Small businesses are facing `summer of uncertainty'

NEW YORK >> Small businesses that depend on outdoor crowds and freespending tourists aren't sure what to expect this summer.

Consumers likely have a lot of pent-up demand after more than two years of the pandemic. But they're also facing some significant financial headwinds because of the highest inflation in decades. And COVID-19 remains a looming presence.

The U.S. Travel Association, an industry trade group, expects money spent on travel — excluding business travel — in the U.S. to total $726 billion in 2022, up 3% from 2021 and slightly above pre-pandemic levels. Many Americans appear ready to spend what's left of their pandemic savings.

But inflation might throw a wrench in their plans. Higher prices are making day-to-day living more expensive, which could leave less money for discretionary spending. Gas prices are up more than 60% from a year ago and hotel rooms and airfare are pricier as well, putting pressure on travel budgets.

Memorial Day weekend might offer a snapshot of how the summer will go. According to the Transportation Security Administration, an average of 2.23 million people per day passed through U.S. airport checkpoints during the five-day Thursday through Monday holiday period. That was 9% lower than the same five days in 2019, but up 24% from the same days last year.

Businesses are also struggling with inflation — raw materials are finished goods are more expensive and workers are demanding higher pay. Owners have been forced to raise prices or cut back on some services.

“It's a summer of uncertainty,” said Ray Keating, chief economist with advocacy group the Small Business & Entrepreneurship Council.

“Inflation is a major worry and tied to that is increases in costs small businesses are seeing from their own vendors and suppliers. There's a tight labor market. It's a tough mix.”

Jack Morey's family has owned and operated Morey's Piers & Beachfront Water Parks, three boardwalk amusement parks along the waterfront in The Wildwoods, New Jersey, for two generations. Morey said the last two years have been devastating for his businesses, due to shutdowns and COVID-19 restrictions and a lack of staff.

This year, restrictions have been dropped and Morey has been able to fully staff up again. But payroll costs and all other expenses are “through the roof,” so he's had to raise prices. Morey is unsure whether his base of mostly working-class families will come back to the parks because they're facing higher prices for everything from groceries to gas. But he's hoping for the best.

“Will people come back? I think they will. I know they will be coming for the beaches first,” he said. “What's going to happen with inflation and gas, nobody knows. I'm cautiously optimistic — we'll know when we know.”

The higher cost for gas and other items means a growing divide between wealthy tourists and the middle or working class. At Mansion House Inn on Martha's Vineyard, rooms are booking at pre-pandemic prices, with most of the summer sold out. Owner Susan Goldstein said her clientele likes the fact they can drive to the Vineyard instead of flying somewhere, despite higher gas prices.

But Goldstein said people aren't booking as far ahead as they used to.

“There's a lot of last-minute action,” she said. “People are waiting to see what the world is offering.”

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 share of hires 25 to 54 years old fell to 62.9% this April from 75.3% in April 2021.

For Austin Ray, who owns Von Elrod's Beer Hall and Kitchen in Nashville, summer means an influx of crowds, many who come from the Nashville Sounds minor league baseball stadium next door. The minor league season was canceled in 2020, so times were tough. But sales rebounded in 2021 because the restaurant has a large outdoor patio and baseball returned. While the crowds are back, Ray's costs have skyrocketed. He plans a menu revamp that will raise prices 7% to 10% across the board.

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

Still, after weathering the pandemic for more than two years, he thinks his business can weather this, too.

“I feel like we can get through anything, because we've made it this far,” he said.

PHOTOS: MARK HUMPHREY — THE ASSOCIATED PRESS Austin Ray, owner of Von Elrod's Beer Hall and Kitchen in Nashville, stands in the restaurant's outdoor seating area June 7. While the crowds are back, Ray's costs have skyrocketed. He plans a menu revamp that will raise prices 7% to 10%.

Andrew Kravchenko draws a beer for a customer at Von Elrod's Beer Hall and Kitchen, located across the street from Nashville's minor league baseball stadium.