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The rise and rise of the international high schools market

There are three main drivers attracting investors to the international school sector: reliable long-term revenue, upfront capital through student fee payments and a relatively recession-proof product.

Haileybury International School Tianjin. Australia-based Haileybury opened its China campus in 2013.

“Why China works well is there’s a lot of capital in the market, usually tied up with real estate development"

This is according to Ashwin Assomull, managing director at consultancy group Parthenon-EY.

In 2015, the number of English medium international schools reached 8,000, teaching 4.2 million students globally, according to International Schools Consultancy research. And international high schools, which enrol 16-18 year olds, account for more than half (56 per cent) of the worldwide tally.

Overwhelmingly, the surge in international schools has been and continues to be fuelled by demand for a top foreign university degree. Traditionally populated by children of expats, international high schools are now catering to the teenagers of wealthy locals.

Markets are also subject to outside influences like oil prices, surges in industry, demographics or currency devaluation. “It’s not that everybody has always been on fire,” comments Richard Gaskell, director for international schools at the ISC, before adding,“But there always seems to be something going on that gives us this nine, ten per cent growth every year.”

“There always seems to be something going on that gives us this nine, ten per cent growth every year”

Much of industry headway has been made possible by private equity. “Which other business allows you to know that you’re going to get your fee for the next four years, six years, eight years, maybe even 12 years?” says Assomull.

“Wherever you look, even in the worst recessions, even in the UK, you can see that the good, well established schools were still able to raise their fees by inflation plus a little bit more. And when you can raise your fees, that flows directly into the bottom line.”

There are few speed bumps along the sector’s growth trajectory, but one major hump almost all providers face is attracting and retaining quality teaching staff.

Diane Jacoutot, managing director at Edvectus, a recruitment company matching 800-1,000 teachers and schools a year, says if international school growth is 10 per cent annually, the need for quality teachers is growing by 15 per cent.

“When a new school starts, it just has a handful of classes, just a handful of teachers, but as that school gets older the plans are to grow, meaning the number of teachers needed on the international market far outstrips even the numbers of schools growing,” she explains.

Types of operators

Senior boys boarding at St Lawrence College

Senior boys boarding at St Lawrence College

The health of the industry has made it possible for several operational models to develop beyond the initial non-profit schools founded by local expat parents, or embassies in the 1950s.

For-profit chains have schools spanning the globe, while independent schools in the UK and Australia, with historically strong academic reputations, are partnering with overseas operators.

Local investors are also answering demand by opening schools with foreign curricula, while government-backed schools in New Zealand, Canada and Australia increasingly benefit from international student tuition.

There are several for-profit, private education providers offering a range of national curricula – British, American, Indian, Japanese – often at a premium price, to students across a vast network of schools.

“We saw that the market in Vietnam was big enough to split the offering”

Philippe Lagger, corporate development director at Nord Anglia, which has 42 schools worldwide, says they’ve opened more than one school in key cities, like Ho Chi Minh City, to cater to both local and expat clientele.

“We saw that the market in Vietnam was big enough to split the offering,” Lagger says, explaining that one school in HCMC is purely international, with about 70 per cent of students coming from expatriate families and 30 per cent from local families.

“Then we have the bilingual Vietnamese/English school which follows the UK curriculum but where some of the subjects, especially in humanities, will be heavily biased towards Vietnam and the history and the language.”

Dino Varkey, managing director at GEMS Education, which operates 80 international and independent schools across Europe, America, the Middle East and Asia, credits the group’s network of 44 schools in the UAE with safeguarding it against the region’s economic downturn seven years ago.

“In 2009 when the world perceived a significant downturn, within the UAE specifically, we actually grew our student enrolments by five to seven per cent,” he says. “Because education is resilient to economic down cycles and because we don’t have a single model, we have that diversity.”

Government-backed schools

In a different dimension, publicly-funded school systems in Canada, New Zealand and Australia are increasingly benefitting from international student fees. For students, it’s an opportunity to live with a local family, learn alongside domestic students and become integrated in the community. Some stay for short-term stints of a semester or a year but many enrol for two or more years, graduate with a secondary school degree, and enrol in universities in the country.

“What we have seen in the market in general is that you have growth both at the premium end and the non-premium end of the sector”

Recognising the contribution international students make to the school sectors, national and provincial governments are doing what they can to support the industry.

A student at a Nord Anglia school. It operates 42 worldwide.

A student at a Nord Anglia school. It operates 42 worldwide.

In New Zealand, the government provided seed money to launch the non-profit Schools International Education Business Association after sector-wide calls for a representative body, SIEBA, last year.

Education is New Zealand’s fifth largest export sector, and with secondary school foreign enrolments steadily climbing annually, reaching 13,845 last year, the government has earmarked the schools sector as one for potential growth.

“There’s a very positive frame of mind about the industry at this time,” says SIEBA executive director John van der Zwan. “The government agencies are very much looking at working more closely together to ensure that the regulation and the guidelines for what we’re doing supports growth rather than putting barriers in front of the sector.”

In both Canada and Australia, governments have included the schools sector in their national international education strategies which aim to align education with greater economic diplomacy and trade promotion.

Ontario’s Ministry of Education took efforts a step further with an international strategy just for K-12 schools last year.

As a result, membership from Ontario providers has swelled at the Canadian Association of Public Schools – International, says executive director Bonnie McKie.

Last year, members enrolled 26,000 long-term international students (staying for a semester or longer) and a little less than 10,000 short-term students (on non-academic, non-credit bearing courses). McKie notes the largest growth in enrolments has come from mainland China and adds that Brazil, Germany and Japan are “stable but strong” markets.

In Australia, international commencements reached 11,000 in November 2015, 5,399 of which were Chinese.

Independent schools
For decades, reputed independent boarding schools in major study destinations have attracted elite international students to their home campuses. According to the Independent School Council in the UK, overseas student enrolments reached 44,000 last year. Meanwhile, The Association of Boarding Schools (TABS) in the US shows international students make up 16 per cent of overall enrolments across 170 North American schools, totalling around 10,600.

And in Australia, almost 5,700 overseas students, approximately 31 per cent of overseas school students in Australia, were enrolled in independent schools in 2014. The majority – 83 per cent – are at secondary level, with senior secondary accounting for the bulk of enrolments. Needless to say, for the time being, boarding schools aren’t worried about the growth of international schools overseas.

Marlborough College, Malaysia,

Marlborough College, Malaysia

“You could say schools like us should be worried about all the international schools that are opening up, but actually there is still going to be the demand to come to the UK,” says Simon Heard, deputy head at St Lawrence College in England. “The attraction of coming to a British boarding school is you’ve got lots of different nationalities but we’ve also got lots of British pupils. We can offer them something international schools in their country can’t.”

Adrian Hallworth, principal at Taunton International School, a non-selective boarding school in southwest England offering A Level and the IB, echos Heard’s optimism. “Demand is definitely exceeding supply.”

But while interest from international students is soaring, boarding schools have seen the numbers of domestic boarders drop. According to TABS, US and Canadian boarders are declining at a rate of 400 a year. UK operators are facing the same challenge, spurring on the need to attract more from overseas, argues Heard.

Both Heard and Hallworth say their schools have considered taking the leap that many other independent schools in the UK have, to partner with an overseas provider, but both are still confident in the pull of the British academic brand.

“British education still has that kudos, it’s held in high regard,” says Hallworth.

Branch campuses and overseas partnerships
Seeing an opportunity to internationalise their home campuses and establish new revenue streams, many schools have indeed opted to partner with overseas management companies – providing curriculum oversight and branding, while investing little of their own capital.

Every seasoned operator who has overseen the establishment of overseas campuses says preliminary research is essential. “Some schools get involved with the wrong op company,” says Gaskell at ISC. “When they’ve got too much skin in the game it’s very risky. You’ve got to do your due diligence on your partner, absolutely and in every way.”

“You could say schools like us should be worried about all the international schools that are opening up, but actually there is still going to be the demand to come to the UK

Dulwich College, based in London, was one of the first colleges to open operations overseas in 1996. It now operates seven colleges in six cities across China, South Korea and Singapore via its management services company, Dulwich College International.

“We have a growing number of South Koreans, Singaporeans, Malaysians, Taiwanese and Hong Kong pupils because increasingly, as China becomes a very important driver of those economies, so too do those businesses grow to have operations in China,” says marketing and communications director Laurence Cook.

In China, the market is ripe. Chinese nationals cannot legally attend foreign-operated schools, so local investors partner with foreign providers to open dual curricula schools.

“Why China works well is there’s a lot of capital in the market, usually tied up with real estate development,” explains Nick Dwyer, director at Haileybury International School Tianjin. “Big, serious developers will build a town and to give it an international theme you need an international school. So they’re prepared to build a school and then do a joint venture with us to run it.”

This is an abridged version of the original article that appeared in The PIE Review 09.

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