International students’ cash can’t last, universities told

Australian universities have been warned that the days of easy revenue growth from international student fees may be over.

Universities are competing for a shrinking slice of the funding pie.

Australian universities have been warned that the days of easy revenue growth from international student fees may be over and they risk being drawn into a costly race to boost enrolments for increasingly smaller returns.

In a new discussion paper, the Nous Group consultancy tells universities that risks are growing in the $32 billion export industry, which directly delivers univer­sities more than $6bn a year in fee income, more than one-fifth of their revenue.

The paper, Sustainable Growth in International Education, warns against entering a costly “arms race” to build student numbers that could cut revenue yield as fee discounting becomes more popular in the international student ­market.

Authors Jonathan Chew and Ethan Fogarty say in the paper it is time for universities to stop “turning on taps” to create rapid student growth, and instead start “digging wells” with long-term investments for the future.

In recent years, many universities have pushed for rapid growth in international student numbers by opening campuses owned by third parties in Sydney and ­Melbourne, increasing agent commissions, and aggressively discounting fees.

The paper warns that this strategy will deliver “short-term and volatile growth with low yields”.

It urges them to make longer term investments to deliver sustainable growth. These include: improving their course offering to students, delivering better student experience (including more work-integrated learning) and focusing on producing yield for the university and value to students.

The paper says the growth of international students from China, Australia’s largest market, had slowed or even stopped.

“Universities are increasingly competing at the margins for a slice of a finite or even shrinking pie,” it says.

It draws an analogy between international education and the financial services industry where the royal commission into abuses in that sector has “highlighted how a culture focused on growth and profit can undermine the value to customers and cause providers and their agents to behave inappropriately”.

“The fact that such significant issues have emerged in the banking and finance industry, a much more regulated sector than international education, should be cause for concern,” it says.

In the paper the authors say there is an imperative for universities to ensure sustainable growth in international education to offset the impact of the federal government’s freeze on university course funding.

The paper also says universities face the risk of market concentration of students from China and South Asia. It says since 2011, nearly 90 per cent of inter­national student growth in universities has come from these markets.

It also finds universities face the risk of relying on a small number of courses to attract inter­national student markets.

It reports that across a sample of four diverse higher education providers, nearly all the students in some courses are international.

These include the master of ­accounting at a Group of Eight university, the master of professional accounting at a medium-sized metropolitan university, the master of business management at a small regional university, and the master of professional ­accounting at a small private ­provider.

The paper urges universities to think creatively about diversifying their international student strategies and acknowledges universities are thinking about how to buck the recent trends.