English language schools are reporting a 4.3 per cent average drop in gross operating profits in 2014 over the previous year despite increasing student arrivals and longer stays.
This is the second consecutive year the industry is reporting declining average prices and increasing costs, raising concerns about profit erosion and the sector’s long-term sustainability and competitiveness.
Moreover, this year, Malta is unlikely to benefit from the Libyan market due to the ongoing crisis.
“It seems Malta is offering a costly product at eroding average prices,” said David Bonnet from Deloitte, which compiled the survey for the Federation of English Language Teaching Organisations Malta (Feltom).
“I am concerned schools are opting to cut costs in areas such as the maintenance of their properties and in marketing, which are important factors in the long term.
“Additionally, the euro has weakened against the dollar and sterling – our main competitors – so Malta should be in a good bargaining position to increase prices to make up for inflation, while retaining its competitiveness,” he added.
I am concerned schools are opting to cut costs
The most notable increases were in payroll costs and in other areas such as accommodation, commissions, transport and activities. Overheads appear to have been contained.
The decline in operating profits contrasts with the five per cent growth in student weeks and the fact that they seem to be choosing more intensive courses. There was also an increase in junior bookings – and average revenue per week is typically higher on these.
Libya provided a surge in the market during the first half of 2014, with an increase of some 8,000 student weeks. However, this came to a sudden halt in the third quarter as a result of the Libyan crisis.
Another market which appears to have been impacted by political and economic factors is Russia, with student weeks dropping by approximately 7,000 in 2014.
The statistics report a significant increase in student weeks from Italy, with a surge of 8,600 weeks.
Japan, Brazil and Colombia also reported growth, offsetting the declines reported in Spain, Turkey and South Korea.
In 2014, the English language travel sector accounted for 12.7 per cent of total tourist bed nights, with a significant contribution recorded during the months of February and March as well as the peak summer period.
The results show an increase in student arrivals of 3.4 per cent compared to 2013, an increase in the average length of stay of 1.8 per cent and a five per cent increase in student weeks.
Feltom CEO Genevieve Abela appealed to the government to support the English language travel industry by commissioning a much-needed market competitiveness analysis.
This could help the sector better understand where it stands in relation to its foreign counterparts, who Malta’s competitors are and how Malta can attract a bigger share of the world market.
Collaboration between the sector and universities could attract students from large potential markets, she continued.
Additionally, processing the visa applications of Feltom members faster and offering advantageous routes on Air Malta would help put the island on a more level playing field.
Tourism Minister Edward Zammit Lewis said the government will be focusing its efforts on consolidating volumes in the traditional sector of teenagers, who travel to Malta during their school holidays.
It will also invest in boosting the adult, professional, higher-yield, longer-term and off-peak English language travel sector.
Furthermore, there will be a focus on improving flight connectivity with medium- and long-haul markets such as Asia, South America and Eastern Europe.
The government will be trying to improve the cooperation and coordination of marketing and promotion efforts between the tourism authority, Feltom and individual schools.