Strategic Roadmap Development for international education in the PTE sector

Strategic Roadmap Development for international education in the PTE sector

What are Strategic Roadmaps? Strategic Roadmaps are planning tools that identify strategic goals and pathways for growth in international education in each sector and show a series of steps that will enable those goals to be reached. The emphasis of the roadmap development is on activities and decisions, as opposed to business planning. Strategic Roadmaps. will identify: Actionable steps necessary to get to desired destinations Interdependencies among steps Alternative routes that will optimise opportunities or minimise risks.. The outcome of the development process will be roadmaps that have been developed by and for each sector. Strategic Roadmap for PTE Sector

Contents 05 Introduction 06 The PTE sector and international education 10 Market overview 13 Key trends 17 Drivers of Change 22 Scenarios to consider 25 Growth opportunities 3

We all know the industry goal for 2025 But what s the plan? What do I do tomorrow to get on the path to 2025? Strategic Roadmaps The roadmaps are an exciting collaboration opportunity to take part in a project that will influence the direction of our industry for years to come Jump on board. Take part. 4

Introduction The Leadership Statement for International Education was released in September 2011 setting a target to double the economic value of international education to $5 billion by 2025 and outlining a range of proposed actions for achieving that target. While the Leadership Statement sets out key Government objectives for the international education industry and actions that are likely to contribute to the achievement of key targets, it does not set out the strategic options, choices, and actions appropriate for each industry sector to achieve growth that will contribute to the 2025 target(s). The aim of developing International Education Strategic Roadmaps is to do just that provide each sector of our industry with achievable pathways to success. this, which actions / steps have the highest priority and which will yield the greatest benefit relative to their cost / benefit To identify the intermediate steps and interdependencies within each sector To inform the work that ENZ is undertaking to support industry growth. To be successful, the roadmap needs to be developed by and for your sector. We look forward to your participation in the roadmap development process and to having the opportunity to work with you. When completed, the roadmaps will be used: As a communication tool to inform industry and key stakeholders on the potential for each sector between 2014 and 2025 To identify the key issues that currently affect the sector and its ability to grow To identify what actionable steps are required to achieve the desired 2025 destination for each sector, and within Grant McPherson Chief Executive Education New Zealand 5

The PTE Sector and International Education

The PTE Sector and International Education Background The Private Training Establishment (PTE) sector is critical to New Zealand s international education industry; it is responsible for nearly half of all international student enrolments in New Zealand. The sector generated $204 million in tuition revenue in 2012, and contributed an estimated economic value of $671 million to New Zealand s GDP. PTE programmes are mostly in specific vocational niches at certificate and diploma level. An increasing number are offering programmes at degree and postgraduate levels, including Masters degrees. PTEs can also be involved in adult and community education, intensive literacy and numeracy provision, Performance Based Research Fund (PBRF), Student Achievement Component (SAC), Youth Guarantee, workplace literacy, apprenticeships and student loans and allowances. By headcount, the PTE sector is responsible for 46% of New Zealand s international education industry s enrolments. When calculated by EFTS, the proportion is a slightly smaller but still significant 37% (18,504 of a total 49,997). Total number of PTE institutes, students, EFTS and revenue over the past five years 2007 2008 2009 2010 2011 2012 2007-12 change Institutes 236 241 240 240 227 219-17 International fee 43,465 42,350 47,019 48,535 47,806 42,704-1.7% paying students EFTS 12,905 14,626 17,799 18,440 19,121 18,504 43.5% Revenue $132.2M $155.9M $184.8M $198.2M $208.5M $204.2M 54.5% 7

A Diverse Sector The size and scale of the sector varies Over 200 PTE institutions are involved in international recruitment In 2012, 219 PTEs (including English language schools) enrolled international students, ¼ of all institutions are active in the international education industry. This is a decrease from 302 institutions in 2003. 59% of enrolments in the PTE sector are by institutions in the top 50 list (25,306 enrolments of a total 42,704). Of the 167 PTEs (excluding English language schools) that enrolled international students in 2012, 68% (115 institutions) enrolled fewer than 50 EFTS. Distribution of PTEs by enrolled EFTS 70 60 50 40 30 20 10 Excluding English language schools, 15 PTEs feature in the top 50 providers involved in New Zealand s international education industry. 0 8

Current Product Mix Excluding language, business subjects dominate Information Technology Course Popularity Food, Hospitality, Health, Engineering and ICT courses have increased Foundation and Business course numbers are consistent, while Agriculture, English language and Creative Arts courses are down. 8% 12% 7% 5% 3% 0% 33% Foundation Studies Society & Culture Engineering Education Health Therapies 15% 17% Creative Arts Agriculture, Horticulture, Environment Architecture & Building 9

Market Overview 10

Key International Markets Asia, Middle East and South America are dominant China, India, Japan, South Korea and Saudi Arabia are the PTE sector s five largest markets, They are responsible for 65% of total enrolments. China appears stable while Japan and South Korea have trended down. Saudi enrolments have dipped significantly and Indian enrolments are flat. 11

Who are our Competitors? Australia is a major destination for international PTE students 36% of PTE students in New Zealand also considered Australia as a study destination during their decision making process. Followed by USA (33%) and Canada (32%) Once committed 77% of PTE students applied solely to New Zealand. A minority of students also applied to other countries. USA (7%), Canada (6%) and Australia (5%). Source: i-graduate report 12 12

Key Trends 13

International Trends Developing markets are experiencing rapid growth Countries and governments do not have all the resources to meet this demand. Innovative players provide governments, institutions and corporates value for money in education services. New digital technology platforms Disrupting traditional education business models by reducing delivery costs and enhancing the learning experience. Massive Open Online Courses (MOOC s) are fundamentally changing how and where education is being delivered. Education has become a dynamic multinational industry Attracting international investment and new commercial partnerships. 14

International Trends Increased international competition and brand building efforts Many countries are looking to increase their international education market share. Notably Australia, United Kingdom, Ireland, Western Europe, United States and Canada. Increased populations of 16-22 year olds generating new demand Higher education, training and vocational qualifications are required. Forecasts predict Asia, Latin America and Africa will provide this demand. Not all international markets will travel offshore to be educated Emerging economies will be focussed on transformational change within their domestic education systems. Middle class consumption is growing China, India, Japan, South East Asia and US and will account for the biggest share of world s middle class growth 15

New Zealand Trends Recent PTE enrolment numbers have dipped The PTE sector experienced a headcount enrolment decrease of 11% between 2011 and 2012. Enrolment decreases can be partly attributed to increased living cost requirements, duration of study required to qualify to apply for poststudy work rights, and minimum English language entry standards. International student enrolments at PTEs (by EFTS) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Change 2011-12 SDR providers 7,249 6,113 5,434 4,823 4,387 4,899 5,784 5,838 7,059 6,865-2.7% Non-SDR 13,453 9,450 7,441 7,567 8,518 9,727 12,015 12,602 12,062 11,639-3.5% Total 20,702 15,563 12,875 12,390 12,905 14,626 17,799 18,440 19,121 18,504-3.2% All sectors 68,551 64,172 57,033 48,647 47,500 46,877 49,139 50,902 51,013 49,997-1.9% Reliance on low yield, high volume business model The sector s average tuition revenue of $11,039 is lower than the averages for schools ($12,533), polytechnics ($13,496) and universities ($22,541). The sector relies on a high volume of students to ensure viability of their international operations. 16

Drivers of Change Demographic shifts Shifts in global economic power Student mobility Competition 17

By 2030, two-thirds of the global middle class will be residents of the Asia-Pacific region Ernst & Young. (2013). Hitting the sweet spot: The growth of the middle class in emerging markets. Over the next two decades, global middle class expected to expand by another three billion Chinese middle class expected to reach one billion by 2030 18

Drivers of Change: Demographics Since 1800 the world has seen two great middle class expansions, and we are living through a third. The nineteenth century industrial revolution created a substantial Western European and American middle class, which grew again after the Second World War a spurt which this time included Japan. Today this is happening in the emerging markets (EMs). In Asia alone, 525 million people can already count themselves middle class more than the European Union s total population. Over the next two decades, the middle class is expected to expand by another three billion, coming almost exclusively from the emerging world. By 2030, so many people will have escaped poverty that the balance of geopolitical power will have changed completely, and global trade patterns will also be unrecognizable. Ernst & Young. (2013). Hitting the sweet spot: The growth of the middle class in emerging markets. 19

Drivers of Change: Demographics By 2024, India, China, Indonesia and the US will be home to over 50 percent of the world s 18 to 22 year old population. This is despite China s tertiary-aged population being projected to fall by roughly 40 million people in the next decade. Strong growth is forecast in both emerging and key advanced economies such that the world economy is set to recover to its long-run average growth rate by 2015. Over the next decade, global growth in tertiary enrolments will slow from about five per cent per annum to 1.4 percent per annum. India, Indonesia, Brazil, Nigeria and China will dominate global higher education growth in the next decade. The number of outbound students will continue to grow, primarily due to growth in higher education enrolments, as latest forecasts show a marginal decline in the future propensity to study abroad. Source: British Council. (2013). The future of the world s mobile students to 2024. 20

Drivers of Change: Student Mobility China and India will continue to make up over one third of outbound mobile tertiary students, with Germany, South Korea, Saudi Arabia, Nigeria and Turkey also sending significant numbers of students abroad for education. The US, the major beneficiary of growth of outbound students from China and India, and the UK, driven by the large outbound markets from India, Nigeria, Saudi Arabia and Pakistan, will continue to dominate as destination countries to 2024. Should there be an economic slowdown of the growth in the BRIC nations, there will be a tangible effect on global GDP due to the lower affordability of higher education due to the lessening of household incomes and exchange rate effects. Tertiary enrolments and outward mobility globally would decrease and traditional host markets will be negatively affected. Source: British Council. (2013). The future of the world s mobile students to 2024. 21

Scenarios to Consider 22

Baseline Growth Based on incremental growth combined with stable student numbers # PTEs 2003 # PTEs 2006 # PTEs 2012 Current total value Mean value generated per PTE in 2012 # PTEs 2025 Average value generated per PTE in 2025 Projected value generated by sector in 2025 All PTEs 302 266 219 $0.583B $20,618 250 $29,156 $0.728B Assumptions: Fees grow at 4% per annum Living costs grow at 2.4% per annum Providers will stabilise and grow a little but will not expand to the levels of 10 years ago 23

Value / Volume Scenarios PTEs Students 2025 Mean Tuition Fees 2012 Annual growth in fees Value tuition fees 2025 Living costs 2012 Av CPI Living costs 2025 Total value per student 2025 Potential Economic contribution High value/ high volume 35,000 $6,441 4% $10,312 $14,177 2.4% $18,844 $33,021 $1.155b Low value/ high volume 35,000 $6,441 2.5% $8,662 $14,177 2.0% $17,979 $26,641 $0.932b High value/ low volume 28,000 $6,441 4% $10,312 $14,177 2.4% $18,844 $33,021 $0.924b Low value/ low volume 28,000 $6,441 2.5% $8,662 $14,177 2.0% $17,979 $26,641 $0.745b These tables show the impact of increases student volumes combined with various fee increase options. What scenario is most realistic, desirable and achievable? 24

Growth Opportunities 25

Drivers of Satisfaction Expectations are high on career guidance Students have high expectations around careers and employment support. They need their institution to provide quality advice, support and training. Student experience priorities Learning technology and library resources Careers advice, support and training Opportunities to gain work experience as part of course of study Willingness to recommend the institution to other students Institution and qualification reputation important PTE students are focussed on the reputation of the institution and qualifications. Other key considerations are teaching quality and personal safety. Costs are key for students Cost issues for many PTE students drives lower satisfaction scores. This includes living costs, accommodation, opportunities to earn money and availability of financial support. Source: 2012 i-graduate New Zealand International Student Barometer 1454 international students from 155 PTEs provided responses on their experiences. 26

Drivers of Satisfaction Variable Student satisfaction The 2012 i-graduate survey showed large variations by institution as to whether students would recommend their PTE institution to others. 76% of international students surveyed would recommend their institution to others thinking of applying. This is 3% below the global benchmark. Word of mouth key driver in destination decision making Source: TNS 2013 Market Research 27

Achieving Growth Areas to focus on: Channel strategies Quality in-market partners Immigration / visa requirements Market intelligence, international networks and access to trusted advice Brand building capability and marketing tools Access to expansion capital and funding Shared Sector story and collaboration Commercial partnerships Graduate pathways What else is required to grow? 28

Alignment Opportunities PTEs are nimble, responsive and innovative commercial enterprises. The sector is well placed to design innovative products for developing international markets to take advantage of growth opportunities. There are export sector niches where NZ Inc has the motivation, capability and competitive advantage to meet international demand. How can we play in these niches? High Growth Sectors Agribusiness Aviation Health ICT Digital Technologies Food and Beverage Business consulting services Renewable energy Creative industries Professional Sport Tourism 29

NEW IDEAS GROW BETTER HERE 1. Reflect on the messages in this background paper 2. Identify three tangible actions that will lead to a better outcome for the PTE sector on the path to 2025 3. Enrol for the workshop nearest you Jump on board.

For further information on the strategic roadmap process contact: Henry Matthews Business Development Manager henry.matthews@enz.govt.nz T: +64 27 216 1605 W: educationnz.govt.nz