As international enrolment growth stalls, yield optimisation is increasingly critical to sustaining revenue growth
A strategic analysis into university revenue optimisation.
Universities are moving deeper into a constrained environment for international student growth.
Alongside international policy changes, domestic caps, rising costs and increased scrutiny of financial sustainability are making revenue optimisation increasingly important. We recognise that both universities and international students also play a broader role, including economic contribution, soft‑power benefits and contributions to cultural diversity; however, this article focuses specifically on the income and financial implications of recent policy changes. As commencements become structurally constrained, international revenue will increasingly be determined by how effectively universities manage yield, mix and retention rather than volume alone.
We argue that Australian universities generally need to start transitioning from volume‑led international growth to yield‑led revenue optimisation. As smaller post-COVID cohorts are fully replaced by new capped cohorts, institutions will face a delayed but material income pinch where they are unable to increase commencements and hence total enrolments. We set out why this is happening, how different groups of universities are affected, and the strategic levers universities can pull in response to maximise revenue.
Recent Trends and Policy
While universities have maintained growth in international enrolments, recent New Overseas Student Commencement ‘soft caps’ will now hit enrolment growth harder as smaller, uncapped, post-covid cohorts from 2021-23 complete their studies and capped cohorts replace them entirely.
‘Enrolments’ are the total enrolments built from several years of commencements (net of completions and attrition). Changes to commencements typically flow through to total enrolments with a multi‑year lag.
International higher education commencements have now largely stabilised over the past three years, following the post-covid recovery, and are now higher than pre-covid levels. This is amid policy tightening which has driven a decrease in total international commencements but been focused largely on ELICOS and VET commencements.
While year-on-year International higher education enrolments are up ~10% from 2024 to 2025, this number is now likely to stabilise as lagging commencement numbers are stable and the smaller post-COVID enrolment cohorts finished their studies. The real income pinch for universities will emerge as the post-COVID enrolment recovery washes through and is no longer offset by growing new student volumes.
The ‘soft caps’ operate as a practical constraint through visa processing prioritisation. Under Ministerial Direction 111, offshore student visa applications were processed as high priority until a provider reached 80% of its indicative New Overseas Student Commencement (NOSC) allocation, after which further applications moved to standard priority processing1.
Additionally, International Student Visas are being rejected more aggressively with the ABS reporting the offshore visa refusal rate rose to 32.5%, the highest in decades2. Post study work visa processing charge increases may also contribute to reducing demand for international students intending to work in Australia afterwards3.
In 2026, universities were invited to apply for additional places by demonstrating progress against government priorities, including deeper engagement with Southeast Asia and ensuring domestic and international students have access to accommodation4. This has a trade-off for institutions who can potentially secure higher international student numbers in return for commitments to housing investment and greater diversification of their student cohorts.
Key Takeaways:
- Recent policy changes constrain new commencements before they reduce total enrolments, creating a delayed impact on growth.
- The post-COVID enrolment recovery will wash through as new capped cohorts replace lower cohorts from 2021-23.
- Future growth will increasingly depend on securing additional NOSC allocations, which are likely to require credible progress on student accommodation and source-market diversification.
Implications for universities trying to maximise revenue
Universities need to fine‑tune their international student strategy by optimising the balance between volume and yield. International student revenue is determined by number of enrolments and net price per student. Enrolments is a function of commencement numbers over recent years, students’ propensity to remain in courses, and course duration. Net price per student is the difference between average gross fees and average discounts provided.
Therefore universities have 5 levers to pull:
- Commencements: Increasing the number of new students through successful bids for higher NOSC allocations and stronger demand generation, conversion and channel performance.
- Student retention: Improving students’ propensity to remain enrolled by reducing attrition and supporting progression throughout the course lifecycle.
- Course length: Shaping course mix toward longer‑duration programs (e.g. double degrees) which increases total enrolments at any point in time.
- Average gross fee: Managing pricing through course mix and fee settings, balancing headline prices with market willingness to pay and competitive positioning.
- Discounting: Actively managing scholarships and incentives to optimise net price per student without materially undermining demand, mix or retention.
Pulling these levers involves trade-offs for universities, underscoring the need for fine tuning to optimise revenue. For example:
- Increasing prices / reducing discounts will negatively affect commencements
- Shifting course mixes may impact the source markets of students who apply thus changing average discounts
- Increasing commencements may require bidding for higher NOSC caps, which will require shifting volume to different source markets (which will impact average discounts, retention rates, etc.)
The policy changes will require universities to tightly optimise their use of those levers. While there are limitations and trade-offs within, there is evidence that universities are already responding to the policy by increasing prices5, reducing discounts and ‘bidding’ for higher NOSC caps by increasing purpose-built student accommodation6.
Key Takeaways
- Universities need to optimise revenue across five linked levers: commencements, retention, course length, gross fees and discounting.
- These levers are interconnected, so decisions in one area can have flow-on effects across student demand, revenue, mix and retention.
University Strategic Analysis
We have provided strategic analysis of 3 categories of universities, Group of Eight universities, Other metropolitan universities, and regional universities.
Group of Eight Universities
Typically, these universities have benefited from significant numbers of international enrolments from high willingness to pay and higher retention rate source markets. These students have typically received lower discounts, enrolled in higher revenue yielding courses (both leading to higher average net prices) and maintained higher retention rates.
These universities have received some of the lowest NOSC cap increases (incl. Sydney University receiving no increase) due to challenges increasing student accommodation in expensive metropolitan areas with limited property development opportunities. Additionally, these universities have likely been reluctant to shift their recruitment from high value source markets to meet the requirements of diversification into Southeast Asia.
The strategic implication of this is that these institutions may need to prioritise yield over volume. That means:
- Protecting price in premium courses with limited available places and lower price sensitivity
- Reducing unnecessary discounting across high value source markets
- Shifting growth toward exempt cohorts where possible, and
- Promoting longer courses and double degrees to sustain enrolments despite constrained new commencements
- Building the case for future NOSC growth through housing investment and regional diversification
We have seen Go8 universities limit discounting in high‑demand courses with constrained places, instead focusing on gross pricing increases to lift yield without overtly cutting scholarships.
Key Takeaways:
- Go8 universities are likely to face stronger volume constraints due to limited NOSC increases, metropolitan housing pressures and reliance on high-value source markets.
- Their strongest levers are gross pricing and discounts, as strong brand position, premium course offerings and lower price sensitivity in key source markets give them greater ability to lift yield without relying on significant volume growth.
Other Metropolitan Universities
The policy changes have created two opportunities for these universities to either pursue volume-driven revenue growth, where there are opportunities to increase caps and attract excess demand, or pursue yield-driven growth where ability to increase caps is limited.
Some universities in this cohort have received significantly higher NOSC allocations and are pursuing a volume‑led strategy, using additional caps to absorb unmet demand and grow commencements (e.g. Curtin, RMIT, Macquarie). Other institutions, such as QUT and Wollongong, have seen only modest cap increases and will need to drive revenue growth primarily through yield levers, including course mix, pricing discipline and improved conversion.
Other metropolitan universities need to choose between volume‑led and yield‑led growth. Institutions with additional allocation can pursue scale by capturing excess demand, while those with constrained caps must rely more on pricing, course mix and conversion to grow revenue. A more balanced hybrid approach is also emerging at some universities, blending selective volume growth with tighter yield management.
We are seeing some metropolitan universities use strengths in QS rankings and employment outcomes in specific broad fields of education to lift net prices in those courses. We have seen this support per student yield increases of 5-15% with minimal impacts on commencements.
Key Takeaways:
- Other metropolitan universities face different strategic pathways depending on whether they received meaningful additional NOSC allocation.
- Those with higher allocations can pursue volume growth by capturing unmet demand, while constrained institutions need to focus on yield, course mix and conversion.
Regional Universities
Regional universities appear to be the main policy beneficiaries in allocation terms, receiving larger proportional increases as government seeks to distribute international education growth more evenly (Federation and Charles Sturt have had over 50% YoY allocation increases, although these are still below their 2019 allocations).
The constraint for regional universities may be less about allocation and more about demand generation, channel strength, conversion and student experience. Revenue upside depends on whether additional allocation can be translated into actual commencements without excessive discounting or weakening retention.
While regional universities may have more volume headroom, the commercial challenge is whether they can generate enough demand, convert students and support student experience. These universities may have opportunities to compete heavily on prices as expected costs for international students increase from cost-of-living challenges and already expensive visa fees.
Key Takeaways:
- Regional universities appear to have more allocation headroom, but their challenge is converting allocation into real commencements without excessive discounting or weaker retention.
- Volume-led growth remains viable, but only where supported by strong demand generation, conversion and student experience.
For a regional university with a generous NOSC allocation, volume‑driven growth may remain viable but success will depend less on policy settings and more on the ability to generate demand, convert students and improve experience to reduce attrition.
Key Takeaways:
- Regional universities appear to have more allocation headroom, but their challenge is converting allocation into real commencements without excessive discounting or weaker retention.
- Volume-led growth remains viable, but only where supported by strong demand generation, conversion and student experience.
Recent policy changes mark a shift from an expansionary period in international education to a more tightly managed system where volume and yield must be actively optimised. With commencements constrained, universities can no longer rely on volume alone to sustain international revenue. Instead, institutions need to deliberately balance commencements, retention, course mix, pricing and discounting.
Many institutions still rely on enrolment assumptions, fragmented data and intuition rather than an integrated view of enrolments, yield and strategy trade‑offs. These policy changes present a clear opportunity for universities to reset their planning, quantify the revenue implications of policy changes, and deliberately optimise their international portfolio. This requires improved data, clear commercial insight and an informed view of the trade‑offs involved.
1 https://immi.homeaffairs.gov.au/support-subsite/files/ministerial-direction-111.pdf
2 https://www.sbs.com.au/news/article/australias-student-visa-crackdown-hits-record-highs/xi9s1oek9, https://www.afr.com/policy/economy/international-student-whiplash-as-visa-rejections-hit-20-year-high-20260402-p5zkv8