The number of new schools coming into the market means education provision in Dubai is now at a 'tipping point', according to property consultancy firm Knight Frank, with private sector providers being forced to adopt aggressive marketing campaigns or offer tuition fee discounts to fill desks.

A report published by the firm on Monday states that 13 new schools are due to open during the current academic year, which will bring the total to 207.

And although schools in certain areas can charge fees upwards of 100,000 United Arab Emirates dirhams ($27,000) per year, the increasing competition means that schools in the mid-market may find it difficult to pass on cost increases even when they are sanctioned by the Dubai government.

In a telephone interview with Zawya on Monday, Shehzad Jamal, a partner in the firm's education consultancy practice, explained that school fees are generally set by an Education Cost Index - a measure approved by the Dubai government's Knowledge and Human Development Authority (KHDA), which sanctioned a 2.4 percent increase in 2017/18, but schools who perform well and gain higher ratings are allowed to increase fees by a certain multiple above this.

As a result, there has been a "gradual increase year-on-year" in school fees, Jamal said, prior to the current academic year when a freeze on fees was ordered via a directive issued by Dubai's Crown Prince Sheikh Hamdan bin Mohammed Al Rashid in June. Schools on land owned by the government benefited from an accompanying freeze on rents.

But Jamal said the increasing number of new schools is leading to greater competition, specifically in the mid-market, with many new schools offering 'founders' discounts' to attract new students in a bid to ramp up occupancy.

Jamal said that some schools "have a habit of using the ECI and increasing (fees), but under the current circumstances, with the level of competition, they are usually shying away from this," he argued.

"Fees remaining constant is a pretty normal phenomenon. A lot of schools, you will see that they increase fees after a couple of years, or maybe every three years. So although they have gotten a good rating and the ECI does permit them to increase tuition fees, schools choose to keep these fees constant for a few years so parents can plan better."

There are 16 different types of school curricula offered in Dubai. A snapshot of the 2016/17 academic year within Knight Frank's report showed that UK curriculum schools were the most popular in the city, with 74 schools teaching 93,771 students. There were 34 American curriculum schools teaching 48,257 students and 33 Indian curriculum schools teaching 79,579 students. Some 11 schools also taught the International Baccalaureate curriculum to 13,232 students - nine of these had opened within the past five years – and 11 schools with 13,768 students offered the Ministry of Education's curriculum.

The report points out that occupancy levels remain high within the most expensive schools (63,000 dirhams and above), at around 77 percent, or 84 percent if schools that only began operations in 2017/18 are stripped out. Occupancy levels in cheaper schools (below 52,000 dirhams per year) also stand at 84 percent, but drop in the mid-market (52,0001-63,000 dirhams) to 69 percent.

Many of the more expensive schools operate under an international branding licence provided by top schools elsewhere in the world, but those institutions putting their names to local schools are having to become more hands-on. Jamal said that foreign schools could previously simply licence their brand, but rule changes means they now need to have a branch in Dubai and play some part in a school’s governing body, even if they do not own the school. As a result, an increasing trend is for some to take minority stakes in local operations.

"What the KHDA doesn't want is just a template that you've brought from abroad. They want as much presence as possible," he said.

Yet despite the UAE government recently allowing 100 percent foreign ownership of companies in certain sectors, Jamal said he does not believe that this will lead to a wave of foreign schools entirely running their own operations in the UAE.

"There are very few international schools that have the strength to fund the operations," he said. "A lot of the schools back in the UK are trusts and under that scheme they are not allowed to invest into another school operation which will be run for profit," he added.

A report published by Boston Consulting Group (BCG) in May this year stated that the UAE's private sector education market was the most mature in the region, with around 90 percent of students in Dubai and Sharjah attending private schools, compared with 65 percent in Abu Dhabi and a GCC-wide average of just 29 percent. BCG predicted that the size of the UAE's private sector schools (K-12) market is set to grow in size from $4.4 billion last year to $7.1 billion by 2023.

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Reporting by Michael Fahy; Editing by Shane McGinley)

(michael.fahy@thomsonreuters.com)

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