COVID is changing the business environment quickly. The educational sector represents billions of dollars in the capital investment market. A crisis exists for those serving the collegiate community because the students are not coming back. In the past, many investors with money to spend have done very well in buying housing to rent to students and building businesses catering to students. Pizza parlors, bars and coffee shops have done well in many situations because of a large influx of students patronizing these establishments.
Over the past eight years we have seen a significant decline in student enrollment in colleges as the chart below demonstrates. Across the country we are seeing news reports of a significant reduction in classroom teaching, with some schools going to online instruction only.
CNBC reports 93% of students believe online education should be priced significantly below the 'in class' experiences. Many schools have not made any price reductions. And, while many are still trying to figure out the COVID adjustments, many schools are holding the line on student pricing. Are students going to be okay paying a very high price for private and public-school tuition when they are not attending in person?
Many students will look at this situation and make significant alterations in education plans. Without the on-campus experience, or experiences where students are substantially limited in social and other activities, will they continue to pay the high price for a college degree? As the reduction in student enrollment indicates a trend is already in place with less student enrollment. COVID will provide a significant incentive for students not to pay large amounts of money for online education, when much lower cost options are available, you can read my article on college Cost savings.
Investors and businesspeople who are dependent on college campus students for income would do well to rethink the current business model. The reduction in student enrollment has already been on a steady decline, and COVID is accelerating this trend. Most major changes occur over a significant period of time, as the reduction in student enrollment indicates. King Solomon wrote, “There is a time for everything, and a season for every activity under the heavens:” (Ecclesiastes 3:1 NIV)
A key responsibility of the Christian entrepreneur and the business owner is to anticipate future trends and changes, and make the necessary adjustments, to succeed in the future. A question I would ask anyone who holds rental property focused on colleges or a businesses catering to students is to ask yourself where will my business will be in 3 to 5 years? If the business owner believes everything will come back bigger and stronger, then by all means buy these assets rather than sell. However, if you believe this trend is long-term and accelerated by COVID then take a different course of action now.
