It used to take businessman Huang Yun more than eight hours to travel by train from his hometown of Hengyang in Hunan province to the commercial hub of Guangzhou. But that journey was slashed to just 1.5 hours after a high-speed rail link between Guangzhou and Wuhan opened in December 2009.
With trains traveling at speeds of over 350 kilometers per hour, China’s development of fast rail is leading to a dramatic change in domestic passenger transport. The country’s high-speed rail network is expected to reach 13,000 km in length this year, compared with 8,358 km at the end of 2010 – meaning new opportunities for travelers, and big changes and challenges for the tourism industry.
“Many people in Guangzhou can now travel to Wuhan just for a weekend. Previously, that journey took 10 hours,” said Huang, who travels frequently for both business and leisure.
Many more key routes are under construction, helped by the government’s planned investment of US$106 billion in rail construction this year. China is aiming to extend its total rail network to 120,000 km within five years as part of efforts to ease transport bottlenecks and pollution. A US$33.3 billion high-speed line between Beijing and Shanghai, which cuts travel time from 10 to four hours, will begin operating in June, a year ahead of schedule.
Reduced travel times for destinations that were previously the sole domain of air travel – and at much cheaper prices – poses new challenges for domestic airlines.
“The trains will impact flights on regional routes that are within a three hour travel time,” said Ben Cavender, principal associate at China Market Research (CMR).
China Southern (ZNH.NYSE, 600029.SH, 1055.HK), the country’s largest air carrier, has already felt the impact. The airline struggled to compete with the new Guangzhou to Wuhan rail link in 2010 and was forced to cut economy ticket prices between the two cities from RMB700 (US$105) to about RMB350 (US$52). But with rail tickets costing just RMB420 (US$63), China Southern has gone into retreat, reducing scheduled daily flights from 12 to six.
“Price cuts tend to be the first indicator of intensified competition,” said Zhang Wuan, spokesperson for domestic budget airline Spring Airlines.
Coping with change
Still, the impact of high-speed rail development has not changed Spring Airlines’ strategies. Zhang said that trains can’t compete with airplanes when travelers must make journeys of more than 1,000 km. For long flights, competition largely remains between airlines.
“We believe the domestic market is large enough for both rail and air to develop together, particularly as train coverage of Western China is still not as good as air,” Zhang said.
Though high-speed rail offers an alternative to certain routes, flying still provides significant time savings and a different travel experience that is difficult to replace. A CMR survey in 2010 of more than 4,500 travelers across China found that about 90% of respondents still fully intended to fly.
Indeed, Huang said that cheap rail prices aren’t a decisive factor for business travelers as much as speed and comfort.
“You need to consider who is paying the bill. If my company is paying my bill, I don’t care about the price, I only care about time,” Huang said.
For other travelers, high-speed rail also may not be as economical and efficient as it seems. For example, the cost benefits mainly extend to China’s middle class who can afford more expensive high-speed rail tickets, rather than lower-income individuals.
In addition, most high-speed rail routes may not reach destinations directly – and incorporating many stops into the journey could significantly lengthen travel times. “The train companies have been less than open about how slow non-direct trains can be, but consumers do differentiate between them,” Cavender said.
Despite these obstacles, the largest opportunity may lie in the integration of air and rail travel in China. Hong-qiao Airport in Shanghai, for example, has integrated the city’s air and fast rail terminals, allowing travelers to reach neighboring cities like Hangzhou, Wuxi and Kunshan more efficiently.
The development of high-speed trains is a big boost for inter-modal transportation.
“Ultimately, the consumer wins both in terms of price and new travel options,” Cavender said.