Hot tickets on Broadway like Phantom of the Opera have become a problem for the Federal Reserve, according to the top economist of
Apollo Global Management.
Over the past year, the Fed has been rapidly lifting interest rates to quash consumer demand and tamp down on inflation. Its efforts are beginning to show signs of progress for prices on consumer goods but the appetite for households to spend on travel and entertainment has yet to wane.
There are more people traveling by air so far this year than there were over the same period in 2019, according to data compiled by Apollo Global Management chief economist Torsten Slok. Even cruise travel is exceeding prepandemic levels with
(ticker: RCL) saying on Tuesday that it is experiencing a record-breaking winter season.
While higher interest rates have made Americans rethink purchases of houses, autos, and other big ticket items that are often financed, higher rates have done little to curb enthusiasm for enjoying a night—or a weekend—on the town. Especially after households dealt with more than two years of Covid-19 restrictions.
“The fed-funds rate going up after the pandemic kept all of us at home isn’t going to hold me back from going out and drinking beers and eating with my soccer buddies,” Slok told Barron’s in a recent interview. Add that sentiment to January’s surprisingly strong employment data, which showed significant gains in service sector jobs, and Slok sees a situation in which the Fed will have to continue to raise rates to slow down the service sector of the economy.
Even Fed Chair Jerome Powell had to concede in a conversation at the Economic Club of Washington Tuesday that January’s jobs data was “certainly strong—stronger than anyone I know expected” and that getting back to the Fed’s inflation target of 2% “is likely to take quite a bit of time.” The personal-consumption expenditures core price index, the Fed’s preferred measure of inflation, increased 4.4% in December.
Which brings us to how Phantom and other shows are a microcosm for what else is playing out in the broader economy.
Slok analyzes weekly data for Broadway shows, sporting events, restaurants, and travel to get a sense of households’ propensity to spend.
Tickets for Phantom average $205 a pop with the show often selling more tickets than seats available at New York City’s 1,645-person Majestic Theater, according to recent data from industry trade group The Broadway League, the data source Slok uses. The eagerness of theater goers to pay top dollar for standing room only tickets means that the Fed still has a long way to go to tamp down on consumer demand.
Some may think that recent ticket sales of Phantom aren’t indicative of the Broadway industry—or even the economy—at large. After a 35-year run on Broadway, the show is set to close in April, which has led to a surge in demand for the musical. But other shows have also been faring well. Hamilton, Funny Girl, Moulin Rouge! The Musical, and MJ the Musical are some of the other top grossing shows on Broadway that are performing to almost sold out crowds.
So for this season, which started on May 1, 2022, the 41 theaters that encompass Broadway have sold 87.4% of seats—slightly below 2018-19’s record season of 94% but still impressive considering the current season has been hampered by concerns over Covid-19.
And few of the people who see a Broadway show stop there. Nearly two-thirds of Broadway attendees come from outside the NYC-metro area, according to 2019 data from The Broadway League. (Data was complicated between 2020 and 2022 when Broadway was closed for 18 months and had a slow return.)
Those travelers equate to hotel stays, restaurant meals, shopping, and a host of spending on other services. Broadway itself brought in $1.8 billion during its 2018-19 season but contributes $14.7 billion to New York City’s economy and supports 100,000 jobs. Broadway attendance in 2018-19 was greater than attendance at games for the 10 professional NYC-based sports teams combined.
Anyone who has recently spent time in New York City can witness spillover effects of Broadway’s return. Getting reservations at Broadway-adjacent restaurants can be a challenge and the walk to the subway when the shows let out can make all of Times Square feel like a crowded subway car. Forget trying for an Uber, as prices can sometimes rival show tickets.
Charlotte St. Martin, president of the Broadway League credits some of this season’s success to “pent-up demand” from the year and a half that Broadway was shut down but she also credits this year’s roster of shows.
“The mix of shows is terrific. There really is something for everyone,” St. Martin told Barron’s, referring to classics like Funny Girl, family-oriented shows like The Lion King, as well as more modern productions like Some Like it Hot and & Juliet. This spring will also bring a mix of big brand names like Sweeney Todd, New York, New York, and Bob Fosse’s Dancin’. Familiar titles are great for getting tourists to New York where they often end up trying new shows.
“When tourists come to see one show, it will be a brand they know,” St. Martin said. “If they’ll see two shows, they’ll branch out.”
That is great news for Broadway but it’s enough to give Jerome Powell a headache.
Write to Carleton English at email@example.com