New Business Openings Surpass Pre-pandemic Levels in Q1 2022
Yelp Inc. (NYSE: YELP), the company that connects people with great local businesses, today released first quarter 2022 data for the Yelp Economic Average (YEA) report, a benchmark of local economic strength in the U.S. The Q1 2022 YEA report reveals consumers described more inflationary experiences within their reviews on Yelp in 2022 than ever before. New business growth surpassed pre-pandemic levels with nightlife, beauty, and hotels and travel businesses driving new business openings. As gas prices climbed, review mentions related to electric vehicles increased 67% year-over-year in Q1 2022.
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Inflation on Yelp reached record high in the first quarter of 2022.
In Q1, reviewers reporting increasing prices at local businesses grew rapidly in 2021 and reached a new peak in Q1 of 2022, rising by 3% from last quarter (Q4 2021), and 29% from Q1 of 2021. Even as consumer concerns about inflation reached a record high, Yelp data also revealed an increase in people searching for higher cost businesses.
“As inflation rises, Yelp users are mentioning higher prices in their reviews more than ever before,” said Pria Mudan, data science leader at Yelp. “Still, Yelp data shows consumers continuing to search for high-priced restaurants as mask mandates and restrictions lift and restaurants welcome more diners. This pent up demand is also evident in the surge of new business openings in nightlife, beauty, and travel and hotels, which all increased from 2021 levels in Q1. Consumer behavior and business activity suggested favorable economic conditions for local businesses in the first quarter.”
Concerns About Inflation Reached Record High on Yelp, yet Consumers Continued to Search for Higher Cost Businesses
According to Yelp data, reviewers have consistently reported increasing prices at local businesses since 2015, rapidly increasing in 2021 and reaching a new peak in Q1 of 2022 (up 3% from Q4 2021, and 29% from Q1 of 2021). Yet, nearly half (43%) of all restaurant searches using the dollar filter on Yelp in Q1 2022 were looking for higher-priced restaurants with the “$$$” and “$$$$” designation. Searches for low price point restaurants ($) decreased by 13% in Q1 2022 (compared to Q1 2019).
New Business Openings Increased Nationally in Q1
In Q1 2022, business openings increased by 5% to 152,859 from 145,189 in Q1 2021. Hotels and travel (3,637) nightlife (2,346) and beauty (12,744) categories on Yelp had the largest percentage increases, rising 31%, 23%, and 22% respectively in Q1 year-over-year. Restaurant and food new business openings fell slightly to 17,690, a 2% decrease from Q1 2021 (18,090), but still 5% above Q1 2020 (pre-pandemic) with 17,301 openings.
Consumers Increasingly Mention Electric Vehicles Amidst Surge in Gas Prices
Yelp data shows a national increase of 67% in mentions related to electric vehicle charging in Q1 2022 compared to the same period in 2021. For some states this increase grows when they are examined individually, most notably a 352% increase in Maryland and a 107% increase in New York. EV Charging stations experienced a 27% increase in business openings in Q1 2022 compared to Q1 2021
Read the full report, as well as previous YEA reports, at yelpeconomicaverage.com. Assets and images from the Q1 2022 YEA report can be found here. For more information and Yelp’s latest company metrics, visit: https://www.yelp-press.com/company/fast-facts/default.aspx
Price Range Filter Usage
There are currently 4 pricing tiers ($, $$, $$$, and $$$$) 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 Q1 2022. 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 and consistent values. The volume of review text phrases indicating these are normalized by the number of times per million the phrases appeared in reviews and are then used to calculate a ratio of inflationary vs disinflationary experiences. 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.
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 Q1 2021 and Q1 2022, focusing on each category’s share of all consumer actions in its root category.
Electric / Hybrid Review Text Mentions
For the data regarding “electric and hybrid transportation”, we measured the share of total words in U.S. auto services reviews containing phrases related to sustainability, including but not limited to: “electric,“ “hybrid,” “plug in hybrid,” and “EV.”
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.