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June 2003 issue

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New Zealand to slow

After a number of years of healthy growth, 2003 is likely to be more difficult for most English language schools in New Zealand, as student numbers from China slow and the New Zealand exchange rate increases. Gillian Evans reports on the latest market developments in the country.

The New Zealand English language market has been flourishing in recent years. According to Statistics New Zealand, tuition income has risen from NZ$49 million (US$26.3 million) in the year to June 2000 to NZ$154 million (US$82.8 million) in the year to March 2002, and English language student numbers have topped 41,725 in the same period.

''Since 1999, [English language] student numbers have increased by nearly 50 per cent each year,'' reports Lester Taylor, Chief Executive of the industry body, Education New Zealand.

A number of factors have fed New Zealand's popularity, including its favourable exchange rate and the perception worldwide of New Zealand as a safe and peaceful destination. More importantly, the easing of its visa regulations for China caused a huge flood of students from this country who want to study long-term in New Zealand. ''The growth in the number of Chinese students to New Zealand has been phenomenal since visa quotas were lifted,'' confirms Taylor.

According to recently released statistics from the Association of Private Providers of English Language (Appel), Chinese was the largest single student nationality from June to December 2002, taking a 29 per cent share of the market in terms of student numbers. The second largest nationality was Japanese, followed by Korean. Looking at student weeks, China's lead is even bigger, with Chinese students accounting for 45 per cent of the market, followed by Koreans with a 19 per cent share and Japanese with 14 per cent.

Many individual language schools confirm that Chinese is their largest nationality. ''We have found that having a good number of Chinese students has really changed the atmosphere and make-up of the school,'' reports Barbara Takase, Director of Auckland English Academy. ''These students are intently focused on academic achievement. They work very hard and set themselves high academic goals.'' However, the sudden influx of Chinese, has, according to Cleve Brown, Director of Worldwide School of English in Auckland, led to ''a sharp increase in numbers of visible 'Asian' students'', and, continues Robert Tappenden, Director of the English Language College in Christchurch, this has generated ''a negative feeling [among] the public''.

Media stories in New Zealand have reflected this. It was reported that the Education Minister was considering a cap on Chinese students entering the country to study at mainstream schools, although this was denied (see Language Travel Magazine, April 2003, page 4). Another media report dispelled the ''rumour'' that English language schools were poaching state school staff.

However, Brown says that as student numbers from China are expected to fall this year, the problem will no longer be acute.

As well as Chinese, Koreans also jumped up the ranking of market share. Myra Davis, Marketing Executive at the University of Waikato Language Institute in Hamilton, believes that Korean numbers have grown for two reasons: first, the tightening of visa regulations to Australia for Koreans in 2001; and second, New Zealand's favourable exchange rate, which made the country particularly popular at a time when Korea's economy was in decline.

Now, however, the Australian visa regulations for Koreans have eased and the New Zealand exchange rate is climbing against the Australian dollar. This latter factor will have a particularly marked effect on the more price-sensitive markets. Davis observes that they have already noticed a dropping off of Latin American student numbers as a direct result of the higher New Zealand dollar.

As it is, established providers are feeling the pinch from intense competition, as the buoyancy of the market in recent years has led to a rash of new schools opening up. ''There is a major price war going on in New Zealand, particularly in Auckland at the moment,'' reports Susan McAllister, Managing Director of Aspect Education Group. ''Some schools are offering extremely cheap courses - US$90 per week for full-time courses - with commissions of up to 40 per cent. Free homestay, free laptops, free flights home are also being used as incentives for students to enrol.'' However, quality is often sacrificed and McAllister cautions, ''Buyer beware''.

In a bid to ensure that quality remains high in the New Zealand market, the government has introduced two significant initiatives, the first being the Code of Practice for the Pastoral Care of International Students. This, according to Davis, ''makes it difficult for people who thought they could just open up a school and make lots of money out of this boom [in] Chinese students''. The second initiative is the introduction of NZQA accreditation for all English language providers - including those that offer courses of three months and under, which were previously exempt. ''New legislation required courses to meet NZQA requirements and the new Code of Practice required institutions to provide accurate information about the course in order that students' expectations are based on reality,'' explains Taylor. This, he adds, should mean that standards remain as high as they have always been in New Zealand. ''One expects that these regulations, along with continued high quality from the majority of providers, would minimise the impact if a small number of lower quality providers was in operation.''

Another new regulation is that students can leave a course and have their fees returned to them within seven days if the course does not meet their expectations. Although McAllister agrees that consumer rights should be protected, this regulation can disadvantage the established players. ''It's very frustrating after you have spent [money] offshore marketing to have students cancel their course and go to a cheap school up the road because they offer a course for half the price,'' she says. ''These institutions have no offshore marketing costs - they simply tout for local business.''

Another challenge for schools has been the introduction this year of a levy on English language teaching providers. Each institution must pay a fee of NZ$185 (US$99.5) and 0.45% of tuition fee income. Although Taylor says the levy is smaller than anticipated, feelings against it remain high. An indication of the level of opposition is the resignation of the private language school associations, Crels and Fiels, from Education New Zealand.

Takase, who is the Chairperson of Appel - of which both Crels and Fiels are members - states, ''We're not happy about the levy. It is almost unanimously opposed by all [in] the English language school industry. It is going to give us higher compliance costs and these will have to be passed on to the students.''

The income generated by the levy is to be used for research, quality assurance and professional development, as well as some generic industry promotion. ''[There's] a big cost involved [in the levy] and the details are still extremely vague,'' says Davis. ''It could prohibit small schools from starting up, but it could also be useful in terms of monitoring standards amongst New Zealand institutions.''

However, most private providers are not convinced of its benefits. ''New government regulations and taxes - it is a tax not a levy no matter what the government calls it - will increase compliance costs, time to complete red-tape work, confuse overseas agents and generally make it difficult to be profitable this year,'' asserts Tappenden. ''The so-called 'cowboy' schools that have fallen outside government checks so far will continue to operate outside the regulations. The schools that play by the rules will again be punished.''

Jody Costello, Manager, Marketing and Admissions at Hawthorn English Language Centre in Auckland, also predicts ''pressure on financial resources, particularly marketing resources''.

Already, many schools have increased their tuition fees to compensate for the levy, and this, together with a number of other negative factors (see right) leave most sources rather pessimistic in their outlooks for 2003, despite the encouraging figures to date.


Forecasts for 2003

Most sources forecast a slow 2003 in comparison to previous years. Lester Taylor of Education New Zealand predicts ''modest'' growth this year, while Susan McAllister of Aspect Education Group NZ says that tougher market conditions may cause some of the newer schools to go under. ''Schools reliant on one or two markets will close in 2003/2004 but the well-established schools will survive and will have to pick up the pieces once again,'' she says.

The rather downbeat forecasts are borne out by Education Directions' first Export Education Confidence Survey. Eighty-five private education establishments took part in the survey, which asked respondents to forecast the direction of change in the market in the first six months of 2003. It was measured using a scale varying from -1 (all believe it will decline) to 1 (all believe it will grow), from which an overall average ''confidence measure'' was taken to give the final results.

Overall, growth expectations for the first six months of 2003 were low with a confidence measure of 0.2. Changes in the Chinese market seem to be the cause, with respondents, on average, predicting no change in the Chinese market (0) in the first six months of 2003. The confidence measure decreases to -0.1 when only English language schools are considered (52 participated). Reasons given for the downturn in Chinese numbers are the growing strength of the New Zealand dollar and changes in visa regulations.

Barbara Takase, Chairperson of Appel, explains, ''New immigrants have had to meet a higher English level. This has had a small direct effect on English language enrolments, but it has also been reported back in China as an initiative that could be aimed at Chinese or Asian people.''

The confidence survey also revealed that providers were concerned about the direction of immigration policy. Only four out of 72 respondents felt that immigration policy would enhance enrolment.

In addition, the export education levy was seen as a negative factor, as was the exchange rate.

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