The PIE: Where does international education and student housing sit during this pandemic?
Samuel Vetrak: For our sector, mobility is essential and when it was suddenly restricted, there was a big impact. Unfortunately, the ongoing pandemic and related economic difficulties have hit the industry at the most critical time, prior to summer and just before the start of the new school year. It was a sad and hard hit that nobody could prepare for. Adaptation is taking the best out of all of us, but it needs to be done properly and quickly as otherwise, this will hurt us all for a long time. On the other hand, the student sector has more solid long-term prospects than other sectors – student mobility has increased after every downturn in the last decades.
The PIE: Given your global perspective, what do you think we can expect going forward?
SV: There are two options. Some expect this to take max three months. They believe the market will go back up as rapidly as it went down; a sort of V-shaped crisis. This seems to be unlikely in the globalised world, where it will take time to restore the right health and economic conditions on an international level, as well as enough confidence among consumers for them to spend on services related to mobility. What seems more realistic is that it will take five-to-six months, with a more moderate and incremental increase, a sort of U-shaped scenario, from the start of the upcoming school year.
The PIE: How does the situation look for English language training?
SV: ELT is the hardest hit and has moved online. How many summer centres will be up and running this year is questionable, too. The schools will most likely have no bookings or ability to deliver, at least it seems that way for July. Most of those we talk to are now working hard to expand their capacity in August instead. Some ELT providers are selling ahead for courses to be run later in 2020 or summer 2021 to achieve some revenues now.
The PIE: Are schools in a position to start thinking about long-term planning?
SV: As most ELT schools are dealing with the immediate impact on next term’s enrolments, they’re busy converting to online delivery and dealing with cancellations.But providers are thinking long-term too. For most ELT schools, a reasonable time-limited hibernation at leaner operating levels, together with sourcing credit or government subsidies, and sales where possible, seems to be the best way forward in the short-term.
The PIE: And what about student accommodation?
SV: Student housing is among the best performers – not only across all student sectors- but also across all real estate asset classes, such as retail, office or hotels, all of which went down rapidly. Student housing premises are still accommodating international students. There is a certain dip, but business is still being done. As operators collected summer 2020 semester fees earlier, some of them are dealing with cancellations, and a few are allowing full cancellations, or deferring the payments by regarding them as deposits for the next semester.
The PIE: To what extent is student housing impacted, then?
SV: We are currently seeing a certain downturn, but it depends. Some providers have seen only a small dip, around 2%, but some are looking at around the 40% range. It varies by property, university and city/destination in general. When it comes to bookings for autumn 2020, they are still coming in. It’s not like for the ELT or other short-term programmes. Student housing usually caters for long-term students, and they still plan to come in reasonable numbers for the upcoming semester.
The PIE: Do you think we will see little-to-no investment in 2020?
SV: Not necessarily. As M&A advisors, we also work with investors seeking opportunities. They see it as a good time to buy for less. We have seen a rise of vertical integration of schools are buying agencies. There are agencies with 40 offices, normally valued at US$20 to $30 million which are now available for less than half that. That is an interesting opportunity for investors and schools with investment capital ready.
The PIE: You have an office in China. Is business switched back on?
SV: Our experience is that new inquiries for our services are mostly coming for China and Asia as many educators and schools are looking to benefit from the recovering market. Thanks to our Chinese colleagues’ guanxi and networks, we are in regular touch with dozens of agencies. Most of them have 50:50 online/office availability. There is always at least one person in the office per day, so they can deal with any walk-in inquiries.
The PIE: What is their current focus?
SV: Chinese agencies are now heavily exposed on social media, using WeChat and other digital platforms for marketing. Inquiries are 40% to 60% of what they were pre-COVID-19. Due to limited mobility, agencies are doing a lot of online events either between them and parents, to which they invite schools as well, or there is online B2B trading between schools and agencies in China that we, as a business, also help to organise.