New Business Openings Increase Nearing Pre-pandemic Levels in 2021
Yelp Inc. (NYSE: YELP), the company that connects people with great local businesses, today released fourth quarter 2021 data for the Yelp Economic Average (YEA) report, a benchmark of local economic strength in the U.S. The Q4 2021 YEA report reveals consumers described more inflationary experiences within their reviews on Yelp in 2021 than ever before. 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.
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“In 2021 we saw consumer behavior continue to adapt to the new normal that is pandemic life”
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% increase from Q4 2020 and a 49% increase from the 5 year 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.
“In 2021 we saw consumer behavior continue to adapt to the new normal that is pandemic life,” said Pria Mudan, data science leader at Yelp. “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.”
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Concerns About Inflation Reached Record High on Yelp, yet Consumers Continued to Search for Higher Cost Businesses
According to Yelp data, reviews have consistently reflected increasing prices at local businesses since 2015. At the onset of the pandemic, this sentiment decreased suddenly in Q2 2020, but quickly rebounded to near pre-pandemic levels by the following quarter in Q3 2020, before reaching a five year peak in Q4 2021. Yet in 2021, searches have increased for businesses designated “$$$$” (the highest price point on Yelp) by 56%, and “$$$” by 31% from 2020. Simultaneously, searches for “$” and “$$” businesses have decreased 24% and 8%, respectively, during the same time period.
New Business Growth Nears Pre-pandemic Levels
In 2021, business openings increased by 8% 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%, 23%, 14% and 15% respectively in 2021. Restaurant and food new business openings (74,616) also increased 10% from 2020 (67,611). Overall new business growth was near pre-pandemic levels decreasing only 1% in 2021 compared to 2019.
Consumer Interest Changes Point to a Return to Travel, Events and Communal Dining
Yelp data shows an increase in consumer interest for activities that point to a desire to blend pre-pandemic norms with our current reality. In Q4 2021, consumer interest on Yelp increased for several travel, events and communal dining categories including DJs (up 110%), photo booth rentals (144%), luggage storage (101%), airport shuttles (66%), dinner theater (97%), and buffets (31%) – all above Q4 2020 levels.
