At the end of 2018, I predicted that 2019 would be the “Year of Agility” for school operators within Dubai, as the market would demand different approaches to HR, new recruitment strategies to attract teaching talent, and new ways to use technology as a resource to support the curriculum.
I also predicted that 2019 would be the “Year of Parent Satisfaction” as schools and parents would need to re-evaluate what it means to belong to a community. Loyalties would be tested in the new competitive climate, and teachers would need to be equipped with communication skills that prepare them to manage parents’ perceptions more effectively.
As the summer months arrive, and the academic year comes to a close, this month’s Purchasing Manager’s Index Report (PMI) from Emirates National Bank may offer a glimmer of hope for those looking for optimism within the education sector, and also a cautionary note for those looking for a slam dunk.
The key findings indicate that the PMI index rose to the highest level since October, 2014 at 59.4. Export orders and new projects have driven this increase along with price discounting. Selling prices declined for the 8 month in a row, which signals that businesses have cut prices (and margins) to remain competitive. These cuts have continued despite cost stagnation. One of the significant, and stark messages from the report is that there has been “no job growth in the UAE’s private sector year-to-date.” And wage stagnation is likely to “weigh on expat population growth and household consumption.”
A summary of the report can be found here: http://www.emiratesnbdresearch.com/research/article/?a=uae-pmi-a-jobless-recovery-1404
The full report can be found here: http://www.emiratesnbdresearch.com/plugins/Research/files/20190610_UAE_MayPMI.pdf
So what is happening out there?
In previous posts, I have written about the evolution of Dubai’s school discount culture, and the shifting demographics of Dubai’s residents, which has resulted in certain residential areas becoming “competition hot-spots”.
So far in 2019, we have witnessed a school offering prospective parents a free helicopter ride, as well as several nurseries advertising on Groupon.
We may very well see the “Cobone Academy” or an “Emirates Business Class” reward in the near future.
The battle of school bingo has taken place across Dubai’s radio stations as listeners have learnt the vocabulary of school messaging through repeated buzz words, student voices, principal cameos and parent testimonies. From January 2019 to April 2019, schools have increased their radio spending by 17% compared to 2018 (IPSOS Statex).
June is historically the month where expatriate residents start to slowdown as they look towards the summer. In June 2017, we saw the highest recorded spending in traditional advertising channels of that year, as operators attempted to sway in-decisive parents before they departed for the summer. In June 2018, this trend did not continue as spending dropped quite significantly.
It’s clear that some schools are still advertising and it’s also clear that some parents are delaying their decisions for a variety of reasons. Staffing appointments may be affected by these delays, and a casual glance across different teacher recruitment sites shows that there are plenty of teaching opportunities available in Dubai, on the face of it.
How is the property sector adapting to the ‘new Dubai’?
The PMI report is one measure of the current economic climate, and so too is the data coming out of the real estate sector.
Given the high expatriate population in Dubai, the dynamics of the property market are closely aligned to the education sector, as demographic shifts can often be seen in schools, albeit at a slower pace.
In a recent article published in May 2019, Property Finder stated that “At least 48,015 freehold residential units in Dubai are under construction and expected by Expo 2020”. This doesn’t necessarily mean that all of these units will be handed over but the continued expansion of residential units has driven property prices downward in the past year, and residents are clearly in the driving seat with landlords and developers.
According to data from Property Finder, Jumierah Village Circle has the highest number of planned projects to be completed before Expo 2020, followed by Mohammed Bin Rashid City which included Meydan and Dubai Hills, Dubailand and Business Bay.
With greater residential options, and expanded incentives, it’s clear that the real estate sector is gearing up for growth. For new residents moving to Dubai, the options are plenty.
Remember, the birth of “A month’s free rent…” happened in 2018. No-one predicted that in 2014.
Can I get my permanent residency card yet?
In speaking to parents, it’s clear that Dubai’s diversity and relative safety are factors that people like about the city.
However, the long term residency issue and education costs are barriers for families to remain in the city as long term residents, with economic security.
The UAE’s move towards permanent residency is a bold, and welcome announcement that will instill confidence and re-shape perceptions around what it means to be part of Dubai’s community, if it evolves for all residents.
So far, the initiative has focussed on the “Gold Card” members who have investments planned across the country.
If the permanent residency initiative has an immediate effect on the real estate market, the trickle down should be seen within schools, and parents may see a greater, long term future in the city through this initiative.
Historically, education and healthcare were considered ‘defence’ or ‘safe’ sectors for their ability to withstand economic downturns. This notion is currently being tested as supply and demand in certain segments of the market suggests that mid-market and affordable schools are in high demand, and premium schools have a surplus.
It’s clear that competition is fierce within the education sector, and this will continue for the next two years as the structural components of Dubai are reset to align to the expectations of Dubai’s new middle class.
So what are the implications for the different types of schools in Dubai?
Standalone schools, not-for-profit schools, and Dubai’s legacy schools will face greater pressure in the future. School groups have different pressures but greater security.
Legacy Schools – What legacy?
Legacy schools have survived largely from the existence of the high income, expatriate packages afforded to certain parents, and the corporate and diplomatic tie-ups that have been existed over time.
As demographics change, so do the economic partnerships within countries and legacies are only as good as the people who acknowledge them. Millennial parents may not share the same exported nationalistic values as older expatriates and legacy schools may be forced to re-brand, re-group and shift with the times.
Not-for-Profit Schools
Very few not-for-profit schools have scaled their style of education and grown to a size to make an impact that comes close to the for-profit groups within Dubai. Without question, Dubai’s for-profit schools have grown with Dubai and been part of Dubai’s growth story.
Without an abundance of resources and assets to leverage, their capacity to be agile will be tested as margins are squeezed. New parents may care less about funding and legal structures, and more about cost and location.
It’s clear that several for-profit schools have established themselves in the top-tier within the city and they still have capacity to grow, and replicate their brand because of their entrepreneurial approach. This represents the biggest threat to the not-for-profit schools.
School Groups
Within the current climate, school groups have greater capacity to pivot and to re-allocate resources at speed to adapt to market forces. However, the pressure to enroll parents is still there. Shareholder expectations need to be managed carefully as more will be need to be achieved with less. Newer school groups with real estate assets may need to re-structure their debt payments, whilst maintaining quality with new parents, who have greater choice and greater bargaining power.
