Hello and welcome you are listening to Patrick Boyle on
Finance, a podcast exploring ideas from quantitative finance,
examining events occurring in markets right now and financial
history to see what lessons can be taken away, including
interviews with some of the most interesting people in the world
of finance. To learn more about the podcast,
visit on finance.org. In the battle against inflation,
some new villains have emerged. Beyoncé and Taylor Swift, or Tay
Tay as she's known on this channel, Higher interest rates
are supposed to reduce the demand for goods and services,
especially discretionary goods. Both the US Federal Reserve and
the ECB have been raising rates quite aggressively of late, and
they both hiked interest rates once again this week.
US rates are now at the highest level in 22 years and European
rates are at their record high, matching the level they reached
in 2001 when the ECB was trying to boost the value of the newly
launched euro. So why, after a series of
interest rate hikes and a surge in the price of essential goods
like food and energy, are we seeing Taylor Swift's latest
tour break records? And Beyoncé stand accused of
boosting the entire nation of Sweden's inflation rate during
her two night stay in Stockholm this May.
Beyonce's world tour, her first solo tour in seven years, kicked
off this May in Stockholm and fans from around the world took
advantage of the attractive exchange rate and flew in to buy
tickets that worked out cheaper in Sweden than in the United
States or Britain at the time. The type of ticket that would
have cost $2000 in the United States was going for around
$200.00 in Stockholm. So Beyoncé fans known as the
Beyhive flew to Sweden booking up hotels and restaurants.
Leading to the Beyoncé Blip, fans allegedly booked up every
hotel room for 40 miles around the concert venue.
The country's CPI hit 9.7% that month, which was higher than
expected, and the local economist announced that Beyoncé
was responsible. That's right.
Beyoncé stands accused of inflicting economic hardship on
the people of Sweden. Bruce Springsteen, Elton John,
Harry Styles and Ed Sheeran are all embarking on major tours
this year, with 1,000,000 rushing to see the shows, even
if the tickets, travel and accommodation are very
expensive. Taylor Swift fans, or Swifties
as they're known, are expected to spend around $600 million on
tickets for her current U.S. tour, which, while a big number,
is a small portion of overall U.S. consumer spending.
American consumers spent almost $7 trillion over an equivalent
period last year. A lot of that most likely went
on those huge water bottles that they carry everywhere.
But music tours are a big business, but not that big when
you look at overall consumer spending.
So do Superstar tours really spur inflation?
And if that is the case, should they be stopped for the good of
humanity? Well, some people feel that it
should. Tay Tay is putting on six shows
in Singapore next March. These are her only dates in
Southeast Asia and demand is very high.
Singapore's education Minister was inundated with requests for
an ad hoc school holiday for the dates of the tour, but he
refused this in case the concerts fueled further
inflation. Minister Chan explained that he
had to refuse because he was concerned about how fans of
other music acts that were visiting Singapore such as.
Coldplay, amongst others, would feel if the Ministry of
Education acceded to the school holiday request from Swifties.
I would imagine that most people would actually request an
additional day of work or school to give them an excuse to avoid
attending a Coldplay concert. But maybe that's just me.
I mean, come on, Coldplay. Economists are used to digging
through what many would consider fairly dull data to try and
understand what's going on in the global economy.
And when they feel that Beyoncé is not getting the treatment
that she deserves, they sometimes jump to her defense,
not unlike Kanye West. And as Kanye West would probably
tell you, a badly timed defense of Beyoncé can come off as an
attack on Taylor Swift. Anyhow, analysts from Credit
Sites, a research firm, compared hotels revenue per available
room for the stops on Tay Tay's current tour to the average for
EU S's top 25 markets. On those show dates, they found
what they have named the T Swift Lift.
The chart on screen shows the spike in revenue per available
room for the dates of Tay Tay's concert in Nashville, TN.
Nashville's hotel revenues per available room Morton doubled
from the same period the prior year.
The chart on screen right now shows the size of the T Swift
lift for the different cities played on her tour, and the pop
in Nashville is the most extreme.
Cities like New York, Boston, and Las Vegas had much more
muted reactions. They may simply be better able
to handle big events like a Taylor Swift concert.
But it's also worth noting that Tay Tay got her start in
Nashville and considers it her hometown, so fans might have
been more excited to see her play Nashville than any other
city. Credit sites even found one
hotel executive in their research who estimated that the
Swifties would boost room revenues for the hotel by 1% for
the entire year. So big events like this are
helping the hospitality industry in the towns they visit.
But does this mean that they're inflationary?
Well, inflation is calculated from the change in prices of a
basket of goods. In the United States, the BLS
record the prices of around 80,000 items each month.
Data on rents is gathered from around 50,000 landlords and
tenants. The CPIU, which is the consumer
Price index for all urban consumers, is the most widely
cited inflation metric in the United States.
But it's not the only version of the CPI being calculated.
The basket of goods and services is supposed to represent a
scientifically selected sample of the prices paid by consumers
for goods and services purchased at a given point in time.
The items sampled and their weights in the overall index are
determined by the Consumer Expenditure Survey, which is
carried out for the BLS by the Census Bureau.
There are a number of other inflation statistics also being
calculated, such as Chained CPI, which aims to reflect how
consumers alter their buying patterns in response to changes
in relative prices. For example, they might buy more
chicken if beef becomes more expansive.
Concerts and hotel rooms are in the basket of goods being
measured. But they have such a lightweight
that national inflation shouldn't be expected to jump as
a result of a single event unless it's on a huge scale.
A spike in hotel room rates near a big event caused by a surge in
demand might often be offset by a fall in costs elsewhere.
A hotel far away from the event might see a dip in demand over a
big concert weekend and lower room rates to attract customers.
Additionally, fans who spend a large amount on a Taylor Swift
concert ticket are likely to cut costs on other items, bringing
down demand and, in theory, prices for those goods for a
short time. In my last video on whether the
luxury goods bubble is bursting, I mentioned that wealthy
Americans appear to have switched from spending money on
branded fashion goods and are instead spending more on travel
and holidays. Since that video, LVMH reported
what is described as a surprising drop in U.S. sales
this Tuesday. As its chief financial officer
said, aspirational customers are not shopping as much as they
used to. It might be that their target
customers spent their disposable income on Taylor Swift tickets
rather than on a new outfit or handbag.
Smaller countries like Sweden or Singapore might see a surge in
demand when there's a big event. But they don't need to worry
about inflation being driven by a Beyoncé or Taylor Swift or
even a Coldplay concert. Thousands of Swifties are
members of the Beyhive. Might be likely to fly in from
neighboring countries and boost the local economy for a few days
that the concert is on. This additional demand is likely
to temporarily push up hotel prices or make it difficult to
get a table at popular restaurants.
Locals might spend some of their savings too, money that they
won't be spending in the future until their finances recover.
James Pomeroy, an economist at HSBC, pointed out that while the
month on month 8.7% increase in Swedish accommodation costs in
May fits with the general Beyoncé explanation, the cost of
food package, holidays and pets nationally in Sweden were also
to blame for the high annual figures.
So while Beyoncé may have caused a shock to 1 month's data, she
is not the reason for inflation in Sweden being well above the
central bank's target. Any negative economic effects
that people might be worried about in such situations will
usually be short lived. When Swifty's return to their
homes. Prices near the concert venue
can be expected to fall. Hotels can't charge Swifty in
rates once the event is over. In fact, the inflation rate
might even look a little bit lower the following month until
people's savings recover. So despite what you may have
read in the press, tours are probably not something central
bankers should worry too much about.
So why have concert tickets become so expensive in recent
years? The BBC reports that average
ticket prices for big arena gigs have more than doubled since the
late 1990s. Well, ever since music streaming
replaced CD sales, the amount of income that artists and
performers receive from their songs has fallen considerably.
Because of this loss of income, musicians have had to switch to
making most of their money from concerts, which means that
ticket prices have gone up. The musicians aren't trying to
take advantage of their audiences.
It's just that historically, a tour was viewed as a way to
boost record or CD sales, while today it's the main source of
income for a musician or band. You get to listen to the music
online for free, but if you want to see it live, it's more
expensive. The average cost to see Taylor
Swift is $254 per ticket today because live performance has
become a musician's main source of income.
They're focusing much more on putting on great shows today.
The shows that you attend today are much more professional than
they were in the past, with better sound, better lighting,
and better venues. All of this costs a lot of
money. Today's musicians play fewer
small venues than they used to. One reason for this is the
competition to stage bigger and better shows.
This is possibly why Taytay has decided to perform her only
Southeast Asia dates in Singapore.
Moving expensive stage sets around is riskier and more
expensive than playing multiple times at the same venue if the
demand is there. The ticket industry has become
more of a monopoly over time, pushing up prices.
And because ticket sales have moved online, scalpers have been
able to buy up tickets in a way they couldn't in the past to
resell them at a premium to music fans.
To combat this, ticket sellers have moved to a dynamic pricing
model where prices rise and fall with demand.
This can seem unfair to music fans, but it really just means
that the price premium that people are willing to pay is
going into the pocket of the artists rather than the ticket
scalpers. The economics of live music may
be changing a lot, but that probably shouldn't keep central
bankers awake at night. Thanks for tuning in for this
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