Small businesses face a summer of uncertainty

New York — Small businesses that rely on the outdoor crowds and free-spending tourists aren’t sure what to expect this summer.

Consumers will likely have a lot of pent-up demand more than two years into the pandemic. But they are also facing some financial headwinds due to the highest inflation rate in decades. And COVID-19 is still looming.

The American Travel Association, an industry trade group, expects money spent on travel – excluding business travel – in the US to reach $726 billion in 2022, up 3 percent from 2021 and just above pre-pandemic levels. Many Americans seem willing to spend the rest of their pandemic savings.

But inflation may throw a wrench in their plans. Higher prices make everyday living more expensive, which can leave less money for discretionary spending. Gas prices are up more than 60% compared to last year, and hotel room rates and airfares are up as well, putting pressure on travel budgets.

Memorial Day weekend may offer a sneak peek into how the summer will go. According to the Transportation Security Administration, an average of 2.23 million people per day passed through checkpoints at US airports during the five-day holiday period from Thursday to Monday. This was 9 percent less than the same five days in 2019, but up 24 percent from the same days last year.

Companies also struggle with inflation – raw materials are more expensive finished goods and workers demand higher wages. Owners were forced to raise prices or reduce some services.

“It’s an uncertain summer,” said Ray Keating, chief economist at a small business advocacy group. Entrepreneurship Council. “Inflation is a huge concern and related to that is the cost increases that small businesses are seeing from their own sellers and suppliers. There is a tight labor market. It is a difficult combination.”

The Jack Morey family owns and operates the Morey Docks and Beach Water Parks, three amusement parks along the waterfront in The Wildwoods, New Jersey, over two generations. Morey said the past two years have been devastating to his business, due to shutdowns, coronavirus restrictions, and staff shortages.

This year, the restrictions were dropped and Morey was able to hire full staff again. But payroll costs and all other expenses “maxed out”, so he had to raise prices. Morey is unsure if his base of mostly working-class families will return to the parks because they are facing higher prices for everything from groceries to gas. But he hopes for the best.

“Will people come back? I think they will. I know they will come to the beaches first.” “What will happen with inflation and gas, no one knows. I am a cautious optimist – we will know when we know.”

The higher cost of gas 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 rates, with most of the summer on sale. Owner Susan Goldstein said her customers love the fact that they can drive to the vineyard instead of traveling somewhere, despite the higher gas prices.

But Goldstein said people don’t book as much as they used to.

“There’s a lot of last-minute excitement,” she said. “People are waiting to see what the world has to offer.”

The employment crisis is stressing many small businesses this summer, too. To hire two Cinnaholic vegan cinnamon bun bakeries in Tennessee, Holly Row had to raise wages — and hire more teens.

Before the pandemic, Rowe employees were 80% over 18 and 20% younger. Now, the ratio has completely changed.

“Most of them were their first job, but it was fun. They’re hard-working, excited and want to impress,” said Rowe, whose stores are in Knoxville and Pigeon Forge, Tennessee, near Great Smoky Mountains National Park and Dollywood amusement park.

Hiring more teens is a national trend. According to data from Gusto, a payroll, benefits and human resources provider, teens made up 9.3% of new hires in April 2022, up from 7.7% in April 2021 and 2% in April 2019. Meanwhile, the proportion of 25- to 54-year-old hires fell to 62.9% in April from 75.3% in April 2021.

Some companies remain concerned about the continuing threat of COVID-19 cases. Samuel Clark’s business, Broadway Crew, a promotional staffing agency and street team that promotes Broadway shows, relies heavily on face-to-face interaction with tourists in Times Square. While his business has recovered since the reopening of Broadway, it has not been smooth sailing. Shows remain temporarily closed due to COVID-19 cases.

“This is a clear and present existential threat – we are seeing events and shows closed and a week off,” he said.

Meanwhile, Clark has had to raise wages, but his employees are under pressure due to rising 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 is heartbreaking to me.”

However, Clark says he’s hoping for a summer as Asia eases restrictions, and hopefully that will bring in an influx of international tourists. However, in April, overseas visits remained 43% below 2019 levels, according to the American Travel Association. Travel from Asia is still down 71% due to restrictions in individual countries.

For Austin Ray, who owns Von Elrod’s Beer Hall and Kitchen in Nashville, summer means an influx of fans, many of whom come from the nearby Nashville Sounds high school baseball stadium. The minor league season was canceled in 2020, so times have been tough. But sales rebounded in 2021 because the restaurant has a large outdoor patio and baseball is back. While the crowds returned, Ray’s costs rose. He plans to revamp the menu that would raise prices by 7% to 10% across the board.

Retaining workers, he said, remains a challenge that requires “more time and more money”.

However, after weathering the pandemic for more than two years, he believes his company can beat this as well.

“I feel like we can get through anything, because we’ve come this far,” he said.