trips" B r i t a i n c a n e n c o u r a g e r e p e a t travellers who might stay longer and have the time and desire to travel beyond London and the south-east of England. In fact, roughly one in eight of European visits to Britain are day t r ips , m a i n l y f r o m F r a n c e , The Netherlands and Belgium (see Table 2).

Business travel in its widest sense is growing at twice the rate of leisure travel and complet ion of the Single European Market will accelerate this trend. Visits to trade fairs and exhibi- tions, small conferences, particularly in country house hotels, and incentive travel all offer potential.

On the other hand the tunnel will syphon off travellers from London and South East England, a prime market for Scotland, Wales and the North of England, especially the short holiday market. The tunnel, together with a fast and reliable rail network in the north, will win France a bigger share of the international tourism market. Already the ferry companies carry significantly more British to France, Ger- many and the Benelux countries than Britain receives from these markets, and the tunnel similarly will almost certainly take more travellers out of Britain than it will bring in.

It follows, then, that both Eurotun-


Notes: Foreign day trippers arrive primarily from France (19% or 433 000 of French visitors), The Netherlands (14% or 154000) and Belgium/ Luxembourg (26% or 171 000).

Excursionists: include business and leisure trips.

less than 0.5%.

Source: International Passenger Survey.

( 'u r ren ! i,~'sHe.~"

Table 2. Overseas visitors on an excursion to the UK by country of origin 1991.

Country Total (%) Excursionists (%) No. of excursionists

France 100 19 433 Germany 100 7 135 Netherlands 100 14 154 Belgium/Luxembourg 100 26 177 Italy 100 2 13 Spain 100 2 12 Denmark 100 6 13

Total EC 100 12 942 Switzerland 1 O0 5 21 Norway 1 O0 6 17 Sweden 1 O0 2 11

Total W. Europe (non-EC) 100 3 56 USA 100 1 20 Canada 100 1 3

Total N. America 100 1 23 Australia 100 ~ 2 Japan 100 1 3 Rest of world 100 1 23

nel and the ferry companies will put the bulk of their promotional effl)rt into the British market and to com- pensate for this loss of domestic market the British tourism industry will have to work very hard to secure new foreign business. At the local level, Kent and Nord-Pas-de-Calais have cooperated in an EC-funded trans- frontier programme to offset some of the potential impacts on the local tourism industry once the tunnel opens. Markets, especially the near Euro- pean ones, will look to competi t ive pricing between air, sea and tunnel options and to off-peak discounting (see Table 3).

Conclusion

The Channel Tunnel will provide an alternative and novel means of acces- sing Britain. Air and coach travel will benefit from deregulat ion and EC liberalization measures. The psychological barrier of the Channel will disappear when the tunnel opens. So far as Britain is concerned, there is a real opportunity for incoming business which initially will benefit London and South East England. On the other hand there is a real threat for the domestic market. The extent to which this leakage can be replaced with foreign visits and the extent to which

Table 3. Forecast overseas visitors' trips to UK.

1992 1997 Average annual growth

Country ('OO0s) Market share (%) ('O00s) Market share (%) 1992-97 (%)

France 2 497 13.8 3 101 13.3 4.4 Germany 2 302 12.7 2 882 12.3 4.6 Netherlands 996 5.5 1 282 5.5 5.2 Belgium/Lux 777 4.3 992 4.2 5.0 Italy 760 4.2 953 4.1 4.6 Spain 675 3.7 958 4.1 7.3 Denmark 296 1.6 363 1.5 4.1 Total EC 9 839 54.3 12 339 52.7 4.6 Switzerland 427 2.4 509 2.2 3.6 Norway 281 1.5 352 1.5 4.6 Sweden 487 2.7 556 2.4 2.7 Total West Europe (non-EC) 2 019 11.1 2 652 11.3 5.6 USA 2 673 14.7 3 517 15.0 5.6 Canada 607 3.3 754 3.2 4.4 Total North America 3 280 18.1 4 271 19.3 5.4 Australia 507 2.8 622 2.7 4.2 Japan 511 2.8 937 4.0 12.9 Rest of world 2 992 16.5 4 136 17.7 6.7 Total world 18 130 100.0 23 398 10O.0 5.2

Note: By 1997 BTA expects that 23 million foreign tourists will visit the UK. About six in ten of those visitors are forecast to come from Western Europe and about two in ten from both North America and the 'rest of the world'.

Source: British Tourist Authority.

T O U R I S M M A N A G E M E N T D e c e m b e r 1 9 9 3 4 2 9

Current issues

first-time visits can be retained in the longer term will be determined by the ability of tourist boards, local author- ities and the industry in Britain to exploit the unique opportunities which 1994 offers.

BTA has already done much to alert the tourism industry to the challenges posed by the cross-Channel market of the 1990s. The publication in 1991 of the Cross-Channel Market ing Strategy was followed in early 1992 by the Destination Britain workshop in Ostend, which brought together Brit- ish producers and tour/travel organiz- ers from mainland Europe, the USA and Japan. A further cross-Channel report is planned for later this year.

Meanwhile, B] 'A continues to de- velop close working relationships with the major carriers on cross-( 'hanncl routes and to seek to maximize the benefits of the new opportuntics. In deed, this year has seen the launch ~t a major new BTA venture in t:;rancc. the Maison de la Grande Bretagnc, which brings together many ~t thcsc carriers - including Eurotunncl , P&O European Ferries, Stena Sealink l,inc, British Rail International and Briltany Ferries. It is through ventures such as this and through the industry's ~w~,n initiatives that Britain will profit most from the new era in cross-( 'hannet travel. It is important that no opportunities are missed.


cross-channel opportunities for britain: 1994 and beyond

Documents