With little change in key market economies or discounting from global chains, discussions at the ICEF Berlin workshop this month were dominated by serious concerns from ELT operators about the next 12 months.
A spate of school closures in the UK and fallout in the education agency sector – Timpany Languages in Spain went under and Kolumbus Sprachreisen in Germany has been sold – have provided evidence that times are tough.
“Agencies will now have to do the same homework and find out the financial viability of the school”
Competition for a declining market share at a discounted price will undoubtedly result in casualties.
“We had to compete,” commented a representative from a global language provider on the price discounts that were being offered to many agents this summer.
Lower prices were often offered on a market by market basis, but in the case of Embassy English, across-the-board discounts were promoted for a limited period.
“Our industry is highly commoditised and highly competitive. As a result, it’s not surprising that one of the few market levers left is price,” commented Johnny Peters, Director, International Business Development at Embassy English: he spoke of a two-fold strategy of time-specific market entry promotion and long-term product differentiation.
“Discounting certainly isn’t the ‘destruction of the market’,” he said. “High quality providers, as in any industry, should be able to withstand short term competitive activity. It’s the long-term product and service differentiators that will ultimately decide market share.”
Nevertheless, concerns about the sustainability of very competitive pricing was a hot topic in Berlin. Gerald Soubeyran, MD at Effective Linguistique agency in France, spoke of discounts of up to 50% (though typically 35%) flooding in from UK and US schools that are not even his partners.
Soubeyran is concerned about the longevity of businesses offering such a markdown.
“One of the biggest challenges in 2016 for schools will be to make sure that the agencies that you work with are financially sound and likewise agencies will have to do the same homework and find out if they are thinking of promoting [a new partner], the financial viability of the school as well,” he warned.
While everyone is nervous about a continued price war next year, operators are now all-too-aware that to be able to compete, product specialisation rather than price has to be the best strategy.
Ignacio Mas de Xaxas, MD of British Summer in Spain, called out UK operators on what he says is complacency that has been finally shaken up by the trading conditions.
“Now, we don’t have the Chinese, Brazil and Russia is going down and 20% of [residential] summer programmes were empty”
Mas de Xaxas said he exhorted his partners in the UK to evolve summer language courses, which were becoming old-fashioned when compared with the innovation seen in English language learning camps in Spain – a well established stepping stone in study abroad – run by his agency and others.
“We were adding horse riding, soccer, whatever but we were also adding opera, brain camp, Tai Chi, Kung Fu, robotics, cooking, all these kind of things, so when the student was jumping from summer camps in Spain to [overseas], in some way they were doing a step back in the type of activities,” he explained.
He said his complaints that UK operators were not being as innovative or creative as their Spanish counterparts didn’t go very far.
“One of the big players said to me, ‘Ignacio, at the end of the day, this is a business, and maybe it’s true that our [courses] are getting old fashioned for your students, but we have the Russians, we have the Chinese, we have the Brazilians’,” he explained.
“That was four years ago,” he continued. “Now, we don’t have the Chinese, Brazil and Russia is going down, and 20% of [residential] summer programmes were empty. So it needs a lot of innovation. That’s everybody’s thinking.”
At CI in Brazil, one of the largest study travel operators, Victor Hugo Baseggio agreed, outlining a new initiative for his large agency operation of graduate travel and sports camps overseas, where language learning may be supplemental to the core product.
It’s not surprising that one of the few market levers left is price,
The company has a new graduate tour division, Amaze and Amaze Sports, for which it is seeking franchise partners. Baseggio also spoke to the popularity of the football group tour opportunities afforded by the Swedish world teen tournament, The Gothia Cup, which CI sends groups to.
Meanwhile Mas de Xaxas also outlined a new division of his agency business, Pepperscope, which focuses on “singular” programmes and is oriented to the new study travel consumer. He said even in the summer with general bookings down, there was a 15% hike in enrolments on such programmes including MBA, work experience, or even acting, film & dance courses.
Travelling around the US or Canada with no language training involved was also popular with teenagers.
The new division has a new booking approach too allowing clients to choose how to book: either directly with the school or the agency can organise the travel and booking for an additional fee.
“A lot of the students in Spain, are now saying I cannot afford to spend €3000/4000 for three weeks, that’s a huge amount of money, and now much more, to do what? Three weeks of lessons and being with friends, Italians and Japanese, going to London and play soccer? That is not enough.”