- Consumer confidence is at it’s lowest point since 2008; consumers expect their real income to decline this year.
- Middle and lower income households are very worried, and over half say rising prices are causing hardship.
- Consumers say they plan to spend less on dining out, vacations, and out-of-home entertainment.
- Despite rising operational costs, out-of-home venues that cater to mainstream consumers still need to focus on a value message.
Inflation grew by 7.5% in January, and with the prospect of continuing non-discretionary price increases impacting consumers in 2022 — plus venues facing their own cost increases due to supply challenges and labor increases, out-of-home entertainment venues find themselves at a crossroads.
On the one hand, costs are up — and perhaps it is perfectly reasonable (and to be expected) that venues would past these additional costs on to customers. On the other hand, many lower and middle income consumers now find themselves strapped for cash with non-discretionary costs rising faster than wages. As consumers become more careful in their spending, they may be more included to choose activities with lower price points and higher perceived value.
Consumers Are Worried About Their Finances
Preliminary results of the February, 2022 University of Michigan Consumer Sentiment Survey indicate that U.S. consumers haven’t felt this concerned about the economy since 2008. The December edition of the survey indicates that this is largely driven by worry about higher prices, and a significant proportion of consumers expect that their financial situation will decline over the coming year.
Expected Change in Real Income During 2022
While it’s true that consumers on the whole expect to earn more money in 2022, they expect any wage increases to be outrun by increased costs. This is in some part due to the increase in news about higher prices that they are hearing, but also by significant price increases at the grocery store and gas pump.
According to Gallup, 79% of consumers at the end of January expect that inflation is going to go up over the next six months, and 50% expect that it will go up a lot. 49% of consumers, including 56% of middle-income Americans and 66% of lower income Americans say that rising prices are causing financial hardship.
Consumers are struggling to make ends meet. In the February 2022 NYT Momentive poll, 55% of workers say they’ve received a pay raise in the last year, but almost half of them say it wasn’t enough to keep up with inflation. 89% of respondents say they’re worried about inflation, and over three-quarters of consumers say they expect it to continue for an extended period.
Consumers Say They Will Spend Less on Out-Of-Home Entertainment and Travel in 2022
Concerns about real wages/income have caused many consumers to refocus their spending plans for 2022. While many say that they expect that they are going to have to spend more on groceries, food, childcare and education, they plan to spend less on out-of-home dining, out-of-home entertainment, and vacations.
The data from NeilsenIQ above is consistent with findings form McKinsey & Company, who heard from consumers that they plan to “treat themselves” less this year than they did in 2021. Note that Travel & Vacations is down by 22 points, and Out of Home Entertainment is down by 7 points.
Implications For Out-Of-Home Entertainment
The impact on out-of-home entertainment attractions is likely a mixed bag. Upper-income households aren’t going to be impacted by inflation as lower-income and medium-income households. So depending on the demographic profile of your audience your impact may be limited.
If, on the other hand, you target mainstream consumers, you will likely want to be thoughtful about the fact that in real dollar terms, these consumers are feeling the pince. They’ll be a lot more thoughtful how they spend their much more limited discretionary dollars, and competition among attractions, venues, and activities will be fierce.
University of Michigan Consumer Sentiment Survey, December 2021
NielsenIQ Consumer Outlook 2022 Survey December 2021
“Americans Expect Inflation to Persist Over Next Six Months,” Gallup Article published Jan 26, 2022. https://news.gallup.com/poll/389129/americans-expect-inflation-persist-next-six-months.aspx
“US consumer sentiment and behaviors during the coronavirus crisis,” McKinsey & Company, December 14, 2021 https://www.mckinsey.com/business-functions/marketing-and-sales/our-insights/survey-us-consumer-sentiment-during-the-coronavirus-crisis