When the Great Recession was in full force in 2008, we saw sales for out-of-home entertainment and restaurants fall. Economists, and more precisely the National Bureau of Economic Research, claims that as of June 2009 the recession ended, so common sense would say that consumer spending should not be continuing to decline. Well the new consumer expenditure data for 2010 paints a gloomy picture. Adjusted for inflation, average household expenditures for all items and for both out-of-home entertainment and restaurants spending saw a greater percentage decline between 2009 and 2010 than during any of the earlier years since the recession’s start.
Compared to 2009, average 2010 household expenditures declined:
All Expenditures -3.5%
Out-of-Home Entertainment -10.8%
Food Away-from-Home -7.9%
This is a serious decline and scary stuff if you are in either industry. Think about it. The average household spent approximately one-ninth less on out-of-home entertainment and about one-twelve less for food away-from-home (of which 96% is spent in restaurants and foodservice establishments) in 2010 compared to 2009. Furthermore, declines for both type expenditures occurred for all five quintiles of household income. The spending decline is the result of both spending less when consumers do visit a restaurant or entertainment venue and consumers just not going out as frequently as they used to. The economists may think the recession is over, but consumers sure aren’t behaving that way. It is apparent that consumes consider both out-of-home entertainment and restaurant expenditures as very discretionary. As a result those categories take a major hit when consumers cut back on spending.
Between 2007 (the recession officially began in December of that year) and 2010, we’ve seen the following cumulative declines in annual inflation-adjusted average household expenditures:
All Expenditures -7.8%
Out-of-Home Entertainment -14.9%
Food Away-from-Home -9.6%
I believe what is happening to shopping malls is also occurring with entertainment venues and restaurants. The ‘A’ malls are doing okay. The ‘B’ malls are suffering and you might as well write off any mall grade ‘C’ or below (most have closed or currently look like ghost malls). When consumers decrease their spending, they become even more discriminating and seek out the best quality, the best value for their money and expendable time. Those entertainment venues and restaurants that offer excellence on all dimensions from the consumers’ perspective; the ones that offer quality food and beverage, great service, a great overall experience and at a price consumers see as reasonable for the value they receive will continue to prosper. The bar has been raised and those entertainment venues and restaurants that don’t met this new higher standard will fall by the wayside. Just like the retail industry, there are more restaurants and entertainment venues than consumer spending can now support, so some will close.
In future blogs or articles in our Leisure eNewsletter, I will be digging into the data on out-of-home entertainment expenditures to examine what changes occurred in 2010 to community-based entertainment spending versus entertainment spending on trips. Could it be that the staycation trend is continuing and perhaps accelerating? (For more on the staycation trend, see our article that examined the staycation trend based on 2009 data.) I’ll also be examining whether the trend of entertainment experience migration from real world entertainment venues to the virtual digital world continued into 2010. (See our article for more on the virtual digital world migration trend.)
