Smaller tourist locations, and even some of the bigger spots like Disney or Universal Studios, may need to prepare for a very harsh few years upcoming. The US producer price index for 2021 has just been released and it’s a monster. From CNN:
The US producer price index, which tracks what America’s producers get paid for their goods and services on average over time, rose 9.7% last year, not adjusted for seasonal swings. It was the biggest calendar-year increase since the data series began in 2010, according to the Bureau of Labor Statistics.
This follows the news yesterday that inflation for 2021 soared by more than 7% in the United States, the largest increase for the world’s democratic republic superpower. That was the largest increase in forty years. For perspective, inflation increased by less than 2% in the year prior.
The US Producer Price Index may be more troubling, however, as it signals that inflation is likely to not only continue into 2022, but perhaps accelerate. With that acceleration, many businesses are preparing for action from the Federal Reserve. Major increases to interest rates may be able to contain rampant inflation not seen since the seventies, but it will likely also lead to an economic recession for the United States. It may be unavoidable. It will certainly reverberate globally.
As a result, tourist destinations should prepare for a middle and lower class that has less discretionary spending over the next few years. According to the US Bureau of Statistics, inflation has yet to launch in full for the tourism sectors. Recreation, for example, has only risen 3.3% in overall cost inside the United States. Services have only risen 4%. However, smaller locales are getting hammered by higher gas prices driving folks off the roadways. Gasoline costs are up an astounding 49.6% year-to-year and other transportation costs are up 22%. You can bet that’s damaging Route 66 travelers over the next years.
Source: Biz Journals
That said, the increases in other sectors are likely to begin pushing inflation up in the tourist and entertainment sectors. Tourism runs on gasoline after all. Even in November, global hotel prices were predicted to rise by 14% in 2022, a number that is likely now being reassessed at a higher number. How much higher must the United States hotel price be rising if the United States is outpacing global inflationary statistics?
One suggestion for readers might be that if you are planning to take a recreational trip this year, the sooner is likely the better. Otherwise you are likely to encounter higher prices the longer that you wait. It’s becoming patently obvious that predictions of “transitory inflation” were foolishness.
