Open Doors Fall 2021 snapshot offered some solace for international student recruiters in the US after the strong headwinds of recent years. It comes after nearly two years of pandemic that has seen a focus on technology enabled learning options, increased online language testing and a brutal culling of pathway relationships during 2019 and 2020. A deeper dive into the numbers suggests that fundamentals are changing in ways that will have a material impact on the future of the private pathway providers.
Global demographics indicate that future growth will be driven by India and south-east Asia with a Mitchell Institute report indicating that “India has now overtaken China as the largest source country of international students.” The majority of Open Doors respondents are now prioritizing recruitment in India – 56% in 2021 compared to 45% in 2019 – compared to China where the percentage is now 51% compared to 58% two years ago. However, an increasing numbers of international students seeking graduate level study and having reasonable proficiency in English will brings challenges for pathways in their existing format.
If Chinese students become less willing to travel due to caution over health, political factors and declining returns on investment in a western degree the problems will be compounded. INTO’s own research from November 2021 notes that agents from China, Hong Kong and Macau think that the US has handled the COVID-19 vaccine roll-out considerably worse than the UK or Australia. The rankings for the US being “welcoming and safe” are even less helpful.
Source: Agent Perspective on International Education in the Context of COVID-19, INTO University Partnerships, November 2021
The two established pathway operators with most at stake in the US are Shorelight and INTO but recent developments suggest differences in their willingness and ability to innovate, adjust strategy and move decisively. It has been eight years since Shorelight burst onto the scene with a model that looked like an enhanced version of INTO’s pathway operation but VP Imran Oomer’s early claim that “we wanted to come in without a formula” was an indication of being willing to adapt. Shorelight now has at least 17 pathway partnerships while INTO has lost Marshall University, Washington State University and Colorado State University in the past three years to reduce it to a portfolio of nine US partners.
Past success is not always an indicator of future prosperity but a brief review of the two companies suggests how they might fare under current circumstances. The context and references are in the public domain and offer some grounds for speculation about possible directions of travel.
Shorelight
Shorelight announced five new partners towards the end of 2021 – Eureka College (Illinois), Austin College (Texas), St Thomas Aquinas (New York), Southwestern College (Texas) and Wilson College (Pennsylvania). It seems a significant shift of emphasis for a business which had previously focused almost entirely on partnerships with US News and World Report nationally ranked institutions. The announcements say that they are “accepting international undergraduate student applications through Shorelight” which indicates these are not the full pathway model.
It’s always been difficult to see inside Shorelight’s finances and performance but there have been several indicators that enrollment aspirations for some partnerships have fallen short of expectations. Huron Consulting Group Inc’s third quarter filing in November 2021 show that the ‘fair value’ of the convertible debt investment in Shorelight was reduced from $64.4m (December 2020) to $61.5m. The total cost basis over three tranches (2014, 2015 and 2020) was $40.9m with a consolidated maturity date of January 2024.
In November 2021, CIBC Innovation Banking announced new debt financing for Shorelight although the amount was undisclosed. The announcement says that the money will be used to “invest in automated, self-service tools for students, counselors and universities engaged on its platform” which may be a glimpse of the future of the Shorelight business. This echoes the language of the recruitment aggregators who have been able to secure significant investor funding in recent years.
The latest surge in partners may be designed to impress potential new investors. US recruitment conditions have eased and a robust pitch highlighting online delivery, long-term contractual partnerships with well-known brands and a burgeoning new stream of direct recruitment partners could be attractive. Memories of the past few years of international enrollment declines are fading but with the mid-term elections in 2022 and a Presidential election now just three years away it could be a small window of opportunity.
More intriguingly, Shorelight may be in a position where a capacity for online delivery, the option of face-to-face study and a technology-led recruitment capability has made it into a credible prototype one-stop shop for student needs. A decent number of strong brand names, a deepening pool of price points and a widening range of institutional types makes the portfolio big enough to provide a credible breadth of choice. With reasonable post-study work options in the US, a more benign visa regime and evidence of demand from high-growth source countries there could be some attraction to playing the longer game.
INTO
INTO’s performance has been reasonably well recorded over the past few years and the new year sees the six-month anniversary of CEO Olivia Streatfield’s tenure. The recent departure of the company’s Chief Recruitment Officer offers scope for a revitalization of a top team that has been virtually unchanged for over five years. Cumulative losses of partners in both the US and UK may have undermined the company’s ability to capitalize on blossoming UK enrollment and the resurgence of the US.
Over a five-year period, where it has lost six face-to-face pathways while major competitors have been growing their portfolios, INTO’s competitive edge has looked increasingly blunted. Linking with Cialfo arguably handed ownership of a key recruitment channel to a third party after the 2020 annual report had trumpeted the acquisition of Schoolapply AG as “part of its strategy to continue develop (sic) its technology platform to maximise student recruitment…”. Schoolapply was closed down in February 2021, just nine months after the purchase.
There are few signs of INTO responding effectively to the opportunities arising from online learning. By contrast Study Group has Insendi, CEG Digital has seven online university partners, Shorelight has Shorelight Live and American Collegiate Live, and Kaplan is working with Purdue and has online UK partners. Even relative newcomer Oxford International Education Group, which is opening its first US operation in 2022, has established a “Digital Institute”.
INTO’s most recent partnership in the US is the direct recruitment relationship with University of Arizona (UoA) which reflects the recent direction of partnerships announced by Shorelight and Study Group. It is not a competitive differentiator but may be a wise first step away from the pathway model at a point when enrollments at Oregon State University offer an insight into the problems as international student mobility trends shift. Declining enrollments at the INTO OSU pathway operation are driven by a significant decline in students from China but there is no evidence that enrollments from India are increasing to pick up the slack.
Source: Oregon State University, Institutional Research Enrollment and Demographic Reports
The past year has also seen INTO announce its first partnership in Australia which provides an even more complex set of options for its sales team to manage. Diversity can be an attractive feature but often comes at the expense of spreading management talent too thinly and confusing the market. By contrast Shorelight has retained a laser focus on working with US institutions while diversifying the ways in which it can serve the needs of agents and students.
INTO’s UK and US portfolio could support a level of organic growth as student mobility increases but a trade purchaser looking to beef up existing operations in the UK, US and Australia may be better able to optimize the assets. With money still cheap and a lot of dry powder around it would not be too difficult to see one of the major global players, with relevant management chops and sales expertise, trying to find some synergies. It would also be interesting to see if the management team has enough confidence in its skill and ability to invest in itself, buy out the Leeds Equity stake and compete aggressively in the new world.
It is appropriate to reflect that demand for US higher education remains strong throughout south Asia and that record numbers of study visas were approved for students from India. For operators that can meet that demand with a mixed US portfolio offering realistic options while also catering to the students considering online options as part of their planning process the future could be bright. While reflections on the future of the current big two pathways operators are speculative there is no doubt it will need an agile, flexible and committed approach to make the most of the changed circumstances.