As briefly discussed on the Instructional Advantages of Flight Simulation page there's good evidence that students clearly prefer flight schools with flight simulators.
Put yourself in the shoes of a young prospective pilot: You know that flight training is expensive, you've been researching schools online for months. You're going to need to balance costs with gaining certifications as well as gaining experience. You've looked at a few schools online and have narrowed it down to a few. You need to decide which school is going to provide the greatest training, and benefit to your career, for dollars spent.
Of course this is an exciting step for most students; who doesn't want to go see their future career, look at airplanes, and perhaps try out a simulator? However, it's also quite stressful. Flight training has become quite expensive1, many students are looking at the gross costs of paying off their loans before they begin. They know that $100 spent on an hour in an aircraft today, is going to be burdened with $35-422 of interest by the time they pay it off. Facing that financial challenge with the starting wages for inexperienced pilots and flight instructors is a daunting prospect.
The school that offers the most comprehensive education at an acceptable price is going to win, but that school also has to look like it's going to be fun, or at least tolerable. Most students today have grown up playing video games and find the prospect of using a flight simulator both enticing, and familiar at the same time. They know that time spent in the simulator is going to give them valuable skills, and won't be as expensive as spending time in the aircraft.
Most students of course still want to maximize their flight time so long as it's within their budget, and simulation allows them to spend more of those hours at a productive phase of learning, rather than basic cockpit familiarization and procedures training which is well suited for even a basic flight simulator.
There's also clearly a perception that a school which has one or more flight simulators is more successful, and committed to a higher standard of education, and that makes sense. Virtually all AFS-200 airlines use simulation because they know it has substantial training value and doesn't take an income producing asset out of service while being used for training. It's safe to assume prospective students have all seen impressive Level D Full Flight Simulators in news reports, and YouTube videos. They know simulation is a part of comprehensive education, and what the "real pros" use.
When a student visits a school which has numerous aircraft, particularly expensive to operate aircraft, and no flight simulators many students will assume (right or wrong) that the school is interested in maximizing billing for time in the aircraft. It's very easy to assume the priority is on making aircraft as available as possible so that they can sell as flight time as possible.
When a student visits a school which has comprehensive simulation facilities they can see that like the airlines they often aspire to fly for, this school is committed to training, rather than selling flight time. The school with the flight simulators also provides a more approachable entry point to flying by allowing students to gain some experience and confidence before getting in an aircraft. This "taste of flying" is an excellent experience for students when they first visit a flight school. It allows them to become more comfortable with the idea of flying and to interact with the school's staff in an instructional situation before signing on the dotted line. Of course, It doesn't hurt that often simulator time can both cost less for the student, and more profitable for the school.
The strong advantage flight simulation provides in training is so clear that over the last several decades we've seen multiple simulator manufactures launch their own training offerings. Most of the large Full Flight Simulator manufactures focused on the larger airlines have provide training services at their own "sim centers." For some companies the revenue from those facilities now exceed the revenue from making simulators.
According to research conducted by long time flight instructor (and NexGen executive) Mike Coligny the inflation adjusted costs of flight training has decreased slowly since the 1960s. U.S. Department of Labor Statistics data shows that despite a 14% reductions in the number of pilots in the workforce since 2002 the inflation adjusted earnings for aircraft pilot and flight engineer (SOC 53-2011) has decreased over the last 20 years. This of course has fueled the demand for more cost conscious education offerings. ↩
Assuming a standard 10 year loan at 6.25 - 7.5 APR ↩