Anna Rathbun, Chief Investment Officer

Now that the peak of the COVID-19 pandemic has passed, many consumers have been taking advantage of the return to live entertainment by attending concerts and sporting events. “Funflation” and “revenge spending” are terms that have emerged to explain this phenomenon in which the cost of live entertainment has skyrocketed due to increased demand as consumers long to return to the experiences they missed out on during the pandemic.

Sporting events in particular have seen the highest annualized inflation rate out of the few hundred categories that make up the inflation gauge. Prices for sports tickets increased by 25.1% YoY from October 2022-2023 as Americans ventured out of their homes and into stadiums, compared to 3.2% for the CPI as a whole. The inflation in tickets for sporting events continued in the double digits into early 2024.

Furthermore, according to a report from Bank of America Global Research, live music is currently the “brightest star” of the media and entertainment industry in that it has been experiencing immense growth. There are several key drivers to this growth, including the rise of the “experience” economy and positive supply and demand trends driven by social media.

While the leisure and hospitality industry as a whole is growing, concerts and sporting events have seen the most significant growth, and Gen Z is the main catalyst for this growth.

According to a study from Intuit Credit Karma, Gen Z is the generation most likely to spend on entertainment. While nearly half of Americans surveyed (46%) are spending on entertainment less frequently than they were before the pandemic, many Gen Z consumers (43%) are actually spending on entertainment more frequently than before the pandemic.

One in five of those surveyed (21%) are also willing to take on debt to afford entertainment activities. Gen Z and Millennials are the most likely to take on debt to afford these activities (35% and 33% respectively) compared to Gen X and Boomers+ (16% and 6%), perhaps due to pressures from social media. In fact, one third of Gen Z admits to feeling pressured by social media to spend money they don’t have on live events or experiences.

Challenges to the American wallet are plentiful. Interest rates are staying high, and food and energy prices continue to rise. American consumers have become more selective in 2024, and it remains to be seen how they decide to allocate their earnings. Despite the potential challenges ahead, the behavioral patterns of younger Americans may mean that funflation continues to contribute to the stickiness of inflation.

Investment advisory services provided through CBIZ Investment Advisory Services, LLC, a registered investment adviser and a wholly owned subsidiary of CBIZ, Inc.