Is the GCC’s private K-12 education sector booming?
The private education sector has been seeing a rise in recent years, a new report by LEK Consulting, a global management consulting firm, revealed.
The report, titled “The Private K-12 Opportunity in the Middle East,” explains that in the past three years alone, the private K-12 education sector in the region has grown three times faster on average than GDP.
There are 3 major reasons that make the region’s K-12 highly attractive:
1. Continued support by the government for a boost in education ahead of reformatory plans such as Saudi’s Vision 2030;
2. The population’s ability and willingness to pay for international education;
3. Thriving local and expat populations increasing the demand for education.
UAE leads K-12 in the GCC
(Infographic by LEK Consulting)
According to the report, the UAE has led the region’s private education sector growth, representing an attractive market opportunity.
“The availability of options in the UAE enables parents to move across price segments as household income changes,” the report states. “This broad coverage has given rise to strong, high-quality mid-priced and premium K-12 markets, contributing to the UAE’s higher overall tuition revenue.”
LEK’s findings show that Dubai and Abu Dhabi account for 60% of the private K-12 market and continue to grow faster than their regional peers.
The UAE K-12 private sector has several aspects that make it attractive to private education investors and operators:
1. A diverse mix of expats with differing budgets allows for a varied education market;
2. Locally-driven demand, as more and more locals are opting for private schools and leaving the public system behind;
3. Resilient demand, with the private K-12 education market maintaining growth at 14% in Dubai and 16% in Abu Dhabi during the 2016/2017 economic slowdown.
4. Supportive regulations, as The UAE’s regulatory environment is highly supportive of the private K-12 market.
5. Finally, the UAE offers large land parcels to private operators to build world-class school facilities.
Entering the market won’t be easy
The report gives a cautionary warning to prospective entrants because the private K-12 market is increasingly competitive as a result of government efforts to broaden supply. Nearly 24,000 seats were added in the super premium (fees >$20k) and premium schools (fees >$10k) segment between 2015 and 2018.
To ensure success going forward, new entrants will need to prioritize the following factors:
1. Invest in understanding the market and competitive landscape: It is imperative that new entrants have an in-depth understanding of the local market and competition at a catchment level to determine the most appropriate price point and curriculum to offer.
2. Develop a clear understanding of evolving parent needs: New entrants must invest in extensive primary research (including parent surveys) to develop the most appropriate school configuration and establish real differentiators to win in the market.
3. Engage with regulators: Market entrants should continuously engage with the local regulator to understand how best to deliver education that is in line with the quality assurance frameworks in place.