Expats paying $43,000 school fees fuel rise of Dubai billionaire private operator

DUBAI – At Gems World Academy in Dubai, the United Arab Emirates, kindergarteners have access to iPads and students spend time at the school’s 70-seat planetarium. That all comes at a cost – fees that can rise to US$33,000 (S$43,000) by grade 12.

It is the most expensive school in the chain run by Dubai’s Gems Education, which is among the world’s largest private school operators.

Founded by Indian-born billionaire Sunny Varkey, Gems caters to every price point, starting at as little as US$3,900 a year. But a boom in the emirate’s financial sector has meant Dubai is home to a growing population of hedge fund traders and bankers willing to fork out premium prices.

Private schools are big business across the globe – and they tend to be pricey in most major hubs. In Britain, for instance, Nord Anglia Education has been looking to sell a stake at a US$15 billion valuation. But Dubai is more lucrative than its peers because local rules make the city’s public schools largely inaccessible to most expatriates.

That translates into big money in Dubai, where about 90 per cent of the population of 3.6 million is from overseas, giving businesses unparalleled opportunities to profit from the education system.

Foreigners from every part of the world – from the US and Britain to Russia and India – have been pouring in since the Covid-19 pandemic, attracted by the city’s safety and low-tax regime. The government in Dubai  expects the population to surge to 5.8 million by 2040.

For Gems, this means demand is running so high that it has drawn up plans to add 30,000 new school places, chief executive officer Dino Varkey, the founder’s son, said in an interview at the company’s headquarters.

This June, the Varkeys raised more than US$3 billion from local banks to recapitalise the business while Brookfield Asset Management and co-investors committed US$2 billion to Gems. The family is now estimated to control a US$3.7 billion fortune, the Bloomberg Billionaires index shows. 

The dependence on a city long known for dramatic boom and bust cycles leaves the business vulnerable to volatile expat numbers that can shrink in cyclical troughs. But for now, the Varkeys are betting that Dubai’s parents will continue to pay top dollar. 

Gems is the largest school operator in Dubai, where it competes with international names like private-equity backed Nord Anglia, as well as a string of local companies and branches of overseas institutions like Kent College.

About 80 per cent of families in the UAE are setting aside over a third of their monthly income to pay for tuition, according to data assessed by investment banking advisory firm Alpen Capital, which cited a survey. Some of them have drained their savings and resorted to personal loans to finance their children’s education. 

While data is scarce, a 2017 study from HSBC Holdings found that foreigners in the UAE spend more on education than families anywhere in the world except Hong Kong. And despite shelling out thousands of dollars, there used to be lingering concerns that the relatively young schooling system could sometimes fall short of international standards, prompting some residents to pay higher fees than they want to in order to ensure a good education.

“The quality of education in Dubai is improving, but concerns remain due to the relative newness of many schools compared to more established systems in other expat hubs,” said Ms Karen Cedillos, senior vice-president for US-based Corporate Relocation Services. 

But these days, the expat influx has meant that Dubai schools are nearly at full capacity. Many parents are placed on waiting lists, forcing some to pay even more than budgeted. 

“In our experience, the high cost of education in Dubai significantly influences expats’ salary expectations,’’ said Ms Cedillos. “Clients tell us that the added financial burden often leads expats to attempt to negotiate higher salaries.” BLOOMBERG