International students are now the lifeblood of many universities in Australia and international rankings are a vital tool in attracting this market. While most institutions invest heavily in these rankings they’re often unable to link investment levels with strategy and desired outcomes in terms of student attraction. KPMG Australia’s unique International Rankings Return on Investment Model gives the evidence needed to demonstrate ROI and help build the case for future investment.
International education has become a major contributor to Australia’s economy, with unprecedented numbers of international students enrolling at Australian universities. Education is Australia’s fourth largest export, with the international student market valued at $30.3 billion a year1.
In 2018, there were 693,750 international students in Australia. With 45.5 percent of international students enrolled in higher education institutions, the revenue from international student fees has become an important source of income for Australian universities.
For universities, this revenue forms an important cross-subsidy into funding core research activities, and it is conservatively estimated that one in every five dollars spent on research is cross-subsidised from teaching revenue2.
It is no surprise that Australian universities are competing heavily to attract international students to study at their institutions. Universities understand that international university rankings – such as the Quacquarelli Symonds (QS)3 and Times Higher Education (THE)4 World University Rankings – enable them to build, maintain or improve their reputation and profile internationally, and that high-achieving students use rankings to shortlist institutional choices, especially at the postgraduate level5.
In fact, data indicates that:
As a result, universities have increasingly incorporated rankings results into strategic planning. Most Australian universities now have formal internal mechanisms to regularly review their rankings performance, as well as strategies to improve their ranking. The presence of an institution in the rankings table heightens their reputation and profile9.
A possible reason is that rankings are currently the only available comparative measure for higher education institutions at an international scale10. As a result, institutions use rankings to set targets or benchmark their performance, set strategic goals, define targets/key performance indicators (KPIs), and aid resource allocation11. Rankings are seen to provide the evidence, justification or rationale for making strategic change and investment across a university12.
To date, most Australian universities’ rankings strategies have focused on what we might think of as ‘low hanging fruit’. For example, most universities have streamlined and optimised the way they collect and report data to the rankings agencies.
Similarly, most universities maintain databases of academic colleagues and employers of graduates to submit to QS for the survey metrics. And marketing teams routinely engage such people in the lead up to the rankings to keep the university ‘top of mind’. The benefits of such tactical ‘optimisation’ cap out pretty quickly, and in order to continue to improve, significant strategic investments will be required.
To help universities develop their rankings strategy, and to understand the costs and benefits of improved institutional ranking performance, KPMG Australia has developed an International Rankings Return on Investment Model. Our model allows Australian universities to understand how investment in different areas of university operations (e.g. research expenditure, staffing levels, marketing spend) can improve rankings performance and generate international student revenue.
Our model helps universities to understand:
To do this, we have examined the relationship between institutional rankings performance and international student enrolments, trends in international university performance in QS and THE rankings for over 1000 universities, and patterns of university expenditure for all Australian universities over a five year period. Our data driven approach allows universities to have an evidence base to decisions on investment into institutional rankings performance.
To illustrate the tool, we have presented two hypothetical scenarios generated by the model:
In each case, we have analysed what impact an additional investment of $50 million and $100 million would make on each university’s rankings performance and student revenue.
|Scenario||Rank with additional $50m investment||Rank with additional $100m investment|
|Top 50 rank university||Just inside top 40||Just outside top 30|
|350-300 rank university||Top 250||Top 150|
For the lower ranked institution
As might be expected, for the higher ranked university
However, not all expenditure is created equally, and spending has to be targeted at improving in areas where the university can improve its rankings, and not at areas where it can’t. For example, for our hypothetical university in the world’s top 50, there are a range of metrics in the QS ranking where the university is already performing almost at the top of what is possible – like academic reputation and employer reputation. Investing more into university marketing, while it may be an important activity, might not therefore represent the best rankings strategy available.
Instead, the areas where there is greatest room for improvement are in Faculty to Student ratios and Citations, so investments should be targeted at activities that will improve these indicators.
This is clear from our modelling: when we look at the $100 million expenditure we see that if the University were to spend this largely on marketing, there would be no lift in the university’s performance. If, on the other hand, it spent this on academic wages, primarily for research-only staff, this could drive improvements of around 10 ranks.
In this way, our modelling has assisted universities to hone in on the areas where rankings strategy and investment overlap.
The key value of rankings performance for universities is how it drives international students’ decision-making of where to study. To help universities make the case for additional investment, our model is also able to provide an indication of the expected boost to international student enrolments that are likely to accompany improved rankings.
Continuing our two cases, the table below shows the additional international students that are associated with different investment scenarios.
|Scenario||Additional students with additional $50m investment||Additional students with additional $100m investment|
|Top 50 rank university||190-340||470-680|
|350-300 rank university||180-370||300-640|
Interestingly, the return in each case is not substantially different in both investment scenarios. As with the size of the investment, however, this must be understood in relation to the size of the university’s existing student cohort. In the Top 50 University either case will result in a smaller percentage increase in student revenue for the investment, whereas for the mid-ranked university this will be a substantial proportional increase in student numbers.
In terms of the associated revenue, the table below shows the expected revenue in each scenario. The ranges are calculated based on an average fee for postgraduate courses of $28,50013, but will be impacted by higher and lower cost subjects and is dependent on the courses offered at any university.
|Scenario||Additional revenue with additional $50m investment||Additional revenue with additional $100m investment|
|Top 50 rank university||$5.4 - $9.7m||$13.4 - $19.4m|
|350-300 rank university||$5.1 - $10.5m||$8.6 - $18.2m|
The return on investment is not immediate, and a university should expect that it will be several years before the investment is recouped. However, as a general principle, the fact is that there will be a bump in international student fees and this will continue to be realised for several years after the investment. In either case, it would be at least five years before the initial investment is recouped in student fees.
There would be other benefits to improving rankings performance that would also offset the investment, though, such as additional funding under the government’s research block grants scheme, which includes measures of postgraduate research students, increased ability to attract research partners, and increased success in grant funding that follows from additional investment in research.
The cost of improving rankings is inevitably high. For example, in Korea a 38 percent increase in per student expenditure across the period 2005-2012 saw an additional two Korean universities enter the QS top 200, for a total of seven, with the existing five all also increasing their rankings. In China, institutions such as Peking University and Tsinghua University have both benefited from $300 million government investments, improving their rankings into the top 40.
There have been cases of universities that had highly ambitious goals, but then abandoned these plans as the university was becoming more prestigious and selective, which ran against its mission. In other cases, the costs of rankings performance are prohibitively high. For example, the University of Rochester found that in order to move up just two points in their national rankings, it would have cost the University $112 million.
Naturally, the higher up the ranking scale a university is, the harder it becomes to improve14. Given this, deciding the role that rankings play in an overall university strategy is a task for each university to undertake. In general, there are three institutional responses:
Advocates of each position exist – for example, advocates of ignoring rankings claim that, especially for regional and specialist universities, rankings can get in the way of servicing local communities, stakeholders and governments15. The approach to international rankings is a decision that each university makes for a range of reasons.
If a university does decide to pursue rankings performance, this must be done strategically, and significant resources will need to be strategically mobilised to succeed. Our modelling provides universities with a set of inputs into such a strategy, including:
As the world changes rapidly, so too must Australia’s education ecosystem to ensure that our students are ready for anything.