Mentions of inflationary phrases soared 29 percent in Q4 year-over-year.
A new study shows consumers' concern with inflation is the highest on record, according to Yelp's Economic Average.
To show how customers have viewed inflation over time, Yelp searched for mentions of various terms, like “higher prices,” “used to be cheaper,” and “more expensive” versus disinflationary experiences such as “consistent value,” “stable prices,” and “reasonably priced” from 2015 to 2021.
Yelp found mentions of inflationary terms reached a five-year peak in Q4, spiking 29 percent compared to last year and 49 percent versus Q2 2020, when the pandemic first arrived.
And it's clear what customers are witnessing, especially restaurant guests. The food away from home index rose 6.5 percent in December year-over-year, the largest increase since January 1982. The previous 40-year high came in November, when inflation was 5.8 percent. The price of quick-service meals jumped 8 percent, while full-service menu items lifted 6.6 percent.
"Inflation is a growing concern for business owners across the country," the report said. "Higher prices for business essentials, including supplies and labor, means higher operating costs for businesses at a time when many are still trying to recoup losses from shutdowns."
However, it appears rising costs haven't done much to quell spending habits, with Yelp data showing an increase in searches for higher-priced businesses in 2021 compared to 2019. To illustrate this trend, Yelp divided businesses into four categories ($, $$, $$$, and $$$$), from lowest to highest price points. Searches for companies labeled "$$$$" and "$$$" increased by 56 percent and 31 percent in 2021, respectively. Meanwhile, searches for businesses labeled "$" and "$$" dropped 24 percent and 8 percent, respectively.
The trend is very much in line with what's been seen across the restaurant industry. Chili's noted in its Q1 earnings call in November that it was planning to take its third pricing action of the fiscal year, and that with the rise, it would carry an incremental 3 percent price hike compared to last year.
But the chain hasn't seen much pushback from consumers.
“We’re feeling really good about the responses, and the strength of the value propositions post-price, and that gives us a lot of confidence that we can continue the traffic momentum that we have post the price increase that’s coming,” CEO Wyman Roberts said.
In addition to impacts of inflation, Yelp found food delivery services are still in high demand, with consumer interest 7 percent higher in Q4 versus 2020 and 107 percent greater than 2019. At the same time, experiential concepts also saw notable increases in the fourth quarter year-over-year, including dinner theater (97 percent), hot pot (55 percent), buffets (31 percent) and conveyor belt sushi (55 percent).
The current economy has presented more opportunities, as well, with restaurant and food new business openings (74,616) increasing 10 percent from 2020 (67,611).
"Overall, 2021 underscored how the pandemic, coupled with supply chain and labor constraints, and pent-up demand, complicate the economic recovery," the report said. "Business openings inched closer to pre-pandemic levels and vaccinations have played a key role in allowing many to return to in-person activities that were restricted just a year ago."