Consumers’ thirst for experience trumps inflationary pressures

Inflation has been a major determinant of consumer behavior over the last year, but the demand for experience wins over wallets

March 23, 2023
  • Keisha Virtue
Inflation has surged since COVID

There’s no doubt about it. Prices are significantly higher than they were before the influx of COVID in 2020. With lockdowns happening around the globe, supply chain disruptions abounded, causing product shortages and driving up the CPI. Further complications like soaring gas prices exacerbated an already bad situation. The CPI experienced steady increases since the cycle low in May 2020. By 2021, year-over-year growth in the index climbed steeply, hitting a high of 9.1% in June 2022. Although the year-over-year comparisons in inflation are softening, the price of core necessities like food and electricity remain stubbornly high. While the overall CPI rose 6.0% from February 2022 to February 2023, grocery prices jumped 10.2% and electricity costs shot up 12.9%. In more positive news, gas prices compressed 2.0% year-over-year, freeing up some of consumers’ spending power. 

Consumers have responded to persistent inflation by shifting money away from discretionary goods purchases in favor of groceries and other key necessities. Mass merchandisers like Walmart and warehouse clubs like Costco benefitted from this focus on consumers’ desire to save money

The CPI index has soared 16.4% since COVID hit

Core necessities still seeing sharply rising prices

Retail sales sees pressure from rising prices

After experiencing strong gains in January of 3.0%, month-over-month, retail sales declined in February by 0.4%. Year-over-year increases were generally anemic when accounting for an overall inflation rate of 6.0%. The true winners in February were health & personal care retailers (with an 8.0% year-over-year increase), nonstore retailers (8.5%), general merchandise stores (10.5%) and food & beverage places, which saw robust gains of 15.3%. This significant jump in F&B sales points to a greater story: consumers’ pent-up demand for experiences.

Consumers flock to F&B places despite inflation pressure

Experiential spending shows signs of life

There has been much talk bruited about that consumers are craving fun, social experiences after years of limited community gathering, but is it true? All signs point to yes. Looking at fourth-quarter sales numbers, spending on travel and experiences have seen clear gains from 2021 levels. Year-over-year spending growth on accommodations topped the list at 36.1%. F&B sales at the end of 2022 also saw meaningful increases. Consumers flocked to theaters, arcades and amusement parks with growth ranging from roughly 20-32%. Motion pictures…eh, it’s a supply problem. We’ve been seeing increased announcements of move-ins and aggressive opening plans from social entertainment concepts like Puttshack, Topgolf, Punch Bowl and Camp Pickle – a pickleball-focused eatertainment concept.

Consumers shift from goods to experience

Urban Air Trampoline Park is on a tear, opening dozens of new locations in 2022, with more to come in 2023. I can tell you, the demand is there. As I ushered my daughter into the Coral Springs location, I could not believe my eyes. I’ve been to many kiddy birthday celebrations at arcades and trampoline parks over the years, but this was like nothing I’ve ever seen. The sea of people, the steadily moving lines… not 5, not 10, but 12 birthday parties happening simultaneously. How could one take it all in? With courage, determination and lots of patience, we hit all the top spots: the VR zone, the trampolines (of course), the obstacle course, and my favorite - the bumper cars! As we headed outside once more into the quiet comfort of suburbia, I couldn’t help but think, “Yeah…I think this is going to stick.”

Contact Keisha Virtue

Research Analyst