Yelp Economic Average: Consumers and Restaurants Adapting to New Normal
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Consumers described more inflationary experiences within their reviews on Yelp in 2021 than ever before, according to fourth quarter 2021 data for the Yelp Economic Average (YEA) report, a benchmark of local economic strength in the U.S. Additionally, restaurant and food new business openings (74,616) also increased 10 percent from 2020 (67,611). Overall new business growth was near pre-pandemic levels decreasing only one percent in 2021 compared to 2019.
"Restaurant and food businesses are continuing to adapt to the many challenges they’ve faced over the last two years," Pria Mudan, data science leader at Yelp, told Modern Restaurant Management (MRM) magazine. "Our data shows restaurant and food new business openings increased 10% last year from 2020 – a strong sign that these businesses are adapting to the changing conditions. The easing of restrictions and rollout of vaccines have allowed many temporarily closed restaurants to reopen and have helped create a favorable environment for new business to open as consumers return to dining out."
In Q4, consumer reviews mentioning higher cost of goods and services grew, reaching a five year peak after dipping at the onset of the pandemic, a 29 percent increase from Q4 2020 and a 49 percent increase from the five0year low in Q2 2020. As consumer concerns about inflation reached a record high, Yelp data also revealed an increase in people searching for higher cost businesses.
As the pandemic continues to evolve, more people might create new businesses that meet the needs of their local communities.
"We are seeing consumer interest rise for dining options that were heavily impacted by pandemic restrictions, with communal dining seeing a noticeable uptick in 2021, Mudan added. "Conveyor belt sushi, buffets and food courts all saw an increase in consumer interest last year compared to 2020. It is interesting to see the increase in consumer searches for higher priced restaurants while consumers are also mentioning rising prices in their reviews. Yelp data shows a 56 percent increase in searches for restaurants at the highest price point in 2021 compared to 2019. As people returned to pre-pandemic activities including travel and events, we observed that people were more willing to spend at higher price points, whether they were dining in or out, or supporting other local businesses in their communities."
Mudan sees the opportunities ahead for restaurants, hospitality and entrepreneurs.
“In 2021 we saw consumer behavior continue to adapt to the new normal that is pandemic life,” said Mudan. “Our data shows a record peak of mentions of rising prices in reviews as businesses face inflation, alongside supply and labor issues. At the same time, growth in people searching for higher cost businesses on Yelp, and renewed interest in travel and event categories could be a positive sign for local economic recovery.”
Last year also brought an increase in new business growth with nightlife, beauty, and hotels and travel businesses making a comeback. While the omicron variant surged in Q4, increases in consumer interest across several categories signaled a return to travel and social activities. In 2021, business openings increased by eight percent to 559,715 up from 517,231 in 2020. . Nightlife (9,344 new businesses), hotels and travel (12,396), beauty (42,540) and local services (60,069) categories on Yelp had the largest percentage increases year-over-year, rising 26, 22, 14 and 15 percent respectively in 2021.
"Changes to everyday life and business operations as a result of the pandemic have created new opportunities for entrepreneurship across industries, including restaurants," said Mudan."We’ve seen this in food delivery businesses, which our data shows increased in Q4 2021 73 percent above pre-pandemic levels (2019). In prior quarters we have also seen bakeries and dessert shops open at increasing rates – possibly as people continue to turn their baking hobbies into new ventures. Both suggest that as the pandemic continues to evolve, more people might create new businesses that meet the needs of their local communities."
Another lesson: the popularity of food delivery is not dropping anytime soon.
"Businesses that offer food delivery have continued to open and consumers now have more options for restaurant and food businesses that offer delivery, and many see it as a safer alternative to dining out," said Mudan. "Our data also shows that consumer demand for food delivery services remains strong, with consumer interest up 107 percent in Q4 2021 than it was in Q4 2019. As more people become accustomed to getting their food delivered through the pandemic, we expect food delivery to continue to be a popular option for consumers in the year ahead and beyond."