By Paul Noland
The world finds itself in one of the most complicated economic environments in decades. Low unemployment, high inflation, supply chain issues, record high gas prices, and concerns about a possible recession are impacting everyone and every institution. Cultural attractions are not exempt. Last week’s Community Conversation explored the root causes of today’s economic situation and how they are specifically impacting cultural attractions. Potential short-term and long-term solutions were also offered and discussed.
- Elizabeth Kohler Knuppel—President and CEO, Skystone Partners
- Dario Lareu—CEO, Temaiken Biopark
- Paul Noland—Principal and CEO, RPN Associates and Of Counsel, Zoo Advisors
- Adam Sacks—President, Tourism Economics
- Zachary Winfield—Vice President, Zoo Advisors
U.S. Economic Outlook
Adam led a discussion of the current state of the economy and its likely issues moving forward. Key takeaways included:
- The economy overall, and travel and leisure in particular, have seen a dramatic recovery since mid-2020.
- Air traffic and hotel room demand are virtually back to 2019 levels.
- Strong job growth exists in all sectors. Since the pandemic hit and unemployment soared, over 22M jobs have returned, only 1.4M short of pre-pandemic levels.
- However, consumers are feeling uneasy. The Consumer Confidence Index has dropped from a high of almost 140 in 2019 to its current level of about 100.
- Consumer spending remains strong, fueled by high personal savings rates accumulated during the pandemic.
- Looking forward, concerns are focused on the “twin-headed enemy of recovery” to quote Adam.
- The first twin head is labor shortages. These exist in several sectors but none more than in hotels and recreation. Cultural attractions are part of the recreation sector. These labor shortages impact more than just guest service, they impact revenue and costs. Without the appropriate levels of staff, lost revenue can come in the form of shorter operating hours, closed food and beverage facilities, and reduced cross-sell and upsell opportunities. On the cost side, wages rates are up more then 20% from 2019 levels in the hospitality and recreation sectors.
- The second twin head is inflation. In June, annual inflation in the U.S. hit 9.1%, primarily driven by the energy and food categories. Economists generally agree that we will be well into 2023 before inflation goes down significantly.
- Regarding supply chain issues, they seem to be moderating. International shipping rates have declined significantly since last year, an important indicator that the backlog of goods to be shipped is easing.
- Economists, however, don’t completely agree on the prospects for a recession. While 70% of economists surveyed believe there will be a recession, most likely in 2023, 30% do not think we will have a recession in that timeframe.
- The good news is that most agree that if there is a recession, it should be relatively mild and short.
- The prospects for leisure, hospitality, and recreation remain strong. Gas prices, while high, don’t seem to be impacting people’s plans and surveys of consumers’ intent to travel is as high as it has ever been.
Stay tuned for our next segment when we’ll share takeaways from our other panelists who focus on the fundraising environment and trends, plus revenue and expense impacts, and addressing costs.
Click here to view the full webinar recording.