Fee freezes, reductions, discounts, scholarships, flexible payment plans – schools in the UAE have been pulling out all the stops to attract parents and retain students, in what analysts are calling an oversupplied and fiercely competitive market for education providers.
It’s no secret that private school tuition in the UAE is amongst the highest in the world, with some of the country’s providers commanding as much as AED80,000 ($21,000) per child per year in kindergarten, and stretching to six figures for higher grades.
Parents have long been ranting about the burden of high school fees. Even prominent public figures, such as Emaar chairman Mohamed Alabbar, have lashed out at the country’s private schools over their extortionate fees that threaten to exclude less fortunate children from access to high quality education. A 2017 HSBC report said parents in the UAE spend, on average, a total of $99,378 on their child’s primary, secondary and tertiary education – more than twice the global average.
But industry experts are claiming the fee woes of families are now easing, as parents hold all the cards while schools struggle to fill seats and compete for students amidst increasingly tough macroeconomic conditions.
“It’s a buyer’s market,” Sajida Shroff, CEO of education and investor advisory firm Altamont Group, tells Arabian Business. “In the past, we had limited options [and] schools were dictating terms. The tables have now turned. Now we have more options, so parents can now be the educated consumer to make the choice.”
With supply exceeding demand, Shroff adds that some schools have had to shut down over the past year-and-a-half because they haven’t been able to meet their enrolment targets or operating costs.
I know private schools have good discipline. But some of these fees – how can any human being pay like this?
Last year, the 30-year-old Emirates English Speaking School in Al Safa announced it would be shutting down in 2019 due to financial constraints. Meanwhile, the British Columbia Canadian School in Dubai Investment Park, which opened in 2017, also sent a letter to parents last year saying it would not reopen in September for the start of the 2018/19 academic year. In 2017, GEMS Education, the largest education provider in the UAE, merged two of its flagship schools, relocating staff and pupils from its Dubai American Academy in Barsha to the GEMS Nations Academy.
David Westley, co-founder of educational consultancy WhichSchoolAdvisor.com, says he believes parents now have it “better than they’ve had it in a long time” because there are more schools, more curriculum options, more specialisation, and a greater variety at different price points.
“Because of increasing competition, schools are now offering discounts, scholarships and bursaries. In cases where parents are having trouble paying the fees, we find that if you go and speak to the school, they are often open to having a discussion,” he says.
Last year, a number of Dubai schools slashed their tuition fees for the current academic year, citing economic pressure as one of the reasons. Horizon International School in Dubai reduced its tuition by 33 percent to AED65,000 ($17,700) for years 12 and 13. The British school also dropped prices for years four and five by 7 percent to AED48,335 ($13,200). Meanwhile, Foremarke School Dubai, part of Evolvence Knowledge Investments, revised its fees and reduced them by 10 percent from Foundation Stage 1 (FS1) to year six.
However, tuition fee discounts could be dangerous, according to some experts.
“A lot of the new schools that have opened recently have offered heavy discounts on their fees to attract enrolments – but that’s a dangerous thing to do when your business model was predicated on that high-fee model,” says Rosamund Marshall, CEO of Dubai-based education provider Taaleem.
Echoing her concern, Clive Pierrepont, board member of The Council of British International Schools (COBIS) says he is seeing a “plethora of knee-jerk reactions to targets missed” in the premium schools sector.
“The discounts to attract students come in the form of unrealistic sibling discounts, matching fees to corporate allowances, a permanent drop in tuition fees, and introducing ‘Founder’ student fee rates. This is a dangerous path to travel as not only will it have an enduring effect on future income, but it will also cause discord and a disenfranchising effect among future, full fee-paying parents.”
Pierrepont adds that being part of a financially stable group “enormously” increases a school’s resilience factor. “Choosing the right financial partners for operators is essential. A realistic business plan and deep pockets are critical for when competition intensifies.”
This sort of aggressive marketing and annual price fluctuation really upsets me. Schooling has been commoditised in a rather disturbing way
A report on ‘The future of affordable education in Dubai’ released late last year by real estate consultancy Knight Frank predicted that pressure on education providers is expected to increase in 2019, with 13 new schools slated to open this academic year, bringing the total number of schools in Dubai to 282.
Investors are also opting away from setting up schools in the UAE for the time being, according to WhichSchoolAdvisor’s Westley. “School investors are, currently, less interested in coming to the UAE now as some sectors become saturated – they are instead looking more at South East Asia, China and even parts of Europe post-Brexit,” Westley says, adding that some schools, mostly in the premium sector, are yet to reach full capacity.
Taaleem’s Marshall adds that the time it takes to build up capacity is nearly five times longer than it used to be. “For example, when we opened a Taaleem school back in 2014, it was filled in one year. The one we opened in 2015 is now at 75 percent capacity, as it usually takes between five to 10 years for a school to fill up.”
Taaleem declared a freeze on its school fees in 2017 in response to the global economic slowdown and the following year, Dubai’s education regulator, the Knowledge and Human Development Authority (KHDA), announced a freeze on school fees for 2018.
But Marshall says this presents a big challenge for schools, insisting that in addition to steep overheads, staffing costs can typically be 70 to 75 percent of revenues. She explains: “To continually strive to improve quality does not come without a cost. The quality of a school never exceeds the quality of its staff. To attract excellent teachers, it’s not just the cost of salaries, it’s also other overheads, such as housing and health insurance, which can be significant for a school. At the same time, the fee increases are not keeping pace with inflation.”
The surplus of seats has been further amplified by families leaving the UAE as a result of job losses, the Taaleem CEO adds.
“We’ve seen a lot of families that have left [the UAE] because of job losses over the past couple of years,” she says. “In the last 12 months, there’s been a sense of uncertainty for some parents thinking they were going to lose their jobs and saying they weren’t sure if they could renew register for the next year.”
Corporate restructures continue to rattle the UAE and wider oil-producing Gulf markets in the new era of fallen crude prices and slow economic growth.
Trefor Murphy, CEO of Dubai-based recruitment consultancy Cooper Fitch, told Arabian Business in an interview last month that corporate restructures, which, more often than not, result in job losses, have taken place across nearly all sectors in the UAE in 2017 and 2018, including manufacturing, healthcare, pharmaceutical, medical devices and the financial sector. He also said “high-end expatriate packages” are no longer available as a rule in the UAE and those laid off and looking for new jobs will struggle to get the same pay packet they were on a few years ago.
Altamont’s Shroff says the altered remuneration structures are also part of the challenge for both schools and parents. “Packages for employment are no longer perhaps as inclusive as they once were – and that’s something we’re seeing across the board,” she says. “The way packages are structured has changed, which means that people have to find different ways of balancing out their own personal budgets.”
Clearly money still isn’t an issue for some people here. Our nursery has to keep asking for kids not to be sent in Gucci or Prada
The HSBC report said that a total of 68 percent of parents in the UAE end up using day-to-day income to help fund their child’s education, while some work extra hours, cut back on their personal savings, or even take on a second job. The study also found that parents are making or have made a range of financial sacrifices to help fund their child’s education with around half reducing their expenditure on leisure activities and 35 percent working extra hours in their existing job. One in four parents has also contributed less towards their own long-term savings.
Parents say measures taken by schools have done little to alleviate the pressure and strain on their finances. A parent, who declined to be named, tells Arabian Business that schools are still “disconnected from reality” not only in their overpriced models but in how they address the responsibility of teaching.
“I’m all for paying lower fees but the amounts are still astronomical in today’s market situation,” the mum of two teens says. “This sort of aggressive marketing and annual price fluctuation really upsets me. Schooling has been commoditised in a rather disturbing way. This is about a child’s future but they’re selling it like real estate. It’s plain and simple: these discounts simply mean their profit margins have always been ridiculous and will just come down temporarily.”
The KHDA said in its 2016-2017 report that the total fees collected by 185 schools reached AED6.8bn ($1.85bn) in 2016-2017, up 11.48 percent from AED6.1bn ($1.66bn) in 2015-2016.
Expat Roger Hollier, who has two toddlers, says school fees are not affordable for middle-income families, and especially those who don’t get school allowances.
“I can say for sure it’s almost certainly the reason we’ll return to the UK – we can’t afford it for one, let alone two children,” he says. “My kids are two- and three-years-old and even nursery is a crazy amount. Even a ‘reasonable’ nursery for AED3,000 ($800) per month adds up, especially when it’s two children. It’s extortionate and it just keeps going up – that’s the worry. Your kids get happy in a school but what if you then have to pull them out due to fees?”
Hollier adds that as long as schools have a reasonable percentage of the sort of elite customer-base the UAE offers, they are unlikely to cater to folks like him. He explains: “Clearly money still isn’t an issue for some people here. Our nursery has to keep asking for kids not to be sent in Gucci or Prada. They say ‘please don’t send kids in designer clothes because we’re rolling around and playing all day’.”
Emaar’s Alabbar previously alleged private school educators “suck the life out of the fees” and asked: “How can any human being pay like this?” But Westley fromWhichSchoolAdvisor says no parent would ever want to pay higher fees.
“The UAE is the world’s largest market for private education in terms of financial value owing to the large expatriate workforce, and the fact that, realistically, this is a private school market. From a parent’s perspective, school fees will always be too high.”
Barry King, a dad of two girls, says he has simply come to accepting the high tuition fees “as the downside” of living in the emirates. “You just suck it up and make sacrifices as part of overall cost of raising children in the UAE,” he says. “My youngest daughter starts school soon and I know that when my eldest gets to high-school age in a couple of years, our time here will likely come to an end as it’s just not feasible.”
“You can only blame schools to a certain degree. They’re like any business here – and sadly education is a business in the UAE – that has high costs. It’s way more than I’d ever want to pay, but what’s the solution? Nobody seems to have the answer.”
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