The recession has proven a boon for for-profit colleges, driving up enrollment and share prices on Wall Street.
The major operators—Phoenix-based Apollo Group Inc., which operates the University of Phoenix with offices in Costa Mesa, and Santa Ana-based Corinthian Colleges Inc.—see this continuing as public universities cut back classes and admissions.
“Tough economic times are going to give us a turbo boost—there is no denying that,” said Peter Waller, chief executive at Corinthian.
Corinthian runs more than 100 campuses in the U.S. and Canada offering degrees in healthcare, criminal justice and other areas.
Phoenix, Corinthian and Cypress-based TUI University LLC have seen significant growth during the past 10 years, increasing their share of college enrollment from 1% to almost 9% as of this year.
University of Phoenix, the largest private university in North America with enrollment of about 400,000 students, added 80,000 students to its degree programs in its latest quarter, a 23% jump from a year earlier.
Corinthian’s new student starts—a measure of those who enroll and then show up for class—rose 24.4% in the three months through August.
But an extended recession could end up hurting for-profit colleges, which cater to working adults or older students looking to finish a degree. A prolonged slump could eat into students’ ability to pay for courses.
So school operators are boosting advertising to maintain enrollment gains.
University of Phoenix—which charges about $1,500 per five-week course—has seen a number of problems arise from former students struggling to pay their student loans during the recession. It recently launched a pervasive “I Am Phoenix” advertising campaign in an attempt to improve its student-retention rates.
Ad Campaigns
The depressed media market provides prime-time space at a discount for vocational school operators.
University of Phoenix’s campaign includes television advertising, direct mail, print ads and online advertising.
Television advertising—primarily cable spots on channels such as CNN, MSNBC and Discovery Channel—has proven effective, according to the company.
University of Phoenix spent about $200 million on advertising last year, roughly split between online and traditional channels.
Corinthian hasn’t changed its advertising in response to the recession. But lower advertising prices have allowed it to be more aggressive with marketing dollars, according to Bill Buchanan, director of marketing at Corinthian.
“We have been able to get much better placement and better rates both locally and nationally,” Buchanan said.
The college has seen rates drop from 10% to 20% for space on television and in newspapers in the past year.
“We have seen some great fire sales, which we love to take advantage of,” Buchanan said.
University of Phoenix, Corinthian and TUI University focus heavily on online advertising.
University of Phoenix devotes an average of $20 million monthly to online ads, according to TNS Media Intelligence, a tracker of marketing and advertising that’s part of London-based ad agency WPP Group PLC.
Corinthian’s advertising is split between TV and online, according to Buchanan.
“We have actually reached the tipping point where more of our advertising is interactive than it is television,” he said. “But just barely.”
TUI isn’t as aggressive as the larger for-profit colleges, which use recruiters to respond to inquiries from ads and drive enrollment.
“We don’t believe in that and we don’t have the sales force for it,” said Tom Finaly, vice president of public administration at TUI.
The company does a lot of its advertising through online display and paid search ads. The school operator also uses traditional media with print and radio advertising in college-specific publications including industry magazines.
“(We use) targeted ads in the right locations where we have the ability to recruit students,” Finaly said.
Ad rates in targeted mediums haven’t gone down in the same way that ads in general magazines and newspapers have.
“I’m not in the business of selling courses,” Finaly said.
TUI University has seen student enrollment growth due to budget cuts at local public universities and the growing acceptance of online education schools.
“There are a lot of people completing community college and they have nowhere to go,” Finaly said.
Corinthian
Corinthian has spent the past five years working to integrate the many vocational colleges it acquired in late 1990s.
Three years ago, the company had 34 brands of schools across North America.
Corinthian now has just two—Everest College and WyoTech. The company has about 69,000 students.
Last week, Corinthian said it is paying $395 million to acquire San Francisco-based Heald Capital LLC, which runs 11 schools in Northern California, Oregon and Hawaii offering two-year degrees in healthcare, business, paralegal and technology training.
Corinthian’s stock is up more than 35% in the past year, versus about 15% or so for Standard & Poor’s 500 index. The company had a market value of $1.6 billion last week.
Total U.S. enrollment in degree-granting higher education schools—community colleges, four-year colleges and universities—is projected to grow about 9% by 2017, according to the Department of Education’s National Center of Education Statistics.
The center projects that higher education enrollment of students older than 25 will rise by 19% by 2017.
This bodes well for for-profit school operators that primarily serve older, working adults.
For-profit schools that primarily use online programs saw their enrollment grow faster last year than those with a greater reliance on campus-based classes, according to industry sources.
“We’re mainly a solution for working adults,” Finaly said. “We’re not looking for the youngsters looking for the experience of going to college.”
