Small businesses that are dependent on spending tourists and outdoor crowds are unsure what to expect this summer. Many analysts have predicted a lot of pent-up demand after two-plus years of the pandemic. However, the looming presence of Covid-19 combined with the highest inflation in decades may put a damper on spending for many Americans.
The U.S. Travel Association, an industry trade group, expects that money spent on travel in the United States will top $726 billion in 2022. The number would be a 3 percent increase from 2021 and slightly above pre-pandemic levels. Experts predict many Americans appear ready to spend the remainder of any pandemic savings they may have.
Inflation, however, may throw a wrench in plans. Day-to-day living has become more expensive, with higher prices across the board, leaving less money for discretionary spending. The cost of gasoline is up more than 60% from a year ago, with airfare and hotel rooms higher as well, putting added pressure on travel budgets.
Memorial Day weekend gave a glimpse of how the summer season will go. According to the Transportation Security Administration, 2.23 million people passed through U.S. airport checkpoints daily from Thursday through Monday. The numbers were 9% lower than the same period in 2019. However, it was up 24% from last year.
Businesses continue to struggle with inflation as workers demand higher pay, and finished raw materials are more expensive. Many owners have been forced to cut back on some services and raise prices.
“It’s a summer of uncertainty,” according to chief economist with advocacy group the Small Business & Entrepreneurship Council, Ray Keating. “Inflation is a major worry and tied to that is increases in costs small businesses are seeing from their own vendors and suppliers. There’s a tight labor market. It’s a tough mix.”
Labor crunch puts pressure on small businesses
A labor crunch has put pressure on many small businesses. Hiring more teens has become a national trend. According to payroll, human resources, and benefits provider, Gusto, teens comprised 9.3% of new hires in April of this year. This is up 7.7% from April 2021 and 2% from April 2019. At the same time, the hires of 25 to 54-year-olds plummeted to 62.9% in April 2022, down from 75.3% in April 2021.
Some businesses also remained concerned about the ongoing Covid-19 threat. According to Samuel Clark, whose company promotes and staffs Broadway shows, although his firm has recovered since the pandemic restrictions, it isn’t smooth sailing. Face-to-face interactions with tourists in Times Square are essential, and performances occasionally close temporarily due to Covid-19 cases. “That is a clear and present existential threat. We see events and shows closing and having a week off,” he said.
Clark also said that retaining workers remains a challenge that requires “more time and more money.” However, Clark remains optimistic after surviving the pandemic for more than two years. “I feel like we can get through anything because we’ve made it this far.”