English language schools warned against aggressive price cutting

Local English language teaching organisations were cautioned against aggressive pricing strategies at the presentation of the industry’s first benchmarking survey yesterday.

The Federation of English Language Teaching Organisations Malta (Feltom) survey, supported by APS Bank, was carried out by Deloitte and covers 2010.

It will bring “real benefits” to the industry, Deloitte financial advisory leader Raphael Aloisio told stakeholders in his presentation at the Radission Blu Resort in St Julians, as it will help schools to compare their own performances with that of the industry as a whole, enabling them to take timely corrective actions where necessary.

The report highlighted the consequences for the industry of the sharp decline in student arrivals from the peak in 2008. Although student arrivals increased 6.5 per cent last year to 72,695 students, the figures remained 15.4 per cent below the 83,288 students who came in 2008.

In an attempt to boost student arrivals, schools lowered tuition prices, resulting in total school tuition revenue last year being 4.6 per cent below 2009 and 10.6 per cent below 2008.

Reduced student volumes and lower pricing levels also forced schools to cut back significantly on their staffing costs and other expenditure by close to 20 per cent from 2008 levels.

In his closing remarks Mr Aloisio cautioned schools against aggressive pricing tactics, as the survey showed that although student numbers increased 6.5 per cent from 2009 to 2010, total school revenue fell 1.6 per cent in the same period. This was because when one school lowered prices, others followed suit, bringing revenue down across the whole sector.

Malta Tourism Authority chief executive Josef Formosa Gauci took up the same theme, warning stakeholders: “It is easy to lower prices, but it is not easy to bring them back up.”

Quarterly and annual surveys will follow which will allow schools and teaching organisations to do regular benchmarking. Mr Aloisio said he hoped future survey reports would display ranges rather than just averages, so that individual schools could see how their results compared with the worst and best performing schools in each category. A total of 18 schools took part in the first survey: 14 Feltom members and four non-members. These schools accounted for 72 per cent of all student arrivals last year.

The questionnaires for the first quarterly report were sent out in the last few weeks.