Alignable: 47% of Salons & 41% of Restaurants Can't Pay Oct. Rent

RENT REPORT | TREND TRACKER | BOSTON, MA, October 29, 2021: Alignable's October Rent Report has just been released and shows the devastating effects of increasing inflation, supply chain issues, and the labor shortage combining to prevent more than 40% of small businesses in key industries from paying their October rent in full and on time. This is based on a poll of 3,181 small business owners conducted by Alignable from 10/8/21 to 10/28/21.

On average, the poll revealed that, 32% of U.S.-based small businesses couldn't afford Oct. rent (a 3% improvement over September). Unfortunately, that's not quite cause for celebration yet, as this is Q4, usually the biggest spending season of the year. And our polls indicate that spending has yet to pick up in ways that would drive an overall rebound.

With the cost of supplies going up, margins falling, and overall revenue numbers faltering, it's no wonder nearly one-third of all U.S.-based small businesses still can't afford to pay their full rent on time.

Sadly, the situation is even worse in Canada. More than four out of ten Canadian small business owners (43%) reported that they couldn't make rent this month. That's an increase of 5% over September, so a significant percentage of Canada's small businesses are backsliding on rent.

What Industries Are Suffering Most Now?

Delving more deeply into the industry findings, the top category for rent delinquency this month is beauty, but others aren't far behind, showing more problems for the small business economy.

Nearly half (47%) of beauty salons and barbers couldn't afford their rent, with significant percentages of small business owners in the following industries demonstrating similar challenges:

• 42% in construction (for the second month in a row)
  
• 41% of event planners & staffers, including photographers & videographers (up 6%)
  
• 41% of restaurants (down 10%)
  
• 40% of creatives, including designers, entertainers & artists (up 9%)
  
• 39% in the travel/lodging industry (up 17%)
• 36% in transportation (up 6%)
  
• 33% of retailers (down 7%)

The New No. 1 Concern Among SMBs: Inflation!

While 62% of small businesses stated in our recently released October Road To Recovery Report that they're still negatively affected by COVID and its aftershocks, the No. 1 concern among small businesses this month is actually inflation (and rising supply costs). Given this shift, it's interesting to see which industries have reflected this change in their inability to pay rent on time and in full.

Since beauty salons and barbershops are dependent upon in-person business, the best and latest supplies, and hiring the most in-demand stylists, it's no surprise that they're struggling right now given shortages and lingering COVID fears.

Costs of event venues and the decline in the size or number of many events are taking a toll on the event planners and their staffers, many of whom have their own photography or video businesses.

In fact, half of all photographers couldn't pay rent, along with 39% of videographers.

Travel/Lodging Takes Yet Another Hit

Small business owners in travel/lodging certainly have shown how difficult increasing costs have been for them, with the 17% increase in their inability to pay rent this month. (Earlier in the summer, they were flying high. But not so much now, unfortunately).

Nearly 4 out 10 were delinquent on their October rent.

The price of gas going up to rates not seen in years is also a factor, as that has many of hotel and Bed & Breakfast owners worried that they won't get as many consumers booking rooms on trips.

In fact, many in this industry have commented for the past three months that ongoing Delta-related fears have convinced many of their customers to delay or cancel trips that were reserved earlier this summer. Many are pushing trips into 2022.

Of course, much of the rise in rent issues among transportation companies can be attributed to elevated gas prices, as well as auto repair price hikes to maintain their heavy-use vehicles.

A Very Tentative Silver Lining or Two

On the positive side, restaurants didn't keep rising in the ranks of industries that can't pay rent. In fact, there was a 10 percent improvement compared to September.

But still, it's still troubling to see that 41% of restaurant owners couldn't cover the rent -- largely due to inflation and the six-month-long labor shortage.

Retailers also saw a positive lift of 7% from September to October, but still 33% can't cover their rent. And in a related poll, 45% of all retailers said they've earned less than half of the monthly revenue in October than they generated prior to COVID.

So, consumers still need to spend a lot of money locally to help their favorite merchants bounce back this season.

For more state and provincial information, please contact me at chuck@alignable.com.  To see other data and reports, go to the Alignable Research Center.  As always, we'll be keeping our eyes on the rent situations as small businesses continue down their roads to recovery.