Things seem to be moving fast as the big pathway players realise that winter is coming, both physically and metaphorically, to their US operations. Hot on the heels of the recent Study Group closures there are strong rumors of Navitas reviewing its US partnerships and cutting staff. Shorelight has also taken action through changes to its senior management team and staff lay-offs in the past month.
The Navitas partner changes are still at the point of speculation and no brand names have been removed from the list of partners as of today. But the ‘Search Navitas programs’ area of the website turns up no results for Virginia Commonwealth University, Richard Bland College or University of Idaho. Searches for University of New Hampshire courses lead to a broken ‘this page isn’t working’ link.* By contrast the Florida Atlantic University pages, UMass and Queen’s College pages seem fine, as do the Canadian university partner links.
Dr Brian Stevenson took up the reins as CEO and President of Navitas’ University Partnerships North America division at the start of this year. With his strong links to Canada it’s possible that there is a major shift of emphasis that would reflect the continuing popularity of Canada as a student destination. There certainly seems little prospect of any but the best or most market-oriented US universities being a profitable proposition in the near future.
In October InsideHigherEd noted the decline in Chinese student enrollments and its potential impact on US universities but the next news might be about the changing preferences of students from India. 2019 saw the UK have a 42% year on year increase in visas issued to Indian students and there is every sign that the coming year will see similar growth. With changes in post-study work visas coming into effect for 2020 enrollments universities and pathways are already reporting substantial interest.
Back in 2014 Karan Khemka, then a partner with the Parthenon Group, said: “The U.S. third-party/outsourced pathway market is less than half the size of the Australian market despite having a higher education system that is 10 times the size. We anticipate that growth will be constrained only by the pace at which private providers can develop the market.” That was one of the drivers for over $1bn of private investment being made in pathways.
The reality is that, with CEG and EC leaving the market, Study Group cutting back and Navitas now looking hard at its options, the past 18 months has seen a decrease of well over 10% in the number of US pathways. By contrast the UK and European pathway market continues to grow and Australia has just loosened its post-study visa regime a little further. It seems likely that this is the prevailing direction of travel for the foreseeable future.
*Searches undertaken on 30 October 2019. As with all commentary in this blog any authoritative comments or corrections are welcome and will be recorded.
Getting contemporaneous data and sales targets from privately
held pathway providers is unusual. But
in a July 2019 podcast
interview, Sean Grant, Chief Recruitment
Officer of Shorelight Education, tells us that Shorelight recruited 3,000
students “last year” (presumably 2018/19) and are forecasting to recruit ”4,000
students plus this year.” Grant notes
that the 3,000 student figure for 2018/19 represented year-over-year growth of
35%, which suggests Shorelight recruited approximately 2,200 students in
2017/18.
It was equally enlightening to hear that the company continues
to invest heavily in building its sales function. Grant noted that Shorelight’s
US-based onshore recruitment team grew from five people to 28 in “about six weeks”
last year. While staff growth of this magnitude and pace is prodigious by most measures,
it may be the norm for a company that considers itself “the Amazon or the Google
of the…international education sector.”
Because Shorelight is a private company based in the US, it
has largely been able to maintain confidentiality around its economic
performance (unlike UK-based competitors, who are required to publicly disclose
annual financials). The Shorelight website shows 17 current
university partners, and a press
release announced their partnership with Cleveland State for fall 2019
recruitment, bringing the total to 18.
Grant referenced 19 partners in his interview, so it’s just possible we
may have had early notice of a new partner joining the portfolio.
Shorelight is now in its seventh year of operation since its mid-2013 inception. With the disclosure of recruitment numbers and the indication that the business continues to invest heavily in sales staffing, it’s worth drilling down to look at how the six public universities that signed early on with Shorelight are doing*.
Louisiana State University
Shorelight began recruiting for LSU in 2015 and since then
the university’s total enrollment of non-resident aliens have fallen from 1704
in fall 2015 to 1599 in fall 2019 according to the Geographical
Origin of Students spreadsheet.
Table 1 – Total Fall Enrollment of Non-Resident Aliens at Louisiana State University
Souce: LSU Fall Facts and Interactive Dashboard
In the form contract between LSU and Shorelight, publicly
disclosed by the State of Louisiana, the articulated enrollment goal for
the International Accelerator Program, i.e., the pathway, is 850
students in the ’fifth Academic Year of the IAP” (2020/21). Inside Higher Ed reported that in spring 2018 “there were just 136 students
enrolled,” and market
rumors suggest that recruitment remains a long way short of target. The absence
of overall international enrollment growth at LSU suggests that neither pathway
or direct recruitment are going to plan.
University of Kansas
There is a similar story at the University of Kansas where
the fifteen-year contract with Shorelight came under
fire from academics at the time it was signed in 2014. Sarah Rosen, then Vice Provost for Academic Affairs at
KU (who has since moved to Georgia State), was reported to have articulated enrollment
aspirations of about
600 in two or three years. As Shorelight sought
and won an injunction preventing the release of the
contract, no further insight into the parties’ ambitions are available. As KU’s total fall enrollment of non-resident
aliens (termed international in the Factbook) has decreased during the relevant
period, it seems likely that this aspiration was not met.
Table 2 – Fall Enrollment of Internationals at University of Kansas
Auburn signed with Shorelight in 2015. The university’s online, interactive Factbook offers the option to filter enrollments by on-campus, “Primary Major” which includes the various “Auburn Global” programs offered in partnership with Shorelight. Enrollments rose substantially between 2015 and 2016 but have been in steady decline since. Overall, enrollments are largely undergraduate and Chinese.
Table 3 – Fall Enrolment to Auburn Global Courses at Auburn University
At the university level, the impact of the trends within
Auburn Global are clear: total international student enrollment has grown from
1639 in 2015 to 3034 in 2019, with the percentage of Chinese students going
from 46% to 62% during this same time. Obviously, the financial impact of 1400
additional students is material; however, the risk associated with such a large
proportion of students from a single source country, especially in the current
political climate, is palpable.
University of South Carolina
The Fall 2018 International Student Enrollment Report from USC captures the five-year picture on the university’s international recruitment. The International Accelerator Program (IAP) has helped push undergraduate numbers forward but its growth appears to have stalled. Of the total international enrollment for the university 40% of students are from China.
Table 5 – International Student Fall Enrollment – University of South Carolina
Source: USC Fall 2018 International Student Enrollment
Report
Florida International University and University of
Central Florida
Both of Shorelight’s Florida partners have seen strong growth in overall international enrollments. As a comparator, the University of South Florida, an INTO partner, saw total international enrollments grow by around 1500 between 2015 and 2018. This may reflect both the popularity of Florida as a destination for international students and that the three universities have lower fees than the others reviewed.
Table 6 – International Fall Enrollments at UCF and FIU
Source: Factbooks of Florida International University and Central Florida University
Summary
Some crude metrics emerge from the forecasted recruitment
outcomes mentioned in the podcast. If
Shorelight indeed recruits 4,000 students this year, the average number of
students recruited by each member of the 145-person sales team this year will
be 28, and the average number of recruited students per partner (assuming 18
partners) will be 222. Seasoned recruitment
professionals will have views on how that ratio stacks up in terms of
performance.
There will also be opinion on what the drive for 35% growth might mean in terms of cost of acquisition for US-bound students. As Inside Higher Ed reported in June 2018, promotional bonuses were already pushing agent compensation ”well north of the 15 percent threshold,” and it seems unlikely that this cost will have fallen. With the UK resurgent after reintroducing two year post-study work visas competition just got even tougher.
The closure of partnerships by Study Group, CEG and EC has provided insights into how difficult the US pathway business has become. The experience of the partners reviewed here suggest that, regardless of ranking, success can be elusive and only time will tell whether Shorelight’s strategy is a winner. Investment and targets are one thing, but brute market realities are quite another.
*University reporting formats are not wholly consistent. Extensive efforts have been made to verify data used and sources are given for reference. Authoritative comments or corrections are welcome.
INTO’s joint venture with the University of Gloucestershire is under ‘strategic review’ with the possibility of closure. INTO is no longer accepting applications to start at the on-campus centre in 2019, which is understandable given the uncertainty but seems unlikely to improve future prospects. It is anticipated that the review will be complete in early July.
A number of ‘third party’ pathway centres in the UK and US have closed in recent years, including Navitas at Edinburgh Napier and Oxford International at the universities of Canterbury Christ Church and Bedfordshire. In the US four CEG OnCampus pathways are closing, and EC’s higher education business has shut down with partners moving to Study Group. INTO Gloucestershire offers some insights into the dynamics at play in the joint-venture model.
The centre opened in 2013 but has struggled to build enrolments or achieve operating profitability. The most recent published figures show average enrolments falling for two years and lower in 2017/18 than 2014/15. The University’s Financial Statements for 2017/18 noted ‘the highly challenging market’ and it seems unlikely that 2018/19 enrolments were much, if any, better.
The University’s most recent Financial Statement concluded that the ‘financial performance of the JV entity combined with the net revenues from progressing students, continues to deliver a worthwhile partnership arrangement for the university which enhances the internationalisation agenda.’ With the UK likely to be heading for a good enrolment year this might seem to be a good moment to double down on the investment after weathering some difficult years. There’s also the possibility of even better times ahead if proposed changes to post-study work opportunities become reality.
But as the joint venture enrolments have slipped first year, full-time international enrolments have also stalled for the University. Published data doesn’t provide insights into progression from the joint venture but as UK universities have become more competitive for international students it’s possible that more are leaking away to better ranked or more favourably located institutions.
Table 2 – University of Gloucestershire Non-UK Enrolments with JV Enrolment Overlay
Source: HESA Data and INTO Gloucestershire LLP Annual Reports
A closer look at the financial story also suggests some reasons for caution on all sides. Recent Financial Statements show the University has written off £2.8m of debt from the joint venture over two years with INTO University Partnerships (IUP) writing off £3.8m of debt in the same period. Current financial year data is not available but the debtor balance owed by the joint venture to IUP at the end of 2017/18 was £1.77m.
Table 3 – INTO Gloucestershire LLP Debtor Balance to IUP and Written Off Amount
The joint venture has been unable to operate profitably in its first five years of operation despite measures to make ‘changes to the model of paying for services supplied by the two respective parent organisations’. One ratio for pathway watchers to consider is that the joint venture’s cost of sales rose from 73% in the peak enrolment year of 2015/16 to 87% by 2017/18. Significant reductions in operating expenses have been unable to make up for the resulting decline in gross profit, but are likely to have reduced revenue to the partners for services they provide to the joint venture.
Table 4 – INTO Gloucestershire Turnover, Cost of Sales, Operating Expenses and Operating Profit
Note: Operating loss shown excludes exceptional items and interest Source: INTO Gloucestershire LLP Annual Reports
A university statement indicates that the strategic view was initiated jointly. Increasing levels of indebtedness, less revenue from the centre paying for services and little prospect of a significant shift in the ability to recruit students would certainly concentrate the mind. As the joint venture’s Annual Report notes – ‘the principal risk facing the LLP is the continued under-recruitment of students to its programmes.’.
The university have confirmed that ‘no decisions have been made’ and that ‘no compulsory redundancy notices have been issued to staff either employed by the JV, or employed by the University outside of the JV, as part of this process’ and it is to be hoped that INTO and the University of Gloucestershire can find a sustainable way forward . But if not, it would follow INTO University of East Anglia London and INTO St George’s University as the third of the company’s joint ventures to close. That would leave eight joint ventures and two wholly owned operations remaining in the UK.
Most pathway portfolios have partnerships that struggle to recruit and are likely to come under the microscope when times get tougher or business models are disrupted. That’s why there is likely to be more realignment, restructuring and portfolio shuffling as the sector matures. I once heard an industry leader comment that the trough between launch and profitability is becoming deeper and longer – the question is whether some vessels are too leaky to make it to the other side.
The past few months have seen Ardian purchase Study Group, Navitas on course to be taken private and, most recently, news of EC’s North American Higher Education division moving to Study Group. Between 2010 and 2014 the pathway market was characterized by over a billion dollars of private investment and a dash for growth in university partnerships. But as global competition, technological disruption and changing demographics bite there are closures, sales and realignment.
As the market becomes more challenging investors have some strategic decisions to make. Recent developments and news coverage gives some grounds for speculation on what that might mean.
Cambridge Education
Group/Bridgepoint Capital
In 2013 Bridgepoint Capital paid ‘an enterprise value of UK £185m’ (around $241m) for CEG. One commentator suggested, “The pathways sector has delivered remarkable growth and profitability over recent years. Strategically the space is exciting..”. It seems possible that the future will be about excitement in other parts of the portfolio.
CEG recently confirmed the closure of its ONCampus individual pathway centers at Rochester, Rhode Island, CSU Monterey Bay and the University of North Texas. The relaunch of ONCampus Boston in fall 2019 and direct recruitment at Illinois Institute of Technology keeps a toehold in US HE. But with no further ONCampus developments in the UK since 2016 it looks like it has called time on pathways linked to individual universities.
But the Group has other options and is investing in the CATS College brand (colleges for 14-18 year olds) with the first China centers opening in March 2019. The two centers are in Shanghai and will provide a path for students to join CATS UK Colleges and other CEG options in the UK. In the UK the company’s digital delivery arm has also been growing and added Cass Business School and the University of Hull as partners in 2018.
It seems plausible that CEG is focusing on driving the CATS business and building a growth story around digital while putting pathways into a holding pattern.
INTO University Partnerships/Leeds Equity Partners
INTO added the medium sized, public, Illinois State University and smaller, private institution, Hofstra to its US portfolio in 2018. But data from Oregon State and Colorado State reflects the tightening of the US market and the possibility that new partnerships may erode the enrollments of existing partners. INTO hasn’t opened a new UK partner since 2016 and average enrollments at mature partnerships (five years or more) and wholly owned centers shows that overall recruitment in the UK is no greater than 2014/15 levels.
The company’s joint-venture model was a key differentiators in the early days but has been substantially replicated by a US competitor. INTO is focused on pathways but has the potential to build business as a recruiter of non-pathway international students for existing or new partners. If Leeds Equity are looking to move on this could be the moment where the business recapitalizes to buy out their 25% share and perhaps get some headroom to invest in new business opportunities.
Shorelight
Shorelight was six years old in January 2019 and is the only major pathway provider with no interests outside the US. The portfolio grew in the last twelve months with the additions of Cleveland State University (March 2019) and Mercer University (October 2018). Eighteen university partners mean that there are a lot of seats to fill at a tough time for the US market.
With the squeeze on international enrollment growth in the US, Shorelight probably needs to dominate pathway recruitment to deliver the results expected by partners. The growth in pathway options and degrees delivered in English around the world has made it a buyers’ market for students and recruitment agents. Any outperformance in recruitment is likely to come at a price and provoke a competitive response.
Declining markets, increasing costs and over-supply are not easy problems to solve and it may be time to look for new options to spread costs and risks. Given Shorelight’s recruitment infrastructure and evidence of success with some good universities in the US it could be productive to pitch for a high-quality university in the UK, Europe or Australia. A big name that doesn’t want to be part of the Kaplan, Study Group, Navitas or INTO portfolio might find a dedicated partner worth a conversation.
Study Group/Ardian
The purchase of Study Group by Ardian positioned the investor with the ambition to make ‘strategic acquisitions’, and a belief that pathway growth would continue to be ‘double digit’. It is difficult to see that organic growth in the US will be the main driver of the latter prediction. But taking on EC’s operations in the US appears to signal an intention to continue to build market share.
Study Group’s business is diversified geographically and has high-school/college options as well as pathways. The UK/Europe pathway business looks stable and recently announced a new partner in Aberdeen. In the US the Managing Director has just left and it may be a good moment for strategic review in the context of market conditions.
Last Friday saw a pretty eye-catching announcement by the University of Surrey whose problems appear to demand radical cost-cutting action including offering all staff voluntary redundancy. One highlight was Vice-Chancellor Max Lu’s comment that ‘Some of the main financial challenges include reduced income due to Brexit….’. If that’s right a number of universities might be even more troubled.
In 2017/18 the average percentage of EU students (defined as EU domiciled but non-UK) in all degree awarding institutions listed by HESA was 5.94%. With an EU population of 9.9% Surrey was considerably above the norm but far from alone with Lancaster University and City University at 10.1% and 10.5% respectively. This might go some way to explaining Lancaster’s desire to set up a remote campus in Germany.
Leaving aside relatively narrow, specialist degree awarding institutions, Cranfield with 21.2% EU and University Colleges Birmingham with 20.6%, look to have a lot at stake. The broadly-based university with greatest exposure seems to be Aberdeen where 19.9% are EU. If the big brands and specialists are able to overcome any Brexit jitters the next most vulnerable English university looks to be Essex with 12.8% EU.
Table 1: Top 20 Universities for EU Students As A Percentage Of Total Enrollments (excluding specialist institutions) 2017-18
Of course, the spectre of Brexit may just be the University of Surrey’s way of getting impetus for restructuring. To be absolutely fair Lu’s comments continue, “… and an ever more competitive student recruitment environment, significantly increasing pension costs and a national review of tuition fee levels.”. That would be true for every university so it is interesting that he adds, “Our university also faces the not inconsiderable impact of a fall in our national league table positions.”
The potential for league tables to create such havoc with a University’s finances is troubling and needs consideration at another time. But the potential for a sharp fall in European Union recruits is certain to be a concern for those institutions with heavy representation and it would bring even sharper competition to the battle for UK and full-fee paying international students. In that respect the bigger brands have an inbuilt advantage and will be looking to take an even bigger share of the market.
As Brexit plays out it will also be interesting to see if more pathway operators are able to convert university nervousness about recruitment into opportunities for partnership. Navitas seem to have a head start in operating overseas campuses for partners, but QA Higher Education operates UK campuses with full-degree courses for several of its partners, and INTO have been doing the same for Newcastle University in London. It’s an interesting development area for pathway operators attempting to diversify and deepen their services.
Credible and well publicised global comparative university rankings are one factor changing the face of international recruitment. Students and their advisers can compare and contrast between Beijing, Berlin, Boston and Birmingham at the touch of a button. The rapid growth of online courses from universities around the world has also helped to popularise the notion of ‘shopping’ for courses through the internet.
It is clear that league tables matter and that universities see them as an important part of student recruitment. Some less welcome consequences include misleading claims and recent incidents suggest that data submitted is not always accurate. Perhaps these incidents reflect the recognition that league tables can help build reputations that support both country and institutional desirability.
In that respect evidence suggests the US is losing its way as a global rankings leader with strength in depth. For pathway providers it’s a double-whammy when the quality of their US partnerships, as defined by global comparisons, looks to be lagging behind their partners in other parts of the world. At a difficult moment for US recruitment of international students it may be another indicator of harder times ahead.
US DECLINE IN GLOBAL RANKINGS
The US has traditionally been dominant at the top of global rankings and remains powerful. But The Economist (May 19th 2018) highlighted how its broader grip on the Academic Ranking of World Universities (ARWU) table has slipped over time. Chinese and Australian universities have seen the most significant growth in the table over that period.
Table 1 - Representation of Countries in ARWU TOP 500 - 2003 to 2017
The Times Higher Education (THE) World Rankings also noted that in 2018 ‘two-fifths of the US institutions in the top 200 (29 out of 62) have dropped places.’ In contrast, two Chinese universities had risen into the top 30 for the first time. This shift in global power reflects the growing power of China as a first choice for international students.
US PATHWAY PARTNERSHIPS BELOW TOP LEVEL
While many US universities are slipping in global rankings, pathway providers also seem to be struggling to secure partnerships with the very best universities in the country. Since April 2016 none of the partnerships announced by Study Group, Navitas, INTO or Shorelight has been in the top 200 in the QS Ranking or THE World rankings. Only two make it into the US News and World Report (USNWR) Global top 200.
Table 2 – Comparative Ranking of New US Pathway Partnerships Announced Since April 2016*National rank unless noted
Looking over the total portfolio of pathway partners of the ‘big 4’ providers in the US shows that more than half are not globally ranked by the QS, THE or, even in the US News and World Report Global Top 1000.
Table 3 – Global League Table Rankings of Pathway Provider Institutions in the US
UK PATHWAY PARTNERSHIPS LOOK STRONGER IN GLOBAL RANKINGS
Three of these providers are active in the UK where their portfolios look significantly stronger in terms of global rankings. With the addition of the fourth big player in the UK – Kaplan – the overall number of partners is similar. At an aggregate level the worst performance is in the USNWR ranking but even by that measure less than a third of partners are unranked.
The UK is a more mature market for pathways but the recent emphasis of the major players seems to be on enhancing quality. Kaplan partnered with the University of Nottingham in July 2016 and Study Group announced a deal with Durham University in February 2017. Kaplan and Navitas have established new-style arrangements, including investment in infrastructure, with long-term partners Liverpool and Swansea respectively. INTO’s last UK deal was with the University of Stirling in April 2014.
Table 4 - Comparative Global League Table Rankings of Pathway Provider Institutions in the UK
A GLOBAL LEAGUE TABLE FOR THE ERA OF THE CLICK
Some pathway groups also have strong representation in Australia (and to a lesser extent in Canada). A composite league tables to reflect this and show the ‘top 11’ pathway partner universities, according to three major global league tables, shows considerable consistency. Six universities (shaded) are in all the tables and five are in two. It is, however, worth noting that all but one have slipped lower in their placing between THE 2018 and THE 2019.
Table 5 - Top Pathway Partner Universities In Selected Global League Tables
NB: The University referred to in the table as Alabama is the University of Alabama – Birmingham.
CONCLUSION
Most people who work in the sector have seen the growth of league tables as an imposition with occasionally perverse consequences for investment and resource allocation in the institution. It is entirely possible to argue that that the rankings are arbitrary and spurious with no particular relevant to student outcomes. But they are increasingly offering new layers of insight to capture attention – the QS Graduate Employability Rankings is an example.
Students, parents, agents and employers look at league tables and most student recruitment marketing focuses on favourable rankings while ignoring less flattering indicators. They are far from the only factor involved in decision making but they set a tone that influences potential students and staff. It is rare to find an institutional leader who is not keenly aware of their relative performance.
In terms of international recruitment league tables are part of an institution’s ‘sales kit’ and the growth of global comparisons exposes their relative strengths and weaknesses. It is noticeable that as international student growth has stalled in the UK over the past five years the bigger and better ranked university ‘brands’ have taken a larger share of those coming to the country. It seems inevitable that this will be the story for the future and that universities without ranking ‘power’ will need to work harder to avoid being marginalised.
NOTE:
The exact nature of pathway provider and university partnerships is not always clear but extensive efforts have been made to focus on pathway partnerships where students are taught on-campus. The author is happy to hear from any authoritative source who has information that might improve the accuracy of the article. Any corrections will be noted below.
Correction and Update – 1 October 2018
The tables and commentary have been updated to reflect the publication of the THE Global Rankings 2019 during week commencing 24 September 2018 (comparative positions for individual universities are shown). Broadly speaking the new table showed declining rankings for both US and UK universities In addition, the tables have been corrected to show the rankings for Shorelight partner the University of Mississippi (Table 2) and INTO partner the University of Exeter (Table 5).
In 2014 Karen Khemka, a partner with the Parthenon Group, said “The U.S. third-party/outsourced pathway market is less than half the size of the Australian market despite having a higher education system that is 10 times the size.We anticipate that growth will be constrained only by the pace at which private providers can develop the market.” (Inside Higher Education, Bridge or Back Door? 30 April, 2014). With reports recently indicating that two leading providers in the US, Study Group and INTO, are for sale it’s a good moment to see what has happened.
Khemka’s statement came towards the tail end of a period when more than a billion dollars was invested in private pathway providers with the potential for pathway development in the US a strong incentive. But the next billion-dollar question facing potential investors may be whether US pathways were really a field of dreams where you could, to borrow loosely from the film, ‘build it and they will come’. Or has attention to the supply side of the equation ignored the challenges of changing patterns of demand around the world?
To size the growth in capacity in the US I took the NAFSA publication Landscape of Third-Party Pathway Partnerships in the United States (NAFSA, 2017) as a starting point. The publication identified eight providers who were partnering with 45 institutions on 1 April 2016. The criteria was that these partnerships had to be ‘contractual agreements between universities and third-party entities to provide English language courses along with academic credit.’
I revisited each of the third-party entities listed to determine what relationships they have added. It is reasonable to say that the wording of some media statements and the content of web-sites is, either by accident or design, unclear about the exact nature of the relationship or offering. However, Table 1 summarises my understanding of new partnerships that meet the original criteria and notes the dates they were announced.
Table 1 – New US Pathways of Eight Providers Announced 2016 to 2018
* Source: Landscape of Third-Party Pathway Partnerships in the United States (NAFSA, 2017) **I can find no public announcement of the Shorelight partnership with Utah but it is reflected on the web-site of each organisation
Table 2 shows arrangements listed on the providers’ websites but which I have omitted. I am happy to accept any authoritative corrections in my understanding of the nature of the partnerships or courses provided and to add any partners I have missed. I have not gone beyond the original group of providers although a number of additional providers, such as EC Higher Education, have also developed pathway courses in recent years.
Table 2 – Partnerships listed on provider websites but not meeting criteria
The eight providers have added 21 new partnerships to the 45 shown in the original study – a growth of 47%. This suggests that the private providers have set about growing their businesses in the US with a good deal of vigour and some degree of success. At the time of Khemka’s quote in 2014 Shorelight was a new player but they have moved on to secure the most partnerships just four years later.
That growth in pathway capacity comes at a time when the global balance between supply and demand is in a state of flux and the future is somewhat less certain. The expanding availability of degrees taught in English and the ambitious targets of both traditional recruiting countries and emerging destinations has radically changed the competitive environment. While much of the world is adding rocket fuel to its recruiting engines the US looks to have loaded its unleaded petrol engine with diesel.
In the US a decline in non-degree new enrolments in 2015/16 was followed a year later by both graduate and undergraduate new enrolments declining. And non-degree enrolments continued to fall in 2016/17 which may be a leading edge indicator of further decline. The IEE Fall 2017 International Student Enrollment Hot Topics Survey says ‘Responding institutions report a 6.9 percent decline of international students enrolling for the first time at a U.S. institution, continuing the declines first seen in Fall 2016.’ (IEE, November 2017)
Table 3 – US New International Student Enrollment, 2006/07-2016/17 Source: Institute of International Education (2017). Open Doors Report on International Education Exchange. Retrieved from http://www.iee.org/opendoors
Like many sectors higher education is being obliged to rethink the fundamentals of supply and demand as demographics, competition and disruptive technologies undermine the old certainties. It is a challenging moment to be launching new initiatives and building capacity based on past performance.
NOTES AND CORRECTIONS
This post was updated on 24 September 2017 to include Lynn University as a Study Group partner announced in May 2017. Other related statistics have been updated. At the time of announcement it was billed as ‘is set to open in January’ – presumably 2018. As of the date of this correction the partner is billed on the Study Group site as ‘Launching Soon’.
After looking at the broader picture on winners and losers in HE recruitment I’ve focused on a small number of high profile university partnerships to give some texture about those with pathway providers. Diving into the detail published by universities gives some insight as to whether pathway provision is delivering a stable stream and enhancing direct recruitment through global brand-building. Comparisons against the national picture indicate whether they are doing better than the sector overall.
Detailed breakdown of pathway volumes and progression rates are usually deemed commercially confidential and are rarely matters of public record. As a proxy I have looked at overall international student enrolment for the institutions involved as one would expect a thriving pathway of any size to provide a solid underpinning for broader recruitment efforts. Where possible I have supplemented this with Quality Assurance Agency for Higher Education (QAA) or University Annual Report data (available through the BUFDG site.
The examples I have chosen show sharply different outcomes at the university level. The underlying detail from supplementary sources suggests that the pathway is a contributing factor to those outcomes. In a broader context some institutions have done better than average and some not as well.
While the detail is UK related there is little reason to believe that the same isn’t true of the US and I’m doing some more work on that hypothesis for a later blog.
Three Big Players and Partners
Institutions are never wholly comparable but the universities of Newcastle, Liverpool and Sheffield are all large, metropolitan, Russell Group universities with substantial global ambitions. In the Times League Table 2018 Newcastle is 26th, Liverpool is 42nd and Sheffield is 21st. Newcastle and Liverpool have partnered with INTO and Kaplan respectively since 2007. Liverpool recently extended for another 15 years while Newcastle opened a new London campus with INTO in 2015 and are also in for the long haul. Sheffield was with Kaplan but switched to Study Group from September 2015.
Information published in University Annual Reports on overall international student enrolments in the five years from 2012/13 to 2016/17 suggests that Liverpool have, to date, weathered the headwinds facing the UK better than Sheffield or Newcastle. Source: University Annual Reports and Financial Statements 2012/13 to 2016/17
The university financial statements suggests that any changes to fees have not been sufficient to make up enrolment shortfalls. The fee income reflects the down-turn in student numbers for Sheffield and Liverpool in the 2016/17 year but also suggests weakness for Newcastle over the past two years. Source: University Annual Reports and Financial Statements 2012/13 to 2016/17
To provide a comparative performance for the universities I have used HESA data for all international enrolments (all levels, full-time and part-time) in the 129 universities in the 2018 Times League Table. This is a measure which should include students enrolling across the whole year and should account for pathway progression from all intakes. It usually differs from the University Annual Report enrolment figures which are generally taken from a count in December of the academic year. I review the complexity of the broader HESA data in an earlier blog.
All the universities outperformed the average in the first two years under review. Liverpool and Sheffield achieved this between 2014/15 and 2015/16. Liverpool continued to outperform the sector from 2015/16 to 2016/17. Source: HESA
Understanding The Pathway Performance
There is some insight into the changes at the pathways for Liverpool and Sheffield through the Quality Assurance Agency reports. For INTO Newcastle there has been no similar educational oversight although my understanding is that the changing visa situation will mean that ISI will provide oversight in the future which may lift the veil. My observations below are drawn from published material including university annual reports.
Newcastle and INTO
The University notes in its 2016/17 Annual Report that the enrolments at INTO Newcastle ‘had a disappointing year with a 7% reduction in student volumes’ which was comparable to the University’s direct recruitment decline. As a 50/50 joint venture partner the University also reports on its share of joint venture income and surplus/deficit. For completeness I have shown both the Newcastle-based and London-based operations but note that the latter has substantial undergraduate and postgraduate intakes in addition to pathways. Source: University of Newcastle Annual Reports 2012/13 to 2016/17
The London joint venture is still in start up mode and student numbers are reported as having grown from 24 in year one to 184 full time and 20 part-time students in year two. The income and operating surplus/deficit are reported as: Source: University of Newcastle Annual Reports 2014/15 to 2016/17
Liverpool and Kaplan
What is most striking about reviewing performance through the lens of the University Annual Reports is that it can reflect a level of engagement and shared commitment – or in some cases not. On page three of the 2016/17 Liverpool University report the Vice Chancellor reflects on the long-standing relationship, the renewal agreement for the next 15 years and the investment in new facilities for the pathway. The report notes that the partnerships with both Kaplan and Laureate International ‘are vital to the University’s international outlook and global ambitions.’
The Annual Report notes that Kaplan’s International College opened in 2007 with 146 students and has seen 6,500 students study at the College, with 20% of the institution’s international recruitment achieved via its pathways. Future investment includes construction of a new, 47,000 square foot, 13-storey college building due to open in 2019.
A key determinant of a successful pathway relationship is the extent to which the University partner embraces the strengths of the private provider and clears roadblocks to innovation and recruitment. Both parties are undermined if the University does not engage productively at both a senior and operational level. The 2016 QAA Report for Kaplan International College at Liverpool notes ‘The close working relationship with the partner university, which enables highly effective and regular processes for developing, monitoring and reviewing of programmes’.
Sheffield and Study Group
Sheffield International College was first established by Kaplan with the University in 2006. In 2010/11 it had over 1100 students and this number had ‘grown’ by 2013 despite no new programmes being introduced (QAA Reports 2012 and 2013). Over a period from March 2014 to September 2015 there was a transition to Study Group.
The November 2016 QAA Review indicates that 933 students were in the Centre and the next report in October 2017 says that ‘student numbers fell by around 12 per cent between 2015-16 and 2016-17’. On the upside it was noted that 7 per cent more students entering programmes at USIC being eligible for progression to the University. The timing of the QAA review makes it difficult to draw firm conclusions about full-year recruitment.
It’s still early days in the partnership and the whisper in the sector is that the University protected its commercial interests in the event of any performance issues – perhaps a sign that universities are becoming more commercially minded. The PIE noted in August 2017 that ‘Providence Equity Partners, which owns higher education provider Study Group, is reportedly preparing to sell the company for £700m’ so there is a lot at stake as the company manages the expectations of its large stable of partners. Interesting times as the UK itself comes under relentless market competition from Canada , Europe, Australia and the emerging destinations in Asia.
Closing Thoughts
Nobody who is looking from outside can full understand the dynamics of a relationship between University and pathway provider. Anyone who has been at the sharp end knows that personalities, department politics and academic apathy are all facts of life as is, from time to time, a revolving door of senior decision makers. An initial meeting of minds at the highest level is usually not enough for sustained success so the working relationships need to become rapidly embedded.
What is for sure is that the chances of maximising performance are vastly enhanced by realistic expectations, responsiveness to market and action on shared commitments. Universities need to see the pathway as being fundamental to their success and treat the provider as an equal partner with important skills. Providers need to be honest about what they can deliver and manage how their portfolio is balanced to meet targets and business plans.
And perhaps, given the age of the pathway model and the way the market is changing it is time to consider whether further innovation is needed. Over the years I have heard several major pathway players define their approach as ‘disruptive’ or ‘transformational’ but it is difficult to see how pathways are any different now to when they were introduced.
Notes and Corrections
Comments are always welcome and I think it is a good thing to note any corrections or amendments to the text.
30 April 2018 10.05amPDT – amendment to correct ‘Newcastle and Liverpool have partnered with Kaplan and INTO respectively..’. Correction to clarify that INTO partner with Newcastle and Kaplan partner with Liverpool.
It seemed a good moment to look at the pathway market and what happens when relationships don’t work out. This is partly because we may be entering a period where the pathway sector has matured and circumstances make it ripe for realignment. The stakes are high on all sides and the factors are particularly relevant to the UK and US where growth in pathways has been rapid and international student recruitment has been under substantial pressure.
As finances tighten university management is under more scrutiny and is likely to demand more in terms of targets and delivery from partners. The consequences of a failing pathway are becoming increasingly difficult to hide as direct recruitment gets harder. Providers have their own problems with unprecedented global pressures and ubiquitous competition. Some may be reaching a point where optimising their portfolio is more important than simply adding or maintaining capacity.
In the UK a number of institutions have been following the University of Sheffield to see how the switch from one major private provider to another might work. Loyalties are under pressure as university leaders who signed the deal move on and some pathway providers look to change hands after the glut of private equity investment from 2010 to 2014. Pressure to perform has never been greater.
So, when a pathway becomes a dead-end there is every incentive for one or other party to make a U-turn. Or, as Warren Buffett is quoted as saying, “Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be a more productive than energy devoted to patching leaks.” And it doesn’t really matter if it’s a long-term contract (where remedies for under-performance are usually written in) or time for a tender after five years.
IT HASN’T ALWAYS ENDED WELL IN THE PAST
There is, of course, precedent and although closures can be hard to trace I have listed below those that I have uncovered in my research. New partnerships are usually heralded with a fanfare and people smiling as they shake hands on a deal done. Unsurprisingly, a veil is drawn over partnerships that end and those that are public are usually dressed in anodyne media responses.
For both universities and providers that is unfortunate. Considering and addressing failure is a good way of learning and often more informative than the bright, shiny case studies which are so popular as sales tools. In my time with two leading universities with private providers and as COO and CEO with two providers I saw many factors that can make or break a partnership. These are worth sharing.
I make no comment on the reasons for the ending of the relationships noted (but have referenced reports where available). Neither do I claim that this list is exhaustive and I would be interested in any other examples. For organisations contemplating partnerships an open and honest discussion with those who have tried and moved on is probably worth as much as hours of expensive contract development.
Study Group
i) Stirling University (Opened 2007- Closed 2013) Source: QAA
Navitas
i) Western Kentucky University (Opened 2010 – Closed 2016)
ii) Edinburgh Napier (Opened 2011 – due to close 2018)
PRIVATE PATHWAYS MAY NOT BE ACCESSIBLE OR GUARANTEE SUCCESS
UK universities with the greatest decline in overall international enrolments in the past five years often have no pathway partner or are relatively late to the party. Several of the non-aligned universities here have been actively seeking providers but there is, inevitably, caution from providers about taking on institutions that do not have underlying strength.
It remains to be seen whether some of the new partnerships can materially alter the trajectory of underperforming universities. Sector sources suggest that Oxford International and the University of Bedfordshire are parting company and the provider is not currently listing this university on its website.
Table 1 – UK Universities With Greatest Decline In International Enrolments 2012/13 to 2016/17
Source: HESA (enrolments), QAA and University/Company websites
And that brings me full circle to Bath Spa and Shorelight. HESA data (supported by the University’s Annual Report narrative) showed strong growth in international recruitment from 2012/13 to 2014/15. In the first full year of the partnership with Shorelight (2015/16) there was a weakening of growth which was followed by declining international enrolments in 2016/17. There is some way to go for the university to reach the anticipated 2,000 by 2018/19.
Table 2 – Bath Spa University International Enrolments 2012-13 to 2016/17
Source: HESA
Perhaps more troubling is that in December 2017 the THE reported that ‘figures available on (sic) Companies House show that Bath Spa Global – an international pathway college venture set up in 2014 in partnership with US firm Shorelight Education – has lost about £1.4 million in the three years to July 2016, while its parent company Bath Spa U has lost about £736,000 over the same period.’. The 2016/17 Financial Statement from Bath Spa showed international student income and numbers declining year on year and noted that the joint venture partnership, Bath Spa Global, ‘remains fragile’. At the time of writing I can find no mention of Bath Spa University on Shorelight’s web-site and no current reference to Shorelight on the University’s site.
*National rank unless noted
* Source: Landscape of Third-Party Pathway Partnerships in the United States (NAFSA, 2017)
Source: Institute of International Education (2017). Open Doors Report on International Education Exchange. Retrieved from http://www.iee.org/opendoors
Source: University Annual Reports and Financial Statements 2012/13 to 2016/17
Source: University Annual Reports and Financial Statements 2012/13 to 2016/17
Source: HESA
Source: University of Newcastle Annual Reports 2012/13 to 2016/17
Source: University of Newcastle Annual Reports 2014/15 to 2016/17
Source: HESA