Interview: Abdulla Al Karam
To what extent is demand keeping up with the growing supply of private schools?
ABDULLA AL KARAM: Demand is a function of two factors in Dubai: natural population increase and immigration. The former grows at 3-5% per annum, whereas the latter increases at approximately 5%, fuelling a relatively steady need for new facilities. In fact, in the 2006/07 academic year there was a shortage of schools and many parents were faced with long waiting lists. Since then, there has been considerable investment in the space, with an average of 10 schools opening each year. The pinnacle came during the 2015/16 academic year, when 15 new schools came on-line. While this has created some excess supply in the system, we see it as a positive thing. When more schools open, parents have more options, and the resulting competition tends to bring improvements in quality. If supply is growing by 15-20%, as it did in 2015/16, the onus is on schools to attract students, as opposed to on students to find space in a school. Before, competition meant a race to build the best infrastructure, such as swimming pools, but increasingly it is being directed towards curriculum and teaching improvements. There has already been a rise in average performance levels across a number of quality metrics, and schools are providing the best teachers with better packages in order to retain them.
Will the increased number of competing schools lead to reduced prices for students?
AL KARAM: It is unlikely that education costs will decline significantly going forward, as the market tends to equate price reductions with cuts to quality. That said, given the increased competition, schools are having to work harder to retain students and attract new ones, increasingly utilising financial incentives such as discounts. Some institutions have introduced loyalty programmes for families with multiple students, while others are locking in fees at matriculation until graduation. These and other retention-related incentives bring prices down for students and are likely to remain popular given the current, competitive market conditions.
How can investors be best incentivised to develop schools for middle-income families?
AL KARAM: For a long time, investors targeted only the high-end fee scale, but this is changing as dividends in the space are not as high and as easy to come by as they once were. Competition has increased, and costs – especially for land and construction – are not coming down, thereby squeezing margins. Double-digit returns and a return on investment within 3-5 years, which was common during the boom, is no longer the norm. That said, good projects, especially those targeted at underserved segments such as the mid-tier, can still make returns close to 8%, an attractive proposition for many investors. The education sector, like Dubai’s economy in general, is maturing, meaning lower, but more sustainable yields on investment, which is a positive development overall.
What initiatives are schools taking in line with the government’s happiness agenda?
AL KARAM: In the past, schools have focused on improving outcomes through curriculum and teaching upgrades, and we have seen them make great strides on many metrics and international benchmarks. Now they are also concentrating on other ways to improve education. The happiness and positivity agenda encourages schools to think about the well-being of their students as a key component of education. Multiple studies have shown that students who are happy and more engaged in their communities perform much better in the classroom. For the first time in Dubai, we are running the five-year Dubai Student Well-being Census, which will include 75,000 children from grades six to nine. The results will enable us and schools to put together more effective policies to improve the well-being of every student in the country.
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