Senior stakeholders in the study travel sector have acknowledged that 2020 was, to paraphrase the Queen of England, an “annus horribilis”. Speaking at a two-day forum convened by 30 major ELT schools – many of whom operate globally – Claudio Cesarano, CEO of Linguista in Switzerland, acknowledged, “It was not a nice atmosphere” when business evaporated early in the year.
“There were a lot of fights and ‘Give me the money back, otherwise, I would never work with you’,“ said Cesarano, who represents an agency business sending large volumes of students annually.
“Most of the businesses in our sector only have one stream of income, which is revenue”
Delicately articulating the trials of the year – which led in fact to a group of schools setting up the Forum for Leaders in Language Travel – Cesarano said that the sudden crisis caught the whole sector by surprise.
“No one was prepared,” he said. “It’s difficult to find a right or wrong here. It’s not about ‘big’ and ‘small’ here. But the first months were quite hard. I mean, everyone was holding on to what they had.”
Cesarano spoke of visceral, worrisome issues of cashflow: refunds and the question of who should refund a student who had paid in advance to an agency for a program at a language school, but wanted their money back.
Earlier in the year, agency association FELCA indicated a student fee protection system might be a better future system than a business exchange “based on trust”.
“I think it’s been a very difficult time, also because you have to talk, you know, through Skype and you couldn’t just go for a beer and talk about it,” continued Cesarano. He added that his company chose to refund students even when schools they had booked with declined to return the monies paid.
“Some people would say, well, you’re crazy to do it, but it was a strategic [decision],” he shared.
Joining him on the panel discussing the sustainability of the sector was Jane Dancaster, MD of Wimbledon School of English in the UK and Samuel Vetrak, CEO of consultancy firm BONARD.
Vetrak used the webinar to talk more broadly about the lack of access to credit in the study travel sector.
“We work with other sectors, so I can compare [study travel] to high schools or universities or student housing,” he said.
While observing that there was a fairly static supply of 11 million student weeks across study travel, which he did not expect to grow significantly, Vetrak explained, “What’s missing in ELT is actually a factor of financing.
“I know it’s difficult to say it in these times, but basically a business in a mature sector has three streams of credit: income/revenues, loans and investments. And most of the businesses in our sector only have one stream of income, which is revenue.“
Investors shied away from the sector because of a lack of “operational data, HR data, margins etc, for the industry” – it can proffer mobility data but no deeper industry-wide commercial standard data, he said.
“Most businesses in our sector only have one stream of income, which is revenue. So they are desperately fighting for this, even at the expense of [profitability].”
This was the other hot potato assessed by the panel – the eroding value of the programs being sold, with discounting and high commissions combining to create a toxic problem of less value for all.
Asked about the point that some agencies might want a “commercial edge” of a discount in a competitive marketplace, Dancaster responded, “There’s discounts and discounts. I think this all comes back to the issue of commoditisation, which we’ve all been talking about since March.
“It comes back to the value of our product and what we’re offering, which is education, which is a life-changing experience, which is often a single lifetime purchase, not something that you can just go into a shop and choose between two different brands. I think we’ve lost sight of that and we’ve moved away from that.”
She elaborated, explaining that discounts were being offered by some schools of 40%, 50%, with one school group driving that discounting phenomenon now no longer in business.
“That’s a race to the bottom – that is a lose situation for everybody. It’s no good for the school. It’s no good for the agent. Their margins are cut. It’s no good for the student because you can’t provide a quality product if you’re discounting like that.”
“We’ve all realised that [excessive discounting] can’t continue”
With many of the 30 members of the Forum for Leaders in Language Travel agreeing to limit discounts going forward, Dancaster is hopeful, like Cesarano, that the industry can rebuild after a tumultuous year.
“I think the realisation just from talking to agents and schools over the last few months, the big groups, the small schools, we’ve all realised that [excessive discounting] can’t continue,” she said.
“If we get away from that discounting race to the bottom, we will encourage everybody to get back to the roots of what we do, which is this precious, unique product. I mean, Covid also brought that home to all of us. [Study travel] is a 360º product. It’s hospitality, it’s tourism, it’s education. It’s a combination of all those things.”
Dancaster concluded by saying she felt closer to her school’s agent partners and open conversations about commission and costs seem more possible.
“[I feel] we’re a team, we’re a partnership. We share things. I think if we understand each other’s costs, both sides need to be happy with the commission. And I think that’s achievable now. I think we are much more open with each other and that is a really positive thing for the future.”
