Currency woes threatening industry business

26 March, 2015


Weak currency rates are affecting several key student markets in 2015, with the ailing euro in particular threatening outbound business from the Eurozone countries and leading study travel agents to call for support from school partners.



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The euro has steadily depreciated against the UK pound over the last 12 months from €1.20 on March 26, 2014 to €1.41 on March 12 this year, while the exchange rate with the US dollar dropped from €0.70 on March 26, 2014 to €0.94 two weeks ago, although both rates have slightly stabilised in recent days.

Pascal Carré, Director of Languages & Travel in Belgium and Vice President of the Federation of Education and Language Consulting Associations (Felca), said the situation had changed suddenly since the end of last year.

One of the problems for agents is that they have little room for manoeuvre, he said. “Prices were fixed for the year and it is always difficult to put the prices up when published.”

Explaining the impact on students, Carré said, “Our clients are affected and tend to book shorter courses in the summer; one-week bookings instead of two; or do not buy courses at all but other services like au pair and work guaranteed programmes.”

Julia Richter at German association FDSV said most members were reporting fairly stable student numbers thus far in 2015, but that the currency situation had had differing impacts on margins depending on the size of the company.

Larger agencies able to purchase stocks of currency were able to keep selling at regular prices with no negative effects, she said. “Small agents with no currency hedges do have problems, as they change prices for dollar and GBP destinations very often and they have difficulties in being competitive with prices of other providers.”

Paolo Barilari, Director of Lingue Nel Mondo agency in Italy and a board member of Italian agency association IALCA, said the exchange rate with the British pound, traditionally the most popular destination for Italian students, was causing serious problems for agencies.

“For an average Italian family, which used to be the backbone of our business, spending much more that €2,000 for a two-week junior course is not a rewarding investment any longer – and sometimes the prices are even closer to €2,500,” said Barilari.

The same problem was afflicting programmes in the USA, with the added negative impact of flight costs. As a result, “a large part of our students are now choosing Ireland for their English courses.”Indeed, a common response to the situation for European agents has been to promote English language programmes within the Eurozone. “We are currently pushing new programmes in Ireland and Malta to compensate the probable loss in other markets such as the US and the UK,” said Carré. “It is difficult to justify why the same number of hours of classes costs 20 per cent more in the UK than in Ireland or Malta.” Richter also confirmed some German agencies have reported increasing enquiries for Ireland and Malta this year.

Ultimately, European agents are looking for support from school partners during the currency struggles. “The support we would expect from non-Eurozone countries is lower fees – a corresponding decrease of tuition and enrolment fees to compensate the unfavourable exchange rate,” said Carré. StudyTravel Magazine (STM) has already seen some emailed offers of increased commissions and discounted tuition prices sent to European agencies.

Another recommendation Carré made to schools was to consider offering commission payments on accommodation. “Some schools do it, some do not and we tend to favour those who do,” he added.

Barilari, meanwhile, is hopeful that the UK general election on May 7 could arrest the trend of the strengthening pound before agencies have to start paying most of the school invoices.

The strong dollar and pound are also impacting on other student markets. Brazil is suffering from a dual economic and political crisis that could potentially “paralyse the market”, according to Carlos Robles, President of Brazilian agency association Belta.

At the recent Alphe Brazil conference, several agencies told STM that the weakened real, valued at around US$2.32 a year ago and US$3.20 at the time of writing – was damaging business. As a result of the rates, Canada and Ireland were likely to benefit at the expense of the US, many agents said.


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