The Yelp Economic Average 2021 Annual Report recently came out. This benchmark for local economic activity revealed several key findings, including business openings and rising search parameters. To come up with these findings, Yelp analyzed text from 2015 through 2021 that included consumer sentiment and interest.
Here’s what the data revealed for the restaurant industry and the economy at large.
The Hurdle for Economic Recovery—Inflation
In November 2021, U.S. inflation hit a 39-year high, with consumer prices rising 6.8% compared to a year ago.
The strained supply chain isn’t helping, as you can see from the latest market report. In fact, food prices are expected to rise by 5% in the first half of 2022. These rising prices are attributed to increasing freight costs, a continuing labor shortage, growing demand, and reduced supply due to import delays.
The bottom line: higher supply and labor prices mean increasing operating costs.
According to Yelp, consumers described more inflationary experiences in 2021 than ever before. Yelp measured this sentiment in phrases like “more expensive,” “higher prices,” and “used to be cheaper.” In Q4 2021, the mention of increasing prices reached a five-year peak and a 29% increase from a year ago.
Consumers Seeking Higher Priced Businesses
Despite inflation, consumers increased their search for high-priced businesses in 2021. Searches for Yelp’s highest price point designated by four ‘$’ rose by 56%, and searches for businesses with three ‘$’ increased by 31%. Conversely, searches for ‘$’ declined by 24%.
Increase in New Businesses
Growing inflationary concerns are also not stopping entrepreneurs from stepping up to the plate. Yelp reported that new businesses have entered the fray, with nightlife, beauty, and hotels & travel making the top spots. Overall, business openings increased by 8%, from 517,231 in 2020 to 559,715 in 2021.
New business openings in Yelp’s restaurant and food category rose 10%, from 67,611 in 2020 to 74,616 in 2021. Nightlife increased 30%, and hotels and travel rose 22%. States in the South saw some of the highest levels of business growth, with Mississippi, Alabama, Georgia, and Louisiana experiencing 27%, 22%, 19%, and 16% growth, respectively. Hawaii took the lead, with 44% more businesses opening in Q4 2021 when compared to Q4 2020.
Only seven states showed a decrease in the number of new business openings. These included Maine, Massachusetts, New Hampshire, New Mexico, North Dakota, Oregon, and Washington.
According to NPR, an incredible 5.4 million new business applications were filed in 2021, surpassing the record number set in 2020 by 1 million. In 2019, before the pandemic took its economic toll, just 3.5 million new business applications were submitted. With startups driving economic recovery, this may be a good sign for the coming year.
Consumer Interest in Travel and Gathering Returning
Yelp also reported that consumer interest in events and travel is returning. For example, in Q4 2021, silent disco showed a 284% increase compared to a year ago. A silent disco or silent rave is where party-goers listen to music through wireless headphones rather than a speaker system.
Photo booth rentals and DJs also showed substantial search increases, up 144% and 110%, respectively. Consumer interest in travel categories also rose, with searches for luggage storage, airport shuttles, and travel agents up 101%, 66%, and 39%.
The High Demand for Food Delivery Continues
The Consumer search for food delivery was 107% higher than 2019 pre-pandemic levels and 7% higher than a year ago. For many, 2020 spurred them to place online orders for delivery, and that trend does not appear to be diminishing any time soon.
Consumers also seem to be feeling better about joining others in public settings, with dinner theater searches up 97%. Hot pot and conveyor belt sushi were also up over 50% compared to the last quarter in 2020.
While this data reflects the changing landscape created by the pandemic, it also offers some hope in a return to the events that we once considered commonplace. People seem eager to enjoy the ordinary affairs that now seem extraordinary, like going out to eat in a restaurant.