Iran war, $4 gas, took all the fun right out of U.S. consumer economy

Robert Evans doesn’t have to watch the news to find out about economic jolts that might cause the American consumer to pause. He just has to look at his cycling race registrations. 

“Every time something major is announced, like tariffs, or an attack on another country, our event registration tracks like the stock market. People pull back for a minute and pause and take a wait-and-see attitude,” said Evans, who is the CEO of Cycling Quests, which organizes high-end road races. 

He says that wait-and-see attitude is now in evidence.

“Sometimes it rebounds quickly, other times it stays off by 20-30%. We notice this is more so with our events that have a lower entry price point and targeted more down market,” Evans said, noting that events with higher price points seem to be a little more insulated. “But we are starting to see a downturn there as well,” he said.

The more an event is tied to travel and sports tourism, the more increases in airfares and travel costs reduce demand. And for every “fun stop”, Evans says, there is a multiplier effect. Even for mid-sized sporting events in smaller cities like Boise, Idaho, or Provo, Utah, each out-of-town participant represents roughly $900-$1,000 in ancillary economic activity — meals, lodging, gas, and incidental spending — on top of registration fees. Evans says half of participants typically stay at least one night, with 60 percent traveling more than two hours to compete. 

“The stakes for host communities are significant. When consumers start skipping events or choosing closer-to-home alternatives, that spending evaporates while promoters’ fixed costs remain — meaning the economic hit falls hardest on local restaurants, hotels, and retailers, not just the event organizer,” Evans said. 

The same economic impact applies to truly local events. People who opt out of going to an escape room, for instance, may just stay home, skipping the dinner they would have stopped to eat beforehand. This deprives the local eatery of revenue and the waitstaff of tips. 

Escape rooms, bowling, arcade trouble

The war’s impact on the consumer is uneven to be sure. Debit and credit card spending was up in March, the most in more than three years, according to Bank of America, with a 16.5% jump in spending at gas stations the biggest factor, but there also was growth of 3.6% excluding gas. Changes in tax law have pushed up the average IRS refund this year by over 11%, which is also a help.

But overall, Americans are having less “fun” as high gas prices and uncertainty shadow their discretionary spending. The impacts are being felt in the dollars spent on escape rooms, bowling alleys, and arcades. 

“Placer.ai data confirms a recent shift in consumer behavior: shoppers are decreasing their visits to discretionary retailers and entertainment venues, instead prioritizing consumer staples to stretch their household budgets,” says R.J. Hottovy, Head of Analytical Research at Placer.ai.

Bank of America CEO Brian Moynihan told CNBC on Wednesday. “The consumers are spending, the credit quality is very good and improving. … We all face that same uncertainty, but right now, the U.S. companies and consumers are doing well.”

But the consumer psychology is fragile. The University of Michigan’s monthly survey of consumer sentiment tumbled to 47.6, down 10.7% from the March survey to its lowest on record.  

That consumer push-and-pull is having a ripple effect across the U.S.

Bowlero operates over 350 bowling entertainment centers throughout the U.S., and its traffic was down 10.6 percent on average in March, according to Placer.ai data.

Dave & Buster’s, with 170 adult eatertainment locations across the U.S., has seen its traffic slide 4.5 percent in March.

Main Event, which is owned by Dave & Busters, and offers a similar slate of eatertainment activities at its 50-plus outlets, saw its traffic decline by 7.6 percent in March, according to Placer.ai data.

Escape rooms, in general, were down 6.7 percent on average in March. 

Signs of weakness before U.S.-Iran conflict

Still, dig a little deeper and it shows Americans are still willing and able to indulge for something they really want. While bowling alleys and other venues have seen lagging traffic in March, that isn’t the case for the cinema. “Movie theaters have bucked this trend, buoyed by a strong slate of new releases like Project Hail Mary and The Super Mario Galaxy Movie,” Hottovy said. 

For some entertainment-based businesses, the consumer softness began long before the war.

Dave and Buster’s stock has been under pressure as far back as mid-2024, with the more recent geopolitical issues compounding negative investor sentiment. Past management mistakes have been cited by a new leadership team now leading a turnaround effort. But the war is clearly on Wall Street’s mind, with its CFO on a March 31 earnings call responding to a question from a Jefferies analyst about a world that has “changed a lot in March.”

“Obviously, there’s a lot going on from a macro perspective, from gas prices, from consumer sentiment and the like,” said CFO Darin Harper. He said it was difficult for the company to evaluate any macro impact versus timing of holidays changing this year, including spring break and Easter. “So as typical for our business, we kind of like to get through this spring break period of time and try to get a better read on things. We certainly know it’s out there, but it’s too early for us to really parse through what impact that’s having,” Harper said.

Dave & Buster’s did not respond to a request for comment. 

Hottovy says the recent data shows a definitive impact from the war. “Visits to eatertainment and escape room venues have consistently declined on a year-over-year basis since mid-February,” he said. 

Mark Flint, CEO and co-founder of the Escape Game and the Great Big Game Show, one of the nation’s largest operators of escape rooms, said that his company is aware of the Placer.ai data for experiential categories, and the irregular traffic patterns which also coincided with changes in spring holiday dates versus the prior year. “We did anticipate a year-over-year decrease for this time of year, but it does look like some concepts and categories were impacted more than expected,” Flint said of the March numbers. 

But he said the impacts his businesses are seeing are not as pronounced as the overall category data, and year-over-year numbers in April are up so far compared to prior year. In his view, if you run a business people want to come to, “it creates a buffer from the impact of what we consider temporary ebbs and flows from these types of world events.”

Flint said the company is investing $40 million this year on new stores and new experiences across the U.S., and there are no anticipated changes in that plan, “regardless of the macro environment,” he said. “A great game played in a great environment with those you love is valuable to our guests all the time, and even more so when things get tough,” Flint added.

No reason yet to think permanent shift in ‘fun’ economy

Mark Johnson, faculty fellow in investments and portfolio management at Wake Forest University School of Business, said this is textbook consumer behavior when gas prices go up. 

“When people are spending more to fill up their tank, the first things to go are the fun and discretionary items. Those are easy to put off, but rent, a car payment, and groceries are not,” Johnson said. While discretionary and “fun” spending may seem trivial, it isn’t to the macroeconomy. “It matters more than people realize because that discretionary spending is a big part of what keeps local economies growing,” Johnson added.

The good news, Johnson says, is that the “fun” pullback is usually more of a pause than a permanent shift and a quick end to hostilities in Iran would likely bring people back to the bowling alleys and escape rooms. “Once gas prices come down and budgets feel less tight, people tend to come back fairly quickly,” Johnson said. The desire to go out and do things does not disappear — it just gets delayed. 

On Friday, President Trump again indicated the war was nearing an end, and Iran opened the Strait of Hormuz to all traffic, sending oil prices down by as much as 9%. But by Saturday morning, Iran imposed control over the waterway again amid gunfire.

“The key question is how long it lasts,” Johnson said. “I think this surge in gas prices could stick around longer than many expect. If that happens, inflation could spread into more parts of the economy and some discretionary spending habits may start to change in ways that are harder to reverse,” he added.

A recent consumer sentiment survey by Ernst & Young Parthenon shows 27 percent of consumers are pulling back on discretionary spending. 

“While gas prices aren’t the sole cause of discretionary pullbacks, households are becoming more selective as they prioritize essentials,” said Will Auchincloss, Americas retail sector leader at EY Parthenon. “We’re seeing targeted pullbacks in fitness and entertainment, as dollars shift toward non-negotiables such as groceries and housing.” 

Auchincloss says consumers are feeling more confident managing their budgets, even as stress and uncertainty remain elevated, and if broader cost pressures ease, “we’re likely to see consumer spending recover gradually.” 

Meanwhile, back at Cycling Quests, Evans watches registrations with trepidation. He describes a long, convoluted registration recovery from Covid, only to be stopped cold by tariffs. 

“We had events last year that were trending well ahead of previous years, and then the tariffs were announced and registrations just stopped. Stopped,” Evans said — weeks with just a trickle versus a steady stream. 

“As long as there is geopolitical chaos, there will be chaos in the fun economy as well, while people hesitate on whether they should save their money or enjoy life as normal. It’s unpredictable,” Evans said.