PODCAST HIGHLIGHTS: Future of Higher Education
Baird’s Podcast Looks at the Impact of COVID-19 on Higher Education - Insights for Investors and Parents
The fallout from COVID-19 is bringing about dramatic changes in the higher education sector that will have hard-hitting implications for businesses, families and futures. Trends around enrollments, tuition and institutions’ financial situations have been accelerated, delayed or forever altered by the current environment.
In this 20-minute podcast, Dan Alfe, Managing Director with Baird Global Investment Banking, interviews Vanessa Webb, Co-Head of Oliver Wyman’s Global Education Practice and America’s Private Equity Practice. They discuss the impact of COVID-19 on colleges and universities, the challenges and opportunities for companies providing solutions to these institutions, as well as the future of higher education.
Executive Summary
Vanessa discusses the state of higher ed prior to COVID-19 and how some of its challenges have been exacerbated.
Historically/recently about 30% of higher ed institutions have expressed concerns about financial stability due to a number of factors, including slowing enrollments, increasing price sensitivity, slowing state funding and their necessarily fixed cost base.
Over the last month, that has risen to about 80% with students starting to ask for dollars back, loss of ancillary revenues, and lower Alumni donations.
What do you see as the outlook for enrollments this fall?
Looking ahead, our outlook is that things may get worse before they gets better. Oliver Wyman’s Healthcare team is projecting the possibility of another wave of COVID-19. Also, we’re not likely to get completely out of lockdown until we have more extensive testing and contact tracing. In short, expecting everyone to be back in class in the fall seems unlikely.
In general, enrollment has been difficult for undergrads with many contemplating their options including: taking semester off, attending part time, enrolling in a school closer to home or in a community college, or even taking a gap year. As a group, undergrads are more price sensitive than in the past. This has further highlighted the value of the campus experience for traditional undergrads.
International students have added obstacles, such as travel restrictions. The loss of international enrollments is particularly concerning as they are typically full-paying enrollees. They also bring global perspectives to the classroom, which is valued.
One bright spot may be added enrollment for vocational programs and graduate schools, which are often countercyclical.
Has COVID-19 accelerated shift to online? How is that affecting the future for physical brick-and-mortar campuses?
From our perspective, online is here to stay, and it will grow – but this will not necessarily “turbocharge” a migration to online. Because the quality of education and engagement has not been great during this period, I don’t think the balance between online and in-person will change much for traditional undergrads. Both students and professors seem to miss their former environment (in the classroom and the campus), which is why we see enrollment deferring.
Additionally, building/expanding online capabilities may have become more difficult as schools have seen less dollars flowing in.
In other areas, such as working students and non-traditional students, online is an attractive option, but that was already the case.
In addition to offerings like “virtual campus tours,” are there other third-party solutions you see as being winners? Conversely, solutions that could see some more challenges?
I think of this in two buckets. The first is those software and service providers who are solving an institution's revenue challenge. In recruitment, EAB and RuffaloCODY have offerings that help undergrad institutions differentiate in their outreach and increases conversion rates.
The second is Online Program Management (OPM) providers. They help institutions develop and grow an online program. Historically, this has been predominantly full-service solutions that includes recruitment, conversion and retention, as well as revenue sharing. This has become valuable as online is generally a growth area for schools, and they require outside expertise to do well.
Breaking from this one-size-fits-all full service model, we are seeing growth in OPMs that specialize in recruitment or retention, or that focus on international students. On the revenue side, OPMs that specialize in Alumni outreach has been a growth area.
With the expectation that, “if schools are going to be online, they need to get better at it,” we’re seeing more demand for Learning Management Software (LMS) solutions, as well as video capture, virtual campus tours, mental health and wellness tours, online course software, course designers and Professional Development for teaching online.
Will traditional schools continue to fill the skills gap going forward? Are there other business models you think are in better positioned to help students fill or bridge that gap?
I don't think this is the demise of higher ed, but I think there are a lot of tools and types of short courses that also have real value to them. However, shorter courses and shorter course models also have challenges, particularly within B2C. Most notably, there are only so many students to which a given course is relevant – and identifying those students can be expensive.
More interesting models have a link to an institution or an employer so they can leverage that brand name, more easily find students and offer sizable courses. In general, they focus on solving a need and are a great complement to traditional higher education.
Thinking about the remote environment, what does the future look like in for the K-12 ecosystem?
K-12 dynamics are quite different, particularly with lower enrollment risks, but heightened risk of dropouts. For service providers, there's likely to be opportunities for digital supplemental and LMS providers. Basal publishers could face challenges.
NOTE: In Part II of this Podcast, Dan Alfe and Vanessa Webb focus on the K-12 sector.