Showing posts with label for-profit schools. Show all posts
Showing posts with label for-profit schools. Show all posts

Sunday, 23 April 2017

Caveat Emptor - the perils ahead for those investing in Dubai's for-profit private schools

The National 23/04/2017
It has been a tough few days for the UAE schools' market. Last week GEMS announced that their flagship ultra-premium school, GEMS Nations Academy will be 'merging' with GEMS Dubai American Academy (Education Journal Middle East 13/04/2017) and today The National has run two stories indicating that parents are shopping around because the 'High Cost of Education is the biggest challenge faced by parents.'
These stories indicate that the oversupply of schools is having an impact at every level of the UAE private schools market.
The failure of GEMS Nations is indicative that there is not a market for an ultra-Premium school in Dubai.
The effective closure of GEMS Nations Academy after only one year indicates that there is not a market for an ultra-Premium school in what is an already competitive Premium marketplace. This flagship school boasted the best teaching, small class sizes and Rolls Royce school facilities - all at an eye-watering price point that was 30% higher than most of its competitors. GEMS is a big enough organisation to absorb this loss and its merger with DAA is a useful Plan B. Its failure must serve as a warning sign not only to North London Collegiate School, Dubai who are also pitching into the market in September 2017 with ultra-premium priced product, but also to Brighton and Dwight who are coming to Dubai in 2018, and to other UK schools thinking of establishing franchise schools in the UAE.
Market forces are driving a readjustment in Dubai's private schools' market.
The National story on parents shopping around and moving children between schools represents a readjustment in the wider private schools market. It was only in the academic year 2014-15 that the number of places exceeded the number of pupils. Any under-supplied market has the potential for rich pickings for investors, this is all the more so when it is an 'essential' product that is being sold - ex-pat parents are required by law to put their child into a private school. The consequence was that schools were able to open and thrive that do not represent good value to parents. 
A market-driven schools sector is generally a good thing. Now that there is over-supply we are seeing market forces at work: parents moving children between schools, greater competition is driving up school quality, and prices are falling. However, we can also expect more school closures as 'the dark hand of the market' culls those who don't make the mark.
The challenge for school owners, governors and school leaders is to raise standards without raising prices.
The challenge for school owners, governors and school leaders is to raise standards without raising prices. This will be particularly difficult in a context of a global shortage of teachers and of rising costs due to the introduction of VAT in January 2018, and the inevitable subsequent wage-price inflation that will follow. It is likely that schools will be forced to absorb costs in order to retain market share, with the obvious consequence that returns for shareholders will fall.
These are exciting but difficult times for the private school sector. The streets of Dubai are not paved with gold - let anyone thinking of investing in the private schools sector beware - Caveat Emptor. 

Tuesday, 21 February 2017

Private School Fee Increases and the KHDA's Education Cost Index

This week the KHDA published its annual Education Cost Index (ECI) which determines the maximum amount by which private schools in Dubai can increase their fees. The ECI is set at 2.4% which means that 
  • 'Outstanding' Schools can increase their fees by 4.8%  (2.0 x the ECI)
  • 'Very Good' Schools can increase their fees by 4.2% (1.75 x the ECI)
  • 'Good' Schools can increase their fees by 3.6% (1.5 x the ECI)
  • All other schools can increase their fees by 2.4% (the ECI).
The issue of increasing school fees and making money out of educating children is an emotive one. The ECI is an important mechanism to protect parents from organisations profiteering from education. Ultimately, parents are reticent about moving children from the schools in which they are settled because of fee increases. 

ECI Theory and Practice

In theory, the ECI incentivises for-profit organisations by allowing those schools who have invested in achieving high standards to increase fees by a higher rate. However, it may argued the unintended consequence of this is that good schools have the income to get even better, whereas weaker schools are caught in a poverty trap by not having the capital to make necessary improvements. 

Where does the money go?

Much depends on where the additional income from the fee increase goes: whether it is reinvested in the school (as it is in full in the not-for-profit schools) or whether it goes to line investors' pockets. All schools should be transparent about the percentage of school fees that goes on profit to the investors so that prospective parents can make informed choice of school. 
At JESS, Dubai, we publish these data on our website and 100% of any annual surplus is reinvested in the school.



Wednesday, 7 December 2016

The Future of Schooling – A view from the Middle

This article was published in The National on 20th December 2016

The Challenge 

Source: Richard F. Elmore, Harvard University,
Supporting Strong Instructional Practice Feb 2015
One of the greatest challenges for Education in the Twenty-first Century is that there is an ever-increasing divide between the demand for learning and the supply of schooling. This is seen most obviously in the global shortage of teachers, but it extends to dearth of school leaders and to the unavailability of schools themselves. According to UNESCO, there are an estimated 263 million children who are not in education and the world will need 3.3 million more primary teachers and 5.1 million more lower Secondary teachers by 2030. There is no easy solution to this problem, but I believe that lessons from how the Middle East is addressing the problem may provide a solution that will work in other parts of the world. 
You might ask, ‘Why would a solution come from the Middle East? Why not from the most developed Educational systems of Europe and North America?’ Well, I believe that the answer to that lies what Clayton M. Christensen of the Harvard University Business School, calls ‘Disruptive Innovations’ - i.e. innovations which transform the entire form of organization and management of established institutions. Christensen argues that one of the characterististics of ‘Disruptive Innovations’ is that that they ‘originate in Low-End and New-Market footholds’ (‘What is Disruptive Innovation?’ HBR December 2015). On this basis, it is more likely that a solution the Learning-Schooling problem should be found in emerging educational market of Dubai than in established settings of the the US or the UK independent sectors. 

Lessons from Dubai 

The traditional model for schooling around the world was one where education was provided by Governments or by charitable not-for-profit organisations. In the UK, the church and the independent schools, and subsequently the State provided education. No one countenanced the concept of making a money out educating children. Indeed, prior to the recent machinations by the UK Charity Commission, the provision of education was considered an inherent good for the wider benefit of society [a concept in which many of us still believe].
However, Dubai is different. Today 92% of the population are immigrants – economic migrants if you like – who can never be citizens of the UAE. In this context, the State recognizes the need for there to be good schools in order to attract workers to Dubai, but, understandably, sees no reason to provide education for the children of ex-pats free of charge. The consequence has been the growth of the Private School sector. In the early days of the UAE (the nation is only 45 years old) the first schools were founded by the companies working in the country – they were Not-For-Profit following the UK, French or US models. Today 95% of Private Schools in Dubai are For-Profit. The expansion of Dubai is so fast, that the Not-for-Profit sector is not equipped to respond – with the inevitable consequence that the For-Profit sector has filled the void. Market forces play out on the Dubai stage in a way that, I believe, will be a model around the world. So what lessons can we learn For-Profit sector in Dubai? 
The Dubai For-Profit Sector 
The For-Profit sector in Dubai, unsurprisingly is driven by the economic drivers of ‘return-on-investment’, ‘economies of scale’, scalability, differentiated markets and keeping costs down – especially of staffing. However, there are three important characteristics of the For-Profit sector that, I believe, will shape global schooling in the future: 
  1. The For-Profit groups offer education at different price points: The For-Profit groups offer Premium, Mid-range and Budget in the same way that airlines offer First Class, Business and Economy seats on their planes. The differentiators between the price points are school and class size, the range of facilities available in the school, the qualifications of teachers, and the amount of teacher-pupil contact time in the week. 
  2. The For-Profit Groups invest in central I.T. systems: Nord Anglia have developed the Nord Anglia University as a global CPD portal for teachers. GEMS have developed a share VLE for their schools and have introduced ‘blended learning’ programmes which have moved the process of teaching and learning away from the traditional model of a teacher standing in front of a class.
  3. The For-Profit Group invest in top talent for key leadership roles: GEMS have attracted top educationalists from around the world to drive their educational and IT learning strategies.

Looking into the Crystal Ball – Five Prophecies for the Future of Schooling 


So if we apply the principles of Dubai’s For-Profit sector to the global Learning-School problem, what solutions might we see? 

1. Education For-Profit will become the norm around the world. Not-for-Profit education is not equipped to meet the global demand for education, the inevitable consequence is that the For-Profit sector will fill the void. 
2. Being taught by a specialist teacher in a classroom at Secondary level will be a luxury. Technology won’t replace teachers everywhere – but it will in many places. In the future, it will only be Premium Secondary Education that will be delivered by specialist teachers in classrooms drawing on a range of real and virtual resources. Budget Secondary Education will not have subject teachers, but will be delivered totally through online courses on learning platforms. However, for many young people around the world this will be better than the present situation of receiving no education at all. Mid-Range Secondary Education will be delivered by “super-teachers” via Virtual-Reality Conferencing. The For-Profit will invest in new technologies in order to maximise the impact of teachers. 
3. Virtual Reality Teaching will be the disruptor of Secondary education. We also already have ‘Virtual Teaching’ through video conferencing which enables pupils around the world to be taught live by a remote teacher. Furthermore, ‘Virtual Reality’ already enables pupils to travel through time and space – to experience the ancient Colosseum in Rome, life in the trenches or a World-War One dog-fight with the Red Baron. Once these two technologies are combined so that we have ‘Virtual Reality Teaching’, it will be possible for a pupil can put on a headset and ‘feel’ as if they are in a real classroom with a world-class teacher, or be taken on a virtual school visit to any place in time and space. 
“After Games, we’re going to make Oculus a platform for many other experiences. Imagine enjoying a courtside seat at a game, studying in a classroom of students and teachers all over the world, or consulting a doctor face-to-face – just by putting on your goggles at home.” Mark Zuckerberg
4. There will be ‘superstar teachers’ commanding very high salaries. One of the consequences of the rise of Virtual Reality Teaching is that there will be the rise of superstar teachers. The For-Profit sector has a proven record of investing in talent where it can made wider savings. It will inevitably pay to attract top talent, particularly in shortage subjects and their global educational networks will provide a platform which will enable great Virtual Reality teachers will be able to reach millions of students. These teachers will inevitably be very well paid and, given the nature of the C21, it is likely that they will be famous and become celebrities.
Humanoid 'Nao' robots Manufactured by
Aldebaran are being trialled
in S. Australia
5. Primary Teachers will be assisted by Robots. Young children at a formative stage of development need human interaction to shape their learning, thus it is highly unlikely that it will ever be possible to replace teachers in primary schools with technological solutions. One consequence of the predictions for secondary education outlined above is that primary schooling will need to teach the skills to enable young people to access non-classroom based forms of education. It is quite possible that robots will replace Teaching Assistants, performing basic instructive tasks such as teaching basic mathematics and listening to children read. 

Final Thoughts on the Future of Schooling

Prophecy is more about reading the signs of the time and working out a likely a future position from the direction of travel, rather than predicting the future receiving some dislocated revelation from on high.  Prophets are rarely popular because they are usually delivering a message that people don't want to hear. I believe that the signs for a possible future of schooling are there for all to see.
In an ideal world every child in the world would receive the quality of education that is available at Eton, or Phillips Exeter Academy (or even at Dubai College or JESS for that matter) but that isn’t going to happen. The reality is that there is inequality of educational provision in the world and that that is very unlikely to change.  
The challenge to every true educationalist is how that we can give every child the opportunity to have at least some form of basic education. Ideally, Governments supported by the Not-for-Profit sector would provide the solution because I believe that we have to be very careful about how we make money out of something as fundamental as the provision of a child’s education. Sadly, the global political will to achieve this is absent. Thus my hope is, as Diamandis and Kotler argue in Abundance, that the combination of new technologies and billionaire philanthropy will change the world. Unless that happens the approach taken by the For-Profit Sector in the UAE is likely fill the void and that stands as a warning to us all.

Thursday, 1 December 2016

The Future of Schooling - A view from the Middle (Presentation)

A presentation given at the Digital by Design, Digital by Default – ISC Digital Strategy Group Conference 2016 held on Thursday 1st December at Microsoft, Reading, UK.

 

Tuesday, 15 September 2015

Are Private Schools in Dubai still a sound investment?

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:
  1. 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). 
  2. 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.
  3. 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.
  4. 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.