WHITE PLAINS, N.Y. -- In a surprise move, Rail Europe here acquired
longtime rival Destination Europe Resources (DER), creating a
wholesale operation that will handle nearly 85% of Europe rail
sales to U.S. travelers.
Rail Europe president Bernard Frelat said the purchase of DER
will give the combined companies greater economies of scale and
leave them better-positioned to handle challenges in the post-Sept.
11 world.
"Our market is a more complex and dangerous place than we
realized," he said.
(In November, Travel Weekly reported that Rail Europe's
rail-pass sales plummeted 75% and its tour bookings dropped up to
50% in the immediate wake of Sept. 11.)
The deal leaves New York-based CIT North America, formerly CIT
Tours, and BritRail, of Hoboken, N.J., as the only other, and much
smaller, peddlers of European rail-pass products in the U.S.
While BritRail officials were unavailable for comment, CIT rail
department manager David Bruer said the Rail Europe-DER deal
"shrinks the amount of choices consumers have for rail-pass
purchases, though I can't comment on whether that's good or bad at
this point."
And though caught off guard by the merger, Bruer said he is
confident CIT "will hold its own," explaining the company recently
diversified, reorganizing into five divisions specializing in
Italy, the U.S., South America, religious travel and European
rail.
"There are many parts of the market yet to be explored by any of
us, so I feel there's room for us all to grow," he said.
Likewise, Rail Europe's Frelat said the combined company will
focus on FIT tour operations, and it plans to offer all possible
components for such trips -- and not necessarily just to
Europe.
Even the umbrella name for the business -- now Rail Europe Group
-- will change (dropping "rail," for starters) to better reflect
the kind of company the group expects to become and its "more
global scope."
For now, however, current management at each firm will stay in
place, the businesses will operate separately under their brand
names and their commission policies -- which aren't the same --
will remain unchanged.
In addition, no staff reductions are anticipated. After
post-Sept. 11 staff cuts, DER, based in Rosemont, Ill., employs 170
in North America, while Rail Europe counts 250.
The Rail Europe board was expected to choose a chairman for the
combined companies on Feb. 21, and Frelat indicated he might be
tapped for the job.
Terms of the Feb. 15 deal were not disclosed, but DER president
Heinz Wesner said the deal was driven by synergies, as each firm
had something the other needed.
For example, Rail Europe is farther along in technology
development, particularly with electronic booking on the Web and
via its Euronet rail-booking system in agency offices.
DER offers consolidator air tickets and a European car rental
program -- bringing a more extensive nonrail program to the table,
he said.
Frelat also reported Rail Europe is upgrading its
Eurovacations.com tour product Web site, making it easier for
travel agents to use.
The company also is developing a proprietary program called
Tourgate, designed to enable users to dynamically create FITs on
line.
The software is expected to be delivered to Rail Europe in early
spring, but a rollout date for users is not set.
Tourgate will be linked to the Web for use by both agents and
consumers and offered for use by agents in conjunction with the
Euronet system.
Users are expected to be able to book the entire Rail Europe and
DER product lines.
Euronet is in 500 U.S. agency offices.
DER will keep its agent-only Web site, as well.
'It's the way things are'
NEW YORK -- Agent reaction to Rail Europe's purchase of DER was
mixed.
Kathy Green-Seiwert, president of the Travel Gallery, Chicago,
said she was "just happy" both would remain in business given the
post-Sept.11 climate.
"It's the way things are going, with companies merging to stay
healthy, so I'd say it's OK," she said.
Jane Blenker, owner of Global Travel in Stevens Point, Wis., had
a similar response.
"We had a big cruise booked and the tour operator handling it
just plain went out of business," said Blenker. "We need to have
[reliable partners] to take care of clients when they get to their
destinations."
For some, the differences between Rail Europe and DER were
already negligible.
"We worked with and liked both companies, so this merger isn't
an issue," said Jeanne Watkins, president of Carefree Travel, St.
Louis.
It apparently is an issue for Reiner LaGraff, of Peck Travel,
Manhattan Beach, Calif.
"The more concentration [among distributors], the worse it is
for agents, and the more they can dictate," he said, adding, "You
begin to ask yourself why you are booking them."
-- K.K.