What's the future of online booking and how far is study travel from a global distribution system like those seen in the travel industry? These were two of the questions posed to a panel of industry experts at the 2014 IALC Workshop in Brisbane.
The views of the audience, made up mainly of educators plus agencies and service providers, were polled as the discussion progressed.
The panel was moderated by Jean-Marc Alberola, President of Bridge, and comprised four industry leaders with unique perspectives: Mauricio Pucci, CEO of the Information Planet agency network, who is separately developing a global distribution system for study travel, to be trialled later this year; Barbara Jaeschke, managing director of Berlin-based language school and agency GLS; Mark Lucas, managing director of iae GLOBAL, the international wing of Korean agency iae edunet; Rod Hearps, vice president of ICEF, which launched student review site Coursefinders for Languages in 2013.
Is language travel commoditizing?
The broad conclusion was that the short-term, general language course is at an early stage of commoditization and this will continue. But it was felt that products such as university pathways are too complex and expensive to commoditize.
Taking milk as an example of a commoditized product, Rod Hearps reassured niche operators that while the big brands compete purely on price, there's still room on the supermarket shelf for Byron Bay organic.
Mauricio Pucci suggested that standardizing the general language course would bring more agents to the market. Schools need more distributors and simple products can be sold by many agencies, he said. The current complex presentation of the short-term course, with small variations in lesson length and terms like 'intensive' used for both 15- and 30-lesson programmes, makes it harder to sell to consumers and to train agency staff.
An audience poll showed 70% believing the language travel industry is 'somewhat commoditized'. Asked if they were in favour of the standardization of programs and course formats, 54% of the audience said no. Summing up the majority view, Bob Burger of Malaca Instituto said: "By supporting this trend, we'd be gifting the majority of short-stay courses to the chains, who compete primarily on price and branding."
Is our industry in a price war?
The panel consensus was that price wars are happening in some but not all markets and place intense pressure on commissions. Schools are having to price in order to give higher commissions.
Barbara Jaeschke said it was unhealthy for the industry when agents take bigger commissions simply to pass them on to consumers. If commissions continue to rise, she added, quality will be compromised.
Lucas placed some responsibility with educators, arguing that contracts are issued too easily. South Korea has around 4000 agents, resulting in price wars and discounting. He advised schools to build stronger partnerships with fewer, bigger agencies that establish the brand in the market and manage a network of sub-agents.
Some 85% of the audience believed the industry is already very much or somewhat in a price war. Polled separately on the most viable, sustainable commission rate for their business, schools said 25% while the small sample of agents said 25%-30%.
What impact would a global distribution system have on language travel?
The travel industry has four GDS: Amadeus, Galileo, Sabre and Worldspan. A GDS is a business-to-business platform which enables automated transactions between vendors (airlines, hotels, tour operators) and booking agents (office-based and online) in order to provide travel-related services to end consumers. It links services, rates and bookings. It holds no inventory but has a real-time link to each participating vendor's database. So a travel agent with a connection to a GDS can choose and book various flights, hotels and associated services on all the vendors in the world who are part of that GDS.
Presenting his beta-stage GDS for study travel on screen, Pucci said the software aims to reduce the burden of high agent commissions on schools while allowing agents to sell more products.
"If we can diminish the costs of the agents, empowering them with a simple communication system of information, they will ask for less commission, so it's a win-win situation for everybody," he explained.
But among the IALC school directors at the seminar, there was concern that a GDS for study travel would accelerate commoditization by encouraging agents to compare only on price, impacting hardest on high-quality and independent educators.
"It's not in the interests of the IALC kind of school, with its emphasis on quality and distinctive boutique-style values," said Burger.
Do we want fluid pricing in our industry?
Online booking and GDS have brought fluid, real-time pricing to the travel industry, with consumers now used to varying and fluctuating prices for hotels and flights. Jaeschke recalled the negative impact on the travel industry, where too many consumers waiting for last-minute deals affected cash-flow and capacity planning. But Pucci countered that like the travel industry, study travel would adjust to the new model.
Is the travel industry a good comparison? Alberola thinks so: "The language travel sector is a hybrid of education and travel, and basing strategy on comparisons with the travel industry is a valid exercise."
What's the future impact of online booking and student review websites?
With the launch of language school ratings sites like Education Stars and ICEF's Coursefinders.com, the panel considered the likely impact on agents in particular.
The panel agreed that the growth of online booking and ratings sites would cause some disintermediation, but agents would not disappear. "As a school you have to offer your clients the possibility to book online," Jaeschke said. "But a good agent is always worth the money." Reasons to book through agents include saving time, access to expertise and a one-stop shop for a package of services. In some markets consumer protection legislation is stronger when booking through an agent, and most people seeking complex and high-value programmes want professional advice. As Lucas put it: you don't buy a BMW online.
"There is still a role for the agent who can identify quality and definably different schools and products, and counsel individual clients on which course and school is best for them," Burger agreed.
In a final poll on overall trends in online booking in study travel, 59% of the audience expected to see a GDS for our industry, but only 48% expect a trend towards the standardisation of programs. As much as 75% expect increasing price competition. With 64% predicting a growth in reviews of programs and schools, it is perhaps unsurprising that 57% expect some disintermediation in future.
Summing up, Jean-Marc Alberola said: "The realization that language travel is becoming commoditized is an unpleasant one for many, particularly independent schools, which may need to adjust their market positioning. But an awareness of these market forces and dynamics is important, as is an open discussion."
Jean-Marc Alberola, President, Bridge
Jean-Marc Alberola is President of Bridge, a comprehensive provider of language and education services including language instruction, teacher training, study abroad, and translation and interpretation services. Jean-Marc has over 30 years' experience in the language industry and serves on the IALC Executive Board as Vice President - Marketing.
Mauricio Pucci, Director, Information Planet
Information Planet began in 1996 in Sydney, Australia, as 'Information Brazil', when Mauricio Pucci started a small and innovative business 'helping' Brazilian friends to study, work and travel around Australia (just as he had done). By 2010 the company had more than 28 offices around the globe.
Rod Hearps, Vice President, ICEF
Rod Hearps has been involved in the ownership, management and marketing of numerous international education companies, including ICEF GmbH, ICEF Online GmbH, EdMedia and Hyperstudy.com, for the past 24 years. Rod owned and managed a student recruitment agency for 7 years, as well as serving as Principal and Marketing Manager of an Australian ELICOS College.
Barbara Jaeschke, Managing Director, GLS Berlin
Managing Director at German language school GLS Campus , Berlin and managing Director of leading educational agency, GLS Sprachenzentrum.
Mark Lucas - Managing Director, iae GLOBAL Ltd
Mark's 30-year career in education includes founding Technos Language and Commerce College (TLCC), a private English language and vocational college for international students in Sydney. iae GLOBAL has a network of close to 50 branches or joint-venture partner offices in China, Hong Kong, India, Indonesia, Japan, Myanmar, Nepal, Saudi Arabia, Taiwan and Thailand.
IALC Seminar: The future of online booking. Industry panel moderated by Jean-Marc Alberola.