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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New business openings increased in 2021,
nearing pre-pandemic levels. (Graphic: Business Wire)
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.”
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 “$$” businesses
have decreased 24% and 8%, respectively, during the same time
period.
New Business Growth Nears Pre-pandemic Levels
In 2021, business openings increased by 8% to 559,715 up from
517,231 in 2020. Nightlife (9,344 new businesses), hotels and
travel (12,396), beauty (42,540) and local services (60,069)
categories on Yelp had the largest percentage increases
year-over-year, rising 26%, 23%, 14% and 15% respectively in 2021.
Restaurant and food new business openings (74,616) also increased
10% from 2020 (67,611). Overall new business growth was near
pre-pandemic levels decreasing only 1% in 2021 compared to
2019.
Consumer Interest Changes Point to a Return to Travel, Events
and Communal Dining
Yelp data shows an increase in consumer interest for activities
that point to a desire to blend pre-pandemic norms with our current
reality. In Q4 2021, consumer interest on Yelp increased for
several travel, events and communal dining categories including DJs
(up 110%), photo booth rentals (144%), luggage storage (101%),
airport shuttles (66%), dinner theater (97%), and buffets (31%) –
all above Q4 2020 levels.
Read the full report, as well as previous YEA reports, at
yelpeconomicaverage.com. Assets and images from the Q4 2021 YEA
report can be found here. For more information and Yelp’s latest
company metrics, visit:
https://www.yelp-press.com/company/fast-facts/default.aspx
Methodology
Price Range Filter Usage
There are currently 4 pricing tiers ($, $$, $$$, and $$$$) on
Yelp and the pricing tier of a business is voted on by Yelp users.
Consumers can use the price range filter when searching for
businesses on Yelp. The share of different pricing tiers used by
consumers signals their general willingness to spend.
Review Text Inflation / Disinflation Sentiment Ratio
To observe the sentiment of Yelp consumers over time, we
analyzed review text from 2015 through 2021. Yelp examined
consumers’ experience of inflationary situations, such as rising
prices for goods and services and compared that experience to the
inverse scenario of disinflation, which includes sentiments
indicating stable prices. The ratio is calculated as the volume of
review text phrases indicating consumer sentiment of inflation vs.
consumer sentiment of disinflation, normalized by the number of
times per million the groups of phrases appeared in reviews. This
ratio was calculated quarterly and deseasonalized via the index
method using the previous 5 years (2015 - 2019). A ratio above 1.0
indicates overall consumer sentiment of inflation and below 1.0
indicates disinflation sentiment. This was calculated on a national
basis across all major Yelp categories. Changes in the ratio are
quarter-over-quarter percent changes.
New Business Openings
Openings are determined by counting new businesses listed on
Yelp, which are added by either business representatives or Yelp
users. Openings are adjusted year-over-year, meaning openings are
measured relative to the same time period in the previous period
for the same business categories and geographic locations. This
adjustment corrects for both seasonality and any differences in the
baseline level of Yelp coverage in any given category and
geography.
Consumer Interest
We measure consumer interest by looking at select actions users
take to connect with businesses on Yelp: such as viewing business
pages, or posting photos or reviews.
Changes in consumer interest for each category were measured by
comparing year-over-year data from Q4 2021 and Q4 2020, focusing on
each category’s share of all consumer actions in its root
category
About Yelp Inc.
Yelp Inc. (www.yelp.com) connects people with great local
businesses. With unmatched local business information, photos and
review content, Yelp provides a one-stop local platform for
consumers to discover, connect and transact with local businesses
of all sizes by making it easy to request a quote, join a waitlist,
and make a reservation, appointment or purchase. Yelp was founded
in San Francisco in July 2004.
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version on businesswire.com: https://www.businesswire.com/news/home/20220126005328/en/
Yelp Inc. Nick Spence press@yelp.com
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