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Consolidation, strategic pricing marks maturing global ELT market

As the global ELT market cools down, other languages are seeing healthy growth as students seek a competitive edge through third language acquisition, according to a trends analysis from marketing intelligence firm StudentMarketing.

"In simple words, we see an increased number of innovative solutions to the maturing ELT market," said Samuel Vetrak, CEO of StudentMarketing at the 2016 ICEF Berlin workshop. Photo: StudentMarketing.

Of the top 20 source markets for ELT, only eight have seen increases over the last two years

Mergers and acquisitions will increase, price strategies will become more sophisticated and China will continue to present the most opportunities for growth in the maturing market, forecasted Samuel Vetrak, CEO of StudentMarketing.

The maturation of the market has been observed over the last two years, however Vetrak said the slowdown in growth will result in proactive approaches to stay afloat.

“The major message is that Saudi Arabia decreased by 25%. The decrease has infected the whole industry”

Speaking at the annual ICEF Berlin workshop this week, Vetrak noted that global demand for ELT has shrunk to just 3% compared to 10-12% in previous years. Meanwhile, other languages including German, Italian and French are seeing stronger growth rates.

Of the top 20 source markets for ELT, only eight have seen increases over the last two years: Turkey, Brazil, Italy, Thailand, Taiwan and Mexico, with China and Kuwait exhibiting double digit growth.

“The major message is that Saudi Arabia decreased by 25%,” added Vetrak. “Saudi Arabia was the top source market, with almost two million student weeks.

“Now it’s below 1.5 million student weeks, so the decrease is really rapid and has infected the whole industry, especially the IEP programmes in the US.”

The UK’s ELT market is expected to see a boost over Q2 and Q3 due to the decreased value of the pound, while Ireland and Australia continue to benefit from losses in other markets and successful marketing campaigns.

But “global demand is cooling down for ELT”, said Vetrak. “Some destinations are up, some are down. But we’re pretty much talking about the same amount of students weeks.”

The maturity of the market is bringing about unprecedented changes. Juniors now account for nearly half of the UK’s ELT market, whereas five years ago it was around 27%. “If you’re a school or agent and you’re not selling 49% of business to juniors, you’re not meeting the industry average in the UK,” noted Vetrak.

Packaging of services is also on the rise and expected to grow as schools seek alternative revenue streams. “Back in 2005 to 2010, schools were moving away from selling courses plus accommodation but we see that now they’re trying to sell courses and accommodation and maybe books, maybe something else, because if there is no more natural growth at the double digit level then the revenue needs to be found from the customer,” he said.

In the last five years, the UK’s ELT market has seen 18 mergers & acquisitions and 29 school closures, according to Vetrak. He predicted consolidation and vertical integration will carry on throughout 2017 as schools aim to diversify their portfolios or seek to scale operations by affiliating with similar providers.

“We will most likely see more exits of smaller players. It means good news for the good strong ones when growth is slower, but some people will not make it. It will also increase the pressure on agents,” he predicted.

Price wars will wane as there isn’t much more territory to be won, said Vetrak, noting that prices can’t drop much further and commissions can’t go much higher.

As a result, schools and agents are much more creative in shaping their pricing strategies, he noted.

“We see hedging; we see technical pricing; we see selling on net price and not even talking about commission; we see strategic time-limited discounts for a region; we see dynamic pricing; we see regional or country pricing,” he said. “Long story short, pricing has become much more sophisticated [since] 2010.”

“Long story short, pricing has become much more sophisticated since 2010”

However, compared to other industries, the study travel sector is by far underusing the option for repeat business to upsell, he charged.

“Most of the schools have only a limited number of programmes that they can offer for only once in a lifetime purchase, but if you have a portfolio you can have the customers several times,” he advised. “It makes sense to incentivise and it’s possible.”

Providers are also reacting to the cool down by developing new marketing techniques, he observed. Guaranteed level progression and recruiting popular YouTube stars to experience life on campus were some of the examples he cited.

Virtual reality has also found its way into education marketing, as schools aim to bridge the gap between selling a product for younger students to parents who pay the tuition. “If I were a parent and making the decisions with my children on where to go, this would give me confidence, especially if I’m spending thousands of dollars on tuition,” commented Vetrak.

With double digit growth, China remains the most lucrative market for study travel, as “one of the only opportunities to get more students”, said Vetrak.

Beyond the study travel sector, international enrolments in higher education in top study destinations continue to perform well, but K-12 is “by far the fastest growing segment within international education” said Vetrak.

“If you’re an agent and you’re not involved in high school education abroad you definitely should be,” he said.

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