The PIE: And what are the big challenges?
DA: I think the biggest issue of course is one that never goes away which is political and economic change. It’s impossible to accurately predict what’s happening in the world today. Very simple economic and political factors can affect the market so dramatically and so instantly that it’s very hard to pre-empt. But we’d like better visibility in terms of how these changes impact our sector.
“I think that in the next few years, dynamic pricing will be the biggest change to impact this industry”
And there are many situations which are helpful to discuss. Something like the King Abdullah Scholarship Programme (KASP). I recently had quite a frank discussion with an ALTO member about KASP in the US and we both realised we had suffered with almost identical problems. It was very reassuring to know issues we had weren’t affecting us alone.
Another potential big change in our industry is how we manage pricing.
The PIE: Why?
DA: Because the language travel industry is currently lagging behind when it comes to pricing, if you compare it with all other forms of international travel. How many hotels, airlines, and other similar companies set a price in May that is still valid until December the following year? 18 months later? Nobody, everybody changes prices daily. And this is based on capacity, currency, demand…it’s based on many issues.
I think that in the next few years, dynamic pricing will be the biggest change to impact this industry.
The PIE: I see increasing investment in facilities – do you think there will be a ‘leading pack’ in this respect?
DA: Yes. That was one of the reasons I sold my school [to a chain] in 2002 Back in the 90s I put in an internet suite, but I lost a classroom. At the time we didn’t have cheap broadband either, so it was costing me a fortune! I lost income, and we went from selling ourselves as being a small friendly school where the teachers knew every student to saying ‘We have 30 computers, free wifi…’ suddenly I was selling our facilities more and more. It is increasingly the case that students have much higher expectations as to what a school should be.
The PIE: They are considering what else they are getting..
DA: Absolutely, I think it is becoming very important and this could certainly make it increasingly difficult to run a single stand-alone school. The cost of marketing would also be factor, over the years it has become so expensive; much more than it ever was.
The PIE: How much does any operator have to spend on sales/marketing do you think?
DA: I don’t think there are any hard and fast rules in terms of percentage and I certainly wouldn’t like to tell you what our percentage is at Embassy except that it is significant. You’ll have to wait for the ALTO benchmarking to find out the answer to that one.
“If you pay an agent 30% base commission there is a good chance you are actually paying 43/44% as a total cost of acquisition”
Surprisingly I’ve seen that some people don’t always build commission and discounts into their sales & marketing budgets even though it is another cost. If you really look and see how may times you visit an agency, meet them at fairs, how many brochures you send them, scholarships you award etc, put all this into package and the result might come out that your key agents are not your key agents after all. If you pay an agent 30% base commission there is a good chance you are actually paying 43/44% as a total cost of acquisition.
The PIE: How do you see the language travel industry evolving?
DA: One of the very interesting comments made by [ALTO speaker] Verne Harnish was that there are an estimated 2 billion people who will enter the middle class in the next decade – and those that are entering the middle classes will have very different aspirations, especially academic aspirations.
“We only have to look to see how many students still come from developed markets to study English”
We only have to look to see how many students still come from developed markets to study English. Despite the huge investment in developing domestic English education, students more often than not still do not have right level of English. Overall I think it is a buoyant industry and almost a future-proof industry [fingers crossed].
The PIE: Although as we said earlier, stringent visa policy has the ability to change an industry overnight.
DA: Yes it does – if you are a stand-alone school in any one country you are absolutely at the mercy of the current government and whoever is in that particular ministry at that particular time. It amazes (and really pleases) me that more schools in Australia didn’t go to wall over the last few, very difficult years. It was largely because most of them reacted really quickly to make dramatic cuts in their overheads and by making changes to their operating conditions. It’s been really quite difficult to operate in certain countries recently.
If you are a stand-alone school in any one country you are absolutely at the mercy of the current government
And this is where you should see the big chains are more safeguarded – they have a balanced business – the actual volume of students might not change, it might just shift location.
This is why at ALTO we want to try to have as much industry-relevant forward data as we can so we are able to make decisions and changes in a pro-active fashion.. Very often the thing to do is not just spend your time lobbying but to change your business model.
Related articles
As a study abroad travel agency, I have to say ALTO is doing an excellent job connecting schools and agencies which positively affect growth of study abroad industry. Thanks to David Anthonisz and other wonderful ALTO team members!