The Funflation Economy: Rising Experiential Spending is Here to Stay
The first truly maskless summer in four years had consumers ready to see and do it all, baby. Expensive dinners! Flights to Europe! Concerts! Music festivals! Money is just energy and capitalism is king!
With post-pandemic inflation only slowing slightly, its impact is reaching far beyond the gas pump and the dairy aisle — even though we (along with the Washington Post) are still wondering why gas and groceries are still so expensive.
But, does that include events and experiences?
According to the New York Times, yes. In the DealBook Newsletter titled Economists Warn a ‘Summer of Fun’ Could Lead to Autumn Pain, authors Andrew Ross Sorkin, Ravi Mattu, Bernhard Warner, Sarah Kessler, Michael J. de la Merced, Lauren Hirsch and Ephrat Livni write:
Economists are seeing something weird in the inflation data. Consumers are splurging on pricey meals, through-the-roof airfare and expensive concert tickets. Some economists in Sweden even blamed Beyoncé fans for driving up prices of hotels and restaurants when they converged on the country last month to see the star kick off her world tour. In the U.S., others have seen a similar effect with hotel prices soaring in cities where Taylor Swift performs.
“It’s fun-flation, if you’re looking for a word,” Holger Schmieding, chief economist at Berenberg, told DealBook. And the data suggests this brand of inflation isn’t receding. “We’re looking at the summer of fun,” he said.
When inflation runs persistently high, consumers normally cut back. If they do spend, it is typically on so-called durable goods: a new washing machine, a car, a house. The thinking is that it’s prudent to bring forward such purchases if you believe you’ll spend more for them in the near future. Economists and central bankers are seeing a bit of that, but also higher spending on discretionary items, such as travel and nights out.
Consumers cling to events and experiences so tightly because they offer an escape from reality.
But isn’t it ironic that it’s never cost more money to soften the pain of economic stressors? A nationwide survey found that, on average, Americans are willing to spend an average of $728.49 to attend their dream concert or festival, encompassing the cost of tickets, travel and accommodations. Survey respondents also shared that they’re setting aside about 13% (coincidentally, Taylor Swift’s lucky number in fact) of their monthly income on concert tickets, averaging out to about $269.93.
Of course, all spending has a ceiling. If experiential prices skyrocket past the rate of inflation, there will come a point where most consumers are priced out of events. This is where creators experiment with pay-what-you-can pricing models as a progressive approach to accessibility and inclusivity, allowing attendees to choose the price they pay for admission, based on what they can afford.
This model is commonly used in:
- Theatre and performing arts like Lincoln Center and Primary Stages
- Museums like The Metropolitan Museum of Art, MoMa PS1 and The Brooklyn Museum
- Community events and festivals like Edinburgh Festival Fringe and Spoleto Festival USA in Charleston, SC
Even as the cost of purely existing continues to rise, the economy eventually balances itself out over time. As long as creators and producers acknowledge their attendees’ struggles and call out exactly why costs are up, there will be consumers ready to fund their fun.
But there is great news on the horizon for experience creators.
“Funflation” appears to be here to stay, per Bank of America, as they declare that live events are fueling, and will continue to fuel the economy.
“Live entertainment is currently the brightest star in the broader media and entertainment universe,” Bank of America analyst Jessica Reif Ehrlich wrote in an email to clients in September 2023.
Ehrlich outlined five trends that she claims will lead to sustained long-term growth in the live events industry:
- Continued spending shifts towards services and experiences
- Healthy pricing power amid increased demand
- Positive supply and demand trends as social media apps like TikTok boost global awareness and fan growth
- The relatively “disruption-proof” nature of live events as virtual methods remain incomparable
- The advent of experiential marketing
So let’s get to it. What’s the next experience you want to bring to an experiential-hungry world?
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