Navigating the Rising Costs for Outfitters — Inflation Insights

We thought we were heading into calmer waters after a significant reduction of COVID-19 cases. Now, news outlets are talking about inflation and the possibility of a recession. While we’ve already experienced inflation through gas prices and wages, what else do adventure sports outfitters need to prepare for?

The Facts About Why Costs are Rising for Outfitters

The Bureau of Labor Statistics announced in July 2022 that the U.S. consumer price index (CPI) rose 8.5% year over year, a slightly slower pace from last month’s record 9.1% reading. This latest CPI number indicates that inflation pressures are somewhat easing, but it remains at near record-high levels. Data from the  Bureau of Economic Analysis  also tells us that personal consumption expenditures have increased by 3.7% since January 2022.

The slowing inflation rate was mainly due to a 7.7% decline in regular gas prices, but cost declines for used vehicles, airline fares and apparel have also contributed. However, overall prices remain elevated in categories like food.  Supply chain disruptions, the economic impact of the Russia-Ukraine war and overall price increases have all negatively impacted consumer spending, therefore cutting back on travelers’ spending.

What’s Next for Outfitters?

To reduce inflation to a benchmark target rate of 2%, the Federal Reserve (Fed) has already implemented four rate hikes in 2022, including two consecutive 0.75% rate hikes in June and July. The latest inflation numbers impacted the Fed’s decision again by increasing the rates by 0.75% at their September meeting.

Deloitte released its  2022 Summer Travel Survey  at the end of May. The data reports that there’s an increased focus on pricing due to inflation — not COVID-19. It also reports that travelers who planned to participate in outdoor adventure activities remain at the same level as 2021. As expected, a few of these predictions have had completely different outcomes. With continued higher gas prices, increases in flight delays and cancellations due to staffing shortages, we can expect more changes.

Destination Analyst  discovered that 49.5% of travelers reported that the soaring travel prices have impacted their travel plans. High airfare rates, airline strikes and gas prices have travelers rethinking their trips. Adventure sports businesses will need to tighten their schedules to remain efficient through these tough times. Even those who do decide to travel may opt for lower-cost or free activities.

Here’s What Adventure Sports Business Owners Can Do

Take this time to see where you can cut down on expenses. Maybe that’s achieved by switching to a different vendor, cutting down on paper, fewer team activities or tightening up schedules to become more efficient. While customers may struggle to keep up with the rising inflation costs, finding ways to remain competitive and continue to accommodate their needs will be key.  

As employees face increased financial difficulty during this time, it’s become crucial for employers to respond. While every employer may take a different approach to addressing inflation and its impact on their employees, the following are some common strategies that have emerged.

Increasing Compensation

It’s hard to predict how long inflation may linger. To deal with this uncertainty, it’s best to focus on what you can control, such as a budget. Many employers are considering pay increases to help offset record inflation rates. According to data released by Gartner, 63% of executives plan to make compensation adjustments in response to high inflation. Of course, it may not be feasible for many employers to match salary increases to the current rate of inflation. For some, the alternative would be implementing smaller increases that align with their respective budgets.

Analyze Cash Flow

A cash flow analysis allows you to see how much money is flowing in and out of your business. Take time to thoroughly review financial activities, operating costs and investments. If your operating expenses include food (e.g., day trip, hiking snack), now might be a good time to reevaluate those costs. You could save money by purchasing in bulk rather than weekly to help combat the 10.9% increase in the overall price of food. If possible, delay non-crucial or unnecessary expenditures until the economy stabilizes.

Adventure More and Worry Less

As inflation begins to impact your small business, have confidence that your insurance policy will cover you through any storm. To learn more about protecting your business through CBIZ Adventure Sports Insurance,  request a free quote today.

This blog may contain scenarios that are provided as examples only. Coverage is subject to the terms, conditions and exclusions of the policy issued. The information provided is general in nature and may be affected by changes in law or the interpretation of such laws. The reader is advised to contact a professional prior to taking any action based upon this information.

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