Mr James Dalziel is Head of School at NIST, one of Thailand’s most well known international schools. In an hour long interview over Zoom with TIS Monitor, he talks frankly about why the number of international schools in Thailand is growing so quickly, regulating the industry and why enrollment fees are used.
Also taking part in the interview is Mr Jared Kuruzovich, the school’s Director of Communications.
This is the second part of the interview and focuses more on the international education sector in Thailand. The first part was published recently and focuses on NIST.
TIS Monitor: The number of international schools in Thailand is growing exponentially. How do you explain this growth?
James Dalziel: I would explain that as an economics teacher in two ways. First of all, there must be a demand, otherwise they wouldn’t get the students in the first place. There is something that is attractive with this thing called international education as an alternative to whatever the other option might be.
A second part, and I guess that time will tell, is in terms of whether they can make it work financially, and that is what I am looking at with most interest: ”Is this a sustainable market?”, and ”At what point does the market become saturated?”. If there are too many choices, someone is going to fall off the bottom end of that. I guess time will tell, but a danger with that experiment is that it is not a direct experiment about the quality of the school, because it is the investor with the deeper pockets who is going to outlast the ones that don’t, although they might have a better program. That is the reality of the business side of international education as well.
TIS Monitor: What about the regulation for running an international school in Thailand, is it very business friendly?
James Dalziel: I don’t know enough about that side of things yet. I obviously know that there are regulations in terms of having a director and how the director has to answer to the Ministry of Education in terms of providing that. We are certainly inspected every year and we get one of our accreditations from the Council of International Schools, which is international. The other is from NEASC, which is from USA. I don’t know if all international schools have that external accreditation. I do know that they are accountable internally, but I have to be honest and say that I don’t know what that is yet.
Jared Kuruzovich: There is a lot of profit to be made here in international education. The barriers to entry are not so much legal and more just the market itself. And that is by virtue of the changing demographics and economics, and also the geography of Bangkok. A school that would want to really target the expatriate community, for example, will struggle at this point, because in order to reach that market you would really want to be in central Bangkok, where a lot of the expats who could afford an international education would be located. And there is simply no land and no place to really open up that school without an incredible amount of investment capital to lay down right away. The other option is to try to reach middle class and upper class Thais, and that is definitely where the market still has a huge amount of growth potential. So when you look at schools that are now opening, even though they are obviously aimed at expats such as (school name retracted), they are struggling to reach that market. Many schools ultimately become more geared toward the local market to generate revenue due to these challenges. So, the barriers that are in place are definitely not legal in nature, but far more with just the market itself and how it has evolved over the last 15 years.
TIS Monitor: Which means that it’s business friendly?
Jared Kuruzovich: Yes, it’s business friendly provided that you are targeting a very specific market and that you are able to enter in a location where you have enough families who can afford your school to sustain it for the first few years. Most schools from what I have seen do not turn a profit for at least five to ten years after opening.
James Dalziel: One of the anecdotes I can share comes from Singapore. The Singapore government very intentionally made the international school market a feeding frenzy. They just said: ”We know that the bottom X percent are going to fall off, but that is your problem, not ours. The quality will rise and we will support the top quality.” The Singapore government was not interested in saving schools. It’s just an open market system.
TIS Monitor: And the result was that Singapore got really good international schools?
James Dalziel: Yes.
TIS Monitor: Let’s talk about the non-refundable enrollment fees. NIST charges 265,000 baht in enrollment fee, or as you call it, registration fee. Why are enrollment fees good? What is the purpose of having them?
James Dalziel: The purpose of the enrollment fee is a commitment that you are coming to the school. And I want to be blunt. We have a marketing, communications and admissions department that is set up for the school. That costs money and is part of the offset. There is an entry requirement to come in and it does provide us with an element of revenue. It reflects the cost of the application and the cost of joining.
Jared Kuruzovich: One other point I would add is that in terms of families who say they will come to the school and then drop out, which does happen on a fairly regular basis with schools that cater to expatriates, if we offer that place, quite often they decline later on. Then we have no way to fill that seat, simply because other parents have already made a decision by that point.
TIS Monitor: Well yes, but that can be achieved by asking families to pay for the first semester tuition fee up front, right?
James Dalziel: Yes. I take your point but it is just one of those conventions in international education that there is a registration fee. I know, looking at other international schools, that it is one of those levers they are pulling to try to make their product more attractive. They will say, ”We won’t charge you” or ”We will waive it for a year” or ”The second child won’t have a fee” or whatever that might be.
TIS Monitor: Do you see any problems with applying an enrollment fee? Does it stifle competition? If you have paid 250,000 baht to enter a school, and it turns out you are not so happy with the school, you might decide to stick with the school because you don’t want to pay another 250,000 baht to enroll in a new, similar school?
James Dalziel: It is definitely a barrier for departure, yes, it is. That is another reason why families might stay and not flip schools every year, absolutely. But to be frank, this helps us because then we know that you are going to be here. But I certainly feel a moral obligation to families who are applying to us to be very clear about what we offer and what we don’t. Because the last thing that we want is for a family to come in, join the school, pay the fees and then say: ”You weren’t clear about this.” That helps no one. So, we do offer a unique education that is not for everyone.
So our goal is not to get everybody in the door; it is to get the right people in the door, the people who want this kind of education. Though we hope we would be able to provide all applicants with a great education, it’s not unusual for our Admissions Department to say: “Really? I think you are talking about a very British education. That is not what we offer. Here are three schools that you might consider going to.” We are in a very fortunate position that we are full now. We plan to be full in August. We have a waiting list. We have a moral obligation to get the right people in the right place for their kids’ education. You only get one chance to do Year 2 and it should be the best possible.
TIS Monitor: One headmaster I spoke to said the purpose of the enrollment fee is to minimize churn. Schools don’t want to have a huge turnover with kids coming and going, they want stability. Is this something you agree with?
James Dalziel: I certainly agree that churn is hard to plan. Actually, I would argue that if there is churn and every year, people pay a registration fee. If your purpose is to make money, you should be wanting churn, because every time a new family comes in, we get a new registration fee. So, that we are looking for stability goes against the argument that registration fees are about making money. We want you to make a great choice, be here and then stay here for as long as you possibly can.
TIS Monitor: Yes, but schools change too. The school you enroll your child in might not be the same kind of school six years later. And isn’t that the problem, that schools stick with families who are not really happy because they don’t want to pay another 200,000 baht for a new enrollment fee somewhere else?
James Dalziel: Almost certainly. Of course it is a barrier for making a decision to move.
TIS Monitor: Isn’t there a better way? Let me propose something here. What if schools have an enrollment fee but you also sign a contract for, let’s say, three years, with all fees stipulated. If you withdraw before the end of the three year period, you lose the enrollment fee. However, if you stay, then at the end of the three year period you are presented with the new fees for the coming three years, and if you like it, you stay, and if you don’t like it, you can withdraw and get the enrollment fee back. Isn’t that a much more fair system?
James Dalziel: It certainly benefits the customer, but there are some challenges with that model, like predicting things like inflation and costs. I guess one of the risks might be that because those figures might not be known three years ahead, schools might over-inflate the numbers to hedge against it, if things go wrong. That would increase the tuition fees in the long run.
But you bring up a good point which is that schools should not be caught in a traditional system just because that is the way it has always been done. I think this is a healthy conversation to have. Are there any different ways to do things? I know schools here have been talking about ”Do we get together as a coalition of schools and offer one common registration fee?” so that families can move between those schools, almost like a for-profit family of schools. Some of those conversations are happening.
TIS Monitor: But you mentioned that in Singapore the government encouraged competition between schools, wouldn’t this system lead to increased competition in Thailand, and in the end to better schools at lower prices?
James Dalziel: Yeah, it could. I feel tremendous pressure all the time to have the best school possible because, ultimately, parents are the customers. The downside of the three year model is that you are taking their choice away for three years. ”I have made a commitment and I can’t make a change”.
TIS Monitor: Well, yes, but it’s better to have your choice taken away for three years than for 12 years, right?
James Dalziel: But you still have a choice every year that way, you are just going to lose financially. I take your point. It is either one way or the other. If International schools are going to grow, we need to start thinking in those creative ways.
TIS Monitor: One story recently published on TIS Monitor touches on parent’s rights. After enrolling your child and having paid the enrollment fee, you might be happy for a while but then something happens which you are not happy about. If you approach the headmaster and say: ”Hey, I am not happy with this,” the headmaster can simply say: ”Take it or leave it.” Is there such a thing as parent’s rights once you have paid that enrollment fee?
James Dalziel: I think that is part of the contract, isn’t it? We have a system that is hopefully equitable for the parent and the school. Above that sits a moral desire to just be a fair, honest, transparent company and organization, not just with parents but with everybody. And then there is another part. If we didn’t handle the complaint well, would that reflect on us and our reputation? I know how quickly, true or untrue, the customer message gets out and around the community. We are always thinking about A: From one human to another, we need to be handling things at an ethically proper level and B: Organizationally, we need to be handling things so we are reflecting the values that we have within the organization.
If we don’t, there is a pretty high price to pay, which is: ”We don’t want to be the school known as the one who never follow through on its promises, didn’t listen, wasn’t reasonable, gave excuses, avoided the questions.” That is not who we are at all. As a matter of fact, we want to be known as the school that went all the way to understand and looked for solutions. That is the school we are trying to be.
Is there specifically anything to protect parents? One is the contract. The second is our reputation. The third is that they leave, which costs us tuition and a space.
TIS Monitor: The fourth option is to take the school to court. Has that happened?
Jared Kuruzovich: I think that has happened in every school.
TIS Monitor: That leads me to another proposal. Has this industry grown so big in Thailand, with so many international schools, that it is time for this industry, together with parent’s organizations, and legal experts to set up some kind of independent arbitration board, to solve issues between schools and parents, to set up a code of conduct, or best practice, to give answers to ”What is right, what is wrong?”, ”What can parents expect?” and ”What shouldn’t they expect?”, and create a framework how this industry works? Is this something that is possible and something that would be beneficial for Thailand as a destination for parents seeking an international education for their children?
James Dalziel: Well, it would be seen by the customer as protecting customers’ rights. But it already exists partially with accreditation agencies like CIS, the Council of International Schools. Part of the accreditation requirement is that you have the structures in place to protect the policies and procedures, including those with parents. Because we are accredited through them, by default we meet those accreditation requirements. We need to abide by the CIS code of conduct and morals of ethics, their code of ethics. If we don’t abide by that, parents can complain directly to CIS, and that complaint comes directly to me. So we could potentially lose our accreditation. We are under a very strict code of conduct in terms of those accrediting bodies saying: ”This is a school that has the procedures in place to protect everybody in the community, including the parents”.
TIS Monitor: And do you know if any parents have raised the issue to CIS about not getting a refund or lower fee during the ongoing COVID-19 closure?
James Dalziel: Not to our school because we would know about it right away. But it may have happened somewhere else.
TIS Monitor: But you don’t see a need for such a body, board or panel here in Thailand, since the industry after all is growing so quickly?
James Dalziel: Well, could it be helpful? It would be an interesting exercise to set it up in terms of the criteria that we would hold schools to. I say with confidence that I think that we would be fine. Our policies are very clearly laid out. Everything is very transparent, so I would feel confident with that. But I can’t speak for other schools where that might not be the case.
TIS Monitor: But you agree that a family doesn’t really have much leverage against a school if something goes wrong?
James Dalziel: No, other than leaving or taking legal action if there was something that contravened the contract. That can ultimately be even more harmful to the school, so most would presumably try to avoid having it reach that point.
TIS Monitor: We recently did some research on this market, and published a story. It turns out that there are many international schools in Thailand with profit margins reaching 20% or 30% for big schools, and even more for smaller schools, with some kindergartens having margins of close to 50%. These are insane figures. Is this an example of a market that is working well, or a market rife with price fixing and collusion? How do we explain that some schools can be so profitable?
James Dalziel: Well, they can be because people keep paying. The market has continued to grow and expand, with many schools reaching near capacity, so there does simply seem to be a high demand for them.
TIS Monitor: And people didn’t know about these profits until we wrote about it?
James Dalziel: But I don’t know what the profit margins are at the Gourmet Market at Emporium either. They might be around 40% as well, but I still shop there from time to time. So, from a purely economic point of this there is: ”What would the market bear?” If we are in this for a profit, how much can we get away with in terms of doing that? It is certainly not our school’s perspective, but that is the question to ask. If people are paying and they seem to be happy and they keep returning to the product, something is going on that is justifying the fees that are being charged. In our case, as a not-for-profit, our surplus is very small and is reinvested into the school.
TIS Monitor: But if the market had been working well, there would be an operator opening a new slightly cheaper school with slightly lower margins, and eventually fees would be pushed down?
James Dalziel: Yes, but the complexity of opening a new school, like getting a piece of land and hiring teachers, is really the problem. It is not an easy market to enter because there are so many moving parts and it is specialized. And the initial capital for investment, especially in downtown Bangkok, is considerable. But you are right.
TIS Monitor: It seems like many rich Thais with a piece of land will open a hotel. Should more of them instead start opening international schools?
James Dalziel: I think they are, aren’t they? But look, what is more complicated? I am not demeaning early years, but opening an early years center is far easier than opening a school that is going to run year 1 to 12, which is why you see so many early years day care centers opening up. They don’t have the same demands academically, nor the same demands on accreditation requirements. So that tends to be a thriving industry if you want to just open a day care.
TIS Monitor: Ok, last question. It is very difficult to get an interview or a comment with a head of an international school. You are first one who is willing to talk to us since we went live in February. Why do you think so many headmasters or heads of schools are reluctant to talk to TIS Monitor?
James Dalziel: I honestly have no idea. I don’t know why. You ask good questions and I am pleased to work in not-for-profit school where the answers sit certainly more morally centered with me. That might not be the case for other schools. If you had asked me these questions two years ago when I was director of operations in Europe I would have given you a straight response as well, but it wouldn’t have been as easy, if I am going to be frank.
End of part 2. Part 1 of the interview with Mr James Dalziel, Head of School at NIST, was recently published and focuses more on NIST.