Authored by: Ella Damasco, Jared Go, Marianne Lolarga, Elijah Soriano
Edited by: Andrei Dimaculangan
Source: Getty Images
As the pandemic dies down, fans have been paying a premium to snag a seat in two of the most widely talked about super concerts in 2023: Taylor Swift’s “The Eras Tour” and Beyoncé’s “Renaissance World Tour”.
It has been observed that areas that hosted these concerts experienced a boost in economic activity due to the sudden and significant increase in consumer spending. This was the case in Sweden where Beyoncé’s concert was hosted last May. This resulted in inflated rates, more specifically in the restaurant and hotel sector. In addition to this, Americans traveled to Sweden because of lower prices (Smith, 2023).
This inflationary effect was recorded in Sweden during May, where economists attributed the 0.3 percentage point increase in the restaurant and hotel sector and the 0.2 percentage point increase in the recreation and culture sector (Camut, 2023; Roush, 2023). This caused Michael Grahn, chief economist of Denmark’s Danske Bank, to point to the singer as the most probable cause for local inflation.
Thus, a question is posed: “Do superstars bring inflation along with their concerts?” The answer is that it depends. To determine whether these superstars, along with their super concerts, cause considerable inflation in their host cities, we’ll have to first take a look at certain concepts and data.
Inflation is basically the rise in prices of goods and services, and it is most commonly measured using a metric known as CPI (Fernando, 2023). CPI is measured through a represented basket of goods and services (Fernando, 2020). It takes the weighted average of the basket which includes major commodities relevant to consumers like Food, Shelter, Energy, Leisure, and more.
With tourists flocking to Stockholm for Beyonce’s first concert stop, it was expected that the city and the nation would receive an increase in demand for goods and services. With the expected increase in consumer demand, inflation was also expected to follow suit. Hence, the increase in prices due to the influx of demand is attributed to demand-pull inflation.
Beyonce’s Sweden tour happened on May 10 to 11, 2023. It was during this time that Sweden, mainly Stockholm, received a large influx of tourists/concertgoers. As mentioned earlier, such an influx of consumers would have an effect on the demand for goods and services, especially towards the restaurants and hotels sector. Headline CPI came out at 9.7% Year-on-Year (YoY) in May, higher than the 9.4% consensus estimate (Trading Economics, 2023). Among the different sectors in the CPI basket, one stood out, the restaurants and hotels sector. Inflation for the sector grew to 9.2% YoY versus 7.5% the prior month. This large surge in inflation led economists to believe and accuse Beyonce of worsening the nation’s inflation problem.
To understand how concerts may potentially affect a country or region’s prices, it is imperative to take a look into the demand and supply dynamics they bring.
As concert-goers from around the world flocked to Stockholm, they book hotel rooms and eat at restaurants near the concert venue. As shown in the graph above, an increase in demand also leads to a corresponding increase in price. Reflecting this dynamic was the aforementioned inflation for the restaurants and hotels category rising to 9.2% YoY in May. Furthermore, a study discovered that the anxiety from the “fear of missing out” (FOMO) drives prices up as people treat concerts as a “once in a lifetime” experience (Good & Hyman, 2020),
thus, strengthening their purchase intentions.
With this, it may be tempting to conclude that concerts do contribute to inflation but there are a few caveats that must be taken into account.
The first is that this is only a temporary effect as once the concert is over, foreigners leave the country. This leads to either lower demand or a slow-down in demand growth for the restaurants and hotels sector as illustrated in the graph above. Naturally, this leads to either lower prices, or a slow-down in the rate at which prices increase. Reflecting this, inflation for restaurants and hotels in Sweden slowed down to 8.1 YoY% in June.
Another factor that plays a role is the geography of a country. One possible dynamic that may occur is that people exit one part of the country and enter the part where the concert is located. Hence, while prices increase in the area where the concert is located, it is possible for prices to decrease in another part of the country. This kind of event would have offsetting effects on each other when calculating the overall price level and inflation of a country. It is important to note though that this would also depend on the size of the country. For large countries, prices rising in one area due to a concert may have a negligible effect on the overall price level. Naturally, the opposite would occur for smaller countries.
To summarize, as fans from all over the world shell out money to see the world’s biggest acts like Taylor Swift and Beyonce who have not toured in years, their big performances bring an increase in demand for various commodities such as food, transportation, and accommodation in the countries they tour. The inflow of concertgoers, mainly foreigners, increases demand, and consequently, may cause the rise in prices of important commodities and services, which can contribute to the overall inflation of a country.
However, such performances only affect demand in the host cities, which is not typical of the country's overall inflationary pressures. In other words, demand follows the concert. If the concert departs from the host city, demand will likely follow, which brings demand back to pre-concert levels and decreases inflation, holding other things constant. This demonstrates how concerts are simply a short-term or temporary inflationary pressure.
For future mega concerts, countries should expect a similar temporary rise in inflation with increased hotel revenues and consumer spending— especially that of Taylor Swift’s Singapore leg with an expected number of 300,000 attendees (Trivedi, 2023). From a geographic perspective, Singapore may see a bigger rise in its inflation rates, given its six-day duration, geographic scale, and proximity within a dedicated Southeast Asian fanbase. Prior to the ticket release, prices for hotel accommodations and regional flights in Singapore already increased by more than 20%. Airfares from Manila and Jakarta were recorded to be 50-130% more expensive during the period of the Eras Tour (Trivedi, 2023).
But as artists bring in inflation, they also leave with the inflation they have caused. For host countries, the economics of touring should not become a cause for concern.
References:
Camut, N. (2023, June 14). Beyoncé caused Sweden inflation bump, expert says. Retrieved on September 12, 2023 from https://www.politico.eu/article/beyonce-world-tour-renaissance-stockholm-caused-inflation-hike-in-sweden-expert-says/
Fernando, J. (2020, April 23). Consumer price index - CPI. Investopedia. https://www.investopedia.com/terms/c/consumerpriceindex.asp
Fernando, J. (2023, August 11). Inflation. Investopedia; Dotdash Meredith. https://www.investopedia.com/terms/i/inflation.asp
Roush, T., (2023, June 14). Beyoncé caused inflation? ‘Renaissance’ tour may have boosted Sweden’s costs, economist says. Retrieved on September 12, 2023 from https://www.forbes.com/sites/tylerroush/2023/06/14/beyonc-caused-inflation-renaissance-tour-may-have-boosted-swedens-costs-economist-says/?sh=f0317f713c24
Smith, P. (2023, June 16). Beyoncé shows blamed for fueling inflation in Sweden. Retrieved on September 12, 2023 from https://www.cnbc.com/2023/06/16/beyonc-shows-blamed-for-fueling-inflation-in-sweden.html
Statistics Sweden. (2023). CPI, Indices for Main Groups, monthly data. https://www.scb.se/en/finding-statistics/statistics-by-subject-area/prices-and-consumption/consumer-price-index/consumer-price-index-cpi/pong/tables-and-graphs/consumer-price-index-cpi/cpi-indices-for-main-groups-monthly-data/
Trading Economics. (2023). Sweden inflation rate. Tradingeconomics.com; Trading Economics. https://tradingeconomics.com/sweden/inflation-cpi
Trivedi, A. (2023, July 21). Taylor Swift and Coldplay concerts likely to spike inflation in Singapore. Republic World; Republic World. https://www.republicworld.com/business-news/international-business/tylor-swift-and-coldplay-concerts-likely-to-spike-inflation-in-singapore-articleshow.html
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