Low international student numbers crippling local businesses

‘We've been decimated. It's actually killing us.’

For Paul Nasr, co-owner of the Launchpad Group, which owns four cafes located in or near the Melbourne University precinct, servicing a student market was once a strategic business move. Now it’s a death trap.

With no students, there are virtually no customers.

‘We've had to flip over one of our shops just so we can stay open,’ says Nasr, referencing the swift transition of MOFO Foods – a health food cafe – to MOFO Burgers – an American-style burger joint – in June 2020 as a means of tapping into online takeaway platforms during Melbourne’s lockdown period. The group’s other establishments, including the chic Stovetop coffee shop, remain closed, and likely will for the rest of the year.

‘We've got all these village towers [nearby] that usually house international students, and a lot of those are empty,’ says Nasr, who estimates that up to 80 per cent of his customer base is made up of international students, particularly those from China.

The fact that the business is run by four family members makes the sting even sharper, as the long-term viability of the hospitality group’s outlets looms.

‘The problem is where we're based,’ says Nasr, given his cafes’ locations in backstreets that only receive foot traffic via the University of Melbourne. ‘It's mainly students and administration, so if there's no students and no administration, we can't open up.’

The hefty commission paid to Uber Eats and other food delivery providers is then nibbling away at the income trickle generated by MOFO Burgers, which, sitting at around 20 per cent of the group’s usual revenue, Nasr says is nowhere near enough to stay afloat.

Down the line, that’s impacting bread and milk suppliers, cake makers, butchers and farmers.

‘You're looking at eight or ten different companies that we deal with,’ says Nasr. ‘The universities themselves are struggling now, and that automatically is going to flow onto us smaller guys as well.’

Ali Lyons, community manager of nearby Seven Seeds, describes the Berkeley Street cafe’s drop off in student trade this year as ‘drastic’. ‘Initially it seemed like there was a decent number of international students who tried to ride out the wave, but after a few weeks, they left,’ she says. ‘Our daily customers were the last ones standing – construction workers and health care workers, plus a few university staff and students.’

Drums Cafe in the Queen Victoria Market has also taken a devastating hit, stripped of the tourists and international students that typically line up for the cafe’s Sri Lankan street food. ‘The lack of students coming to Melbourne, it's a big blow to the city,’ says owner and chef Vijay Sivaraj, who opened Drums Cafe in 1996 after migrating to Australia from Sri Lanka. ‘They come for food, mainly, and also the night market is bombarded with international students. They spend a lot of money here.’

If international student numbers drop by an estimated 50 per cent in 2021, as reported by the Mitchell Institute, it could spell disaster for the small business.

‘The money won't be there for us. I'm really, really worried for that,’ says Sivaraj, who lost around 90 per cent of his revenue during the Melbourne lockdowns. ‘There are no tourists coming. There are no students and there are no workers coming to the city. So directly it affects all the cafes and restaurants in the city.’

For example, Trinity College Pathways School students, who live in inner-city accommodation and frequent nearby restaurants and cafes, spend an estimated $65 million alone on goods and services in Victoria each year.

A way of getting the economy moving again is to open up travel corridors for international students, as is being trialled in Darwin, where around 70 students from China, Hong Kong, Vietnam, Indonesia and Japan will arrive this week and spend two weeks in quarantine before commencing studies at Charles Darwin University. (Similar programs were planned for Adelaide and Canberra earlier in the year, but were halted by Australia’s second COVID-19 wave.)

If successful, it is hoped that the program will be expanded, and Australian purpose-built student accommodation (PBSA) providers are putting their hands up to help facilitate the process by managing international arrival quarantine programs.

This includes UniLodge Australia, Scape, the Asia-Pacific Student Accommodation Association (APSAA), the International Education Association of Australia (IEAA) and the City of Melbourne, along with the Student Accommodation Association – the representative body for quality student accommodation facilities in Australia. All are lobbying for an industry-led solution that would complement Australia’s current hotel quarantine program. This proposal is being put to the Australian Government this week, outlining a plan to safely return international students to Australia.

‘We can provide further room stock to add resources to the various state government quarantine programs,’ says UniLodge CEO Tomas Johnsson. ‘We think we can get somewhere around 6000 beds between us, and if we can turn those over every 18 days or so, we can bring in 130,000-odd people in 2021.’

It is expected that more than half of these beds would be provided by the Scape Group – Australia’s largest owner and operator of PBSA. Scape is driving an audit process to assess and promote the suitability of PBSA buildings and rooms in offering safe and effective quarantine solutions.

‘Scape has been lobbying and leading the charge as a key representative for the PBSA sector as a whole,’ says Scape CEO Anouk Darling. ‘We believe that together we can offer a viable industry-led solution for the safe return of international students, which does not impact the quota or resources that have been allocated to the return of Australian citizens.’

Without concerted effort and action, the risk is that Australia will end up in the too-hard basket, and the country will lose out on the $37.5 billion in annual revenue associated with international education.

According to the Mitchell Institute, around 57 per cent, or $21.4 billion, of the total $37.5 billion in annual revenue generated by international education comes in the form of goods and services spent in the wider economy.

‘Melbourne is a classic example,’ says Johnsson. ‘When you walk around some streets of Melbourne on a normal day it’s three-quarters students. If you take them out of the equation, the economy certainly feels the pinch.’

By Emily McAuliffe