The currency value has appreciated by up to 15% after the Swiss National Bank decided to unpeg it from the euro, and while this means that the Swiss consumer has more spending power, it also means commission payments to agencies based in all other currencies are now essentially being squeezed.
“This topic is the current hot issue in the Swiss market and has severely affected the industry,” Christian Graf, head of operations at Boa Lingua told The PIE News.
“One month after the Swiss National Bank has announced its decision to abandon the currency peg, the economic consequences are showing. Export-oriented businesses are confronted with up to 15% lower margins while overhead costs like office leases and staff costs continue to increase, causing substantial challenges.”
The Swiss market is one of the major source countries for language schools in Europe, and education agencies are very well established in the country with strong brand recognition.
Some education agencies are reaching out to partner schools asking for consideration of the new currency situation.
Hannah Lindsay, group sales and marketing director at St. Giles International in the UK, confirmed that this topic is on the radar of English language schools. “It is a difficult situation which we are monitoring very carefully,” she said. “There is some optimism that there could be an incline in Swiss numbers because of the currency situation but that has not happened yet.”
The view from Switzerland is that a boom in clients is unlikely.
“Under these unexpected circumstances, people are uncertain of how things will develop and may actually think twice before investing in their study abroad plans,” suggested Krister Weidenhielm, head of product development and purchase at another major player, ESL – Education.
He confirmed, “The amount of anything we sell in a foreign currency is definitely decreasing when converted back into Swiss francs. And yes it is a real problem and it was totally unexpected.”
At LILAS, an association of six independent education agencies in Switzerland, president, Rolf Frischknecht, agreed that he did not expect to see an outbound surge because of increased spending power.
Such companies could have “a profit margin over the whole year of 10%-15% of their commission turnover. This margin is gone”
He believes that larger businesses and tour operators are the most exposed to a risk in profitability. Such companies could have “a profit margin over the whole year of 10%-15% of their commission turnover,” he said. “This margin is gone.”
“The smaller agencies are much more flexible and they do not have branches everywhere,” he added. “They have a completely different cost structure and less overhead costs.”
At ESL, Weidenhielm acknowledged that they would be seeking “creative ways to stimulate business in synergy with our partners”.
One language school, SKOLA in the UK, has introduced summer school prices pegged to an exchange rate of January 2014 as a special offer for eurozone countries as well as Japan, Bulgaria, Ukraine, Russia, Colombia and Kazakhstan.
“Exchange rate changes have a tendency to produce winners and losers, somewhat at random,” said Ben Toettcher, managing partner. “The issue with the change in the Swiss franc was its suddenness, though more than half of that change has been reversed since mid-January.”
He said their offer would give agencies a choice to enrol students at special, temporary prices, subject to availability.