NEW YORK – Small businesses that rely on outside crowds and spendthrift tourists don’t know what to expect this summer.
Consumers likely have a lot of pent-up demand after more than two years of the pandemic. But they also face significant financial headwinds from the highest inflation in decades. And COVID-19 remains an imminent presence.
The US Travel Association, an industry trade group, expects money spent on travel – excluding business travel – in the United States to reach a total of $726 billion in 2022, up 3% from 2021 and slightly above pre-pandemic levels. Many Americans seem ready to spend what is left of their savings in the event of a pandemic.
But inflation could throw a wrench in their plans. Higher prices make daily living more expensive, which could leave less money for discretionary spending. Gasoline prices are up more than 60% from a year ago and hotel rooms and plane tickets are also more expensive, putting pressure on travel budgets.
Memorial Day weekend could offer a glimpse of how the summer will unfold. According to the Transportation Security Administration, an average of 2.23 million people per day passed through US airport checkpoints during the five-day Thursday-Monday holiday period. That was 9% lower than the same five days in 2019, but up 24% from the same days last year.
Businesses are also struggling with inflation – raw materials and finished goods are more expensive and workers are demanding higher wages. Owners have been forced to increase prices or reduce certain services.
“It’s been a summer of uncertainty,” said Ray Keating, chief economist at the Small Business & Entrepreneurship Council advocacy group. “Inflation is a major concern and is linked to the increased costs small businesses are seeing from their own vendors and suppliers. There is a tight labor market. It’s a tough mix.
Jack Morey’s family has owned and operated Morey’s Piers & Beachfront Water Parks, three boardwalk amusement parks along the waterfront in The Wildwoods, New Jersey, for two generations. Morey said the past two years have been devastating for his businesses, due to COVID-19 closures and restrictions and understaffing.
This year the restrictions were lifted and Morey was able to fully staff again. But salary costs and all other expenses are “through the roof”, so he had to raise prices. Morey isn’t sure if his base of mostly working-class families will return to the parks as they face higher prices for everything from groceries to gasoline. But he hopes for the best.
“Are people going to come back? I think they will. I know they will come first for the beaches,” he said. “What will happen with inflation and gas, nobody knows. I’m cautiously optimistic – we’ll find out when we find out.
The higher cost of gasoline and other items means a growing divide between wealthy tourists and the middle or working class. At the Mansion House Inn on Martha’s Vineyard, rooms are booked at pre-pandemic prices, with most of the summer sold out. Owner Susan Goldstein said her clientele appreciates being able to drive to the vineyard instead of flying somewhere, despite rising gas prices.
But Goldstein said people aren’t booking as far in advance as they used to.
“There’s a lot of last-minute action,” she said. “People are waiting to see what the world offers.”
A labor shortage is also putting pressure on many small businesses this summer. To staff her two Cinnaholic vegan cinnamon roll bakeries in Tennessee, Holly Roe had to raise salaries and hire many more teenagers.
Before the pandemic, Roe’s staff was 80% over the age of 18 and 20% under. Now the ratio has completely changed.
“For most of them, it’s their first job, but it’s been interesting. They’re eager to work, excited and want to impress,” said Roe, whose stores are in Knoxville and Pigeon Forge, Tennessee, near Great Smoky Mountains National Park and Dollywood Amusement Park.
Hiring more teenagers is a national trend. According to data from Gusto, a payroll, benefits and human resources provider, teenagers made up 9.3% of new hires in April 2022, compared to 7.7% in April 2021 and 2% in April 2019. During Meanwhile, the share of hires aged 25 to 54 fell to 62.9% in April from 75.3% in April 2021.
Some companies are still concerned about the lingering threat of COVID-19 cases. Samuel Clark’s business, Broadway Crew, a promotional staffing agency and street crew that promotes Broadway shows, relies heavily on face-to-face interaction with tourists in Times Square. Although her business has recovered since Broadway reopened, it’s not been smooth sailing. Shows are still temporarily closed due to COVID-19 cases.
“It’s a clear and present existential threat – we’re seeing events and shows shutting down and having a week off,” he said.
Meanwhile, Clark has had to raise salaries, but his staff are strained by higher living expenses. “For hourly workers, rent is up 25% year over year,” he said. “These guys have no room for error in their budgets. It’s heartbreaking for me.
Still, Clark says he has hope for the summer as Asia eases restrictions, hopefully bringing an influx of international tourists. Yet in April, outbound visits remained 43% below 2019 levels, according to the US Travel Association. Travel from Asia is still down 71% due to restrictions in some countries.
For Austin Ray, owner of Von Elrod’s Beer Hall and Kitchen in Nashville, summer means an influx of crowds, many from the Nashville Sounds minor league ballpark next door. The minor league season was canceled in 2020, so times were tough. But sales have rebounded in 2021 as the restaurant has a large outdoor patio and baseball has returned. As the crowds return, Ray’s costs have skyrocketed. It plans a menu overhaul that will increase prices by 7% to 10% across the board.
Retaining workers remains a challenge, requiring “more time and more money”, he said.
Yet, after weathering the pandemic for more than two years, he believes his business can handle it too.
“I feel like we can go through anything, because we’ve come this far,” he said.
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