As we head into a post-pandemic economy, tensions about social distancing are starting to ease. Whether it will be a thing of the past or develop some hybrid of how it used to be combined with social space awareness remains to be seen. One industry hit hard by the pandemic is the food and hospitality sector. Some restaurants were forced to close their doors, while those who pivoted to alter their offerings and processes could stay afloat. Some even thrived in a new age of entertainment and dining.
According to leading forecasters, 2022 will be marked with numerous economic challenges, including the restaurant industry. Issues such as supply chain difficulties, frequent COVID infections still taking people from work, and the overall labor shortage and "Great Resignation" are all taking their toll on society as a whole and are being felt in the hospitality industry.
There are also concerns that the shortage of available goods will drive inflation, leading to a downturn in the economy, and will likely plague the U.S. at least through 2023. In turn, inflation will make grain and beef products cost approximately 60% more than last year. The consumer will eventually absorb those increased costs, which will likely cut back and choose to prepare meals at home.
For restaurants to remain profitable, they must find new menu offerings with fewer choices and higher prices. Currently, consumer prices are already up an estimated 4%, which is an increase that we have not witnessed in nearly a decade.
The good news is that although costs are climbing, consumers are so happy to return to engagement with the outside world that they are willing to shoulder the increased costs. Despite the new COVID variant issues and other economic uncertainties that plague the U.S. and the world, consumer spending is beginning to rebound.
The biggest hurdle at the moment is the labor shortage. Some workers laid off during the pandemic enjoy the Pandemic Unemployment Assistance that allows them to stay comfortably at home without returning to work. Many restaurants have offered incentive programs like higher pay and more considerable perks to get workers to return. However, those costs will eventually come down the pipeline and fall on the consumer. Labor costs currently are at a 20-year high. Combining that with the inflation rate equals higher menu costs, and how consumers respond is uncertain.