The announcement by KHDA that there will be 27 more private schools opening in Dubai by September 2016 ('More than 63,000 seats for students in Dubai by September 2016' The National 23/08/2015) will undoubtedly bring more competition to the Private Schools' sector, but will it bring profits for investors?
The economic overview of the Dubai Private School sector is a relatively simple one: demand for places has outstripped supply for a number of years. This meant that new players were able to enter the Dubai market place with the relative security that schools will be full and that profits would follow.
However, 2014-15 saw a shift and supply outstripped demand. The cover of the KHDA's Private School Infographic 2015 highlighted the new era: "More seats for students - More choice for parents." According to KHDA's figures, 13% of Private School places were left unfilled last year.
Furtherore, with some seven new schools opening in Dubai in September 2015 and a promised further 27 opening by September 2016, the Dubai Private School market place is going to awash with places.
There are four main consequences of this shift the supply curve:
- Parents will have more choice: New parents are likely to be much more discerning in their choice of school. It is almost certain that we are going to see a significant number parents looking to move schools. The main drivers will be geographical location ('convenience' - moving to schools that are nearer to home - reducing their daily commute) and academic standing of the school ('trading-up' - moving out of under-performing schools to one's with a stronger academic record).
- There will be increased competition between schools. This competition will take three forms: quality (academic standards, wider educational/extra-curricular opportunities, pastoral care), value for money (including class sizes) and price.It is likely that we are going to see Academic League Tables appearing within the next couple of years. There is no doubt that there are going to be opportunities for school marketeers (as schools inevitably put a greater emphasis and resourcing into their marketing strategies).Some schools will develop specialism that enable them to fulfil a particular market niche.
- Standards will rise. Competition between schools will inevitably mean that schools will have to up their game. Until recently, standards have risen because of the drive of KHDA; going forward competition between schools both for the best students and to stay full will drive standards up still further.
- Schools will fail. In any free market there are winners and losers. Some schools will thrive, but those schools that do not provide value for customers (parents) will struggle.
The consequences for Investors
These likely trends will be of interest to potential investors. There are two types of Dubai private school that are likely to succeed. First, are those schools that can ensure high academic standards. Some of these will be the established academic schools (Dubai College, JESS, etc), but others, no doubt, will be new entrants who bring established traditions of excellence to Dubai, whether that be from strong chains (such as Nord Anglia) or UK independent school franchises (such as North London Collegiate School - Sept 2017). Secondly, are those schools which are embedded in a strong residential community. These are particularly important at the Primary level, where parents of young children do not want to be travelling great distances to school, particularly where are a different times for the end of the school day. Thus, schools that have been established in partnership with housing developments, such as Ranches Primary School (declared interest: my wife is the Principal) on Arabian Ranches 2 is well placed to be successful as they have a built in residential community on the doorstep.
Overall, the Private School sector in Dubai is likely to continue to be a fertile sector for investors; however, the era of easy pickings for new comers is over, and some schools will need to review their business models to ensure ongoing survival.