This is such a tough time to be an "in the trenches" working musician. Obviously, it's never been easy, but adaptation and compromise seem to be the keys to survival. I'll agree with the sentiments that venues are in business to make money, and if hiring full bands doesn't make them money, then it only makes sense they'll look for alternatives. This is where the adaptation and compromise concepts come into play, at least in my little corner of the world (central valley/central coast of California).
There is a strong market for live music here, but not in the traditional sense. Post-COVID, loud bars and many other live music-specific venues are mostly a thing of the past. In their place now are wine bars, restaurants, country clubs, and other "fancy folk" businesses that want live music, but want it more palatable for their patrons. That usually means much quieter, with less instruments/players, and often crammed into a small corner of the venue. There are very few places that have music as a featured part of their vibe and that have set their space up to accommodate musicians/bands.
To carve out a place for myself in this new environment, I've had to redefine my entire approach. 90+% of my work now is in a duo format, with a keys/vox guy and myself on drums. We don't use backing tracks, which is part of the appeal of this particular outfit for me, but that also leaves the arrangements quite sparse. It's a trade off for sure - I'd love to have at least bass and guitar in most of the stuff we do, but the reality of my situation prevents that. Everyone's situation is unique to them, of course. Each of us has a limit as to what we will and won't do. If I drew a line that I'd only play with a full band here in my area, I simply wouldn't work very often. There aren't enough opportunities to.
Venues love the duo due to the smaller footprint and quieter presentation. Their patrons love the duo because we're still giving them rhythm, song structure and melody, which I believe are the key elements in the material we're playing. The patrons are able to sing along with songs they know, and the lack of full instrumentation allows us to sound different and "fresh". We still do offer full band services when the situation calls for it, but as we've become established with the duo outfit, most of the events we book ask specifically for the duo.
None of this is how I envisioned myself playing music in my 50's. Just last week, I played a duo gig with brushes and snare, due to lack of setup time and space constraints. As Bo mentioned above, any playing is better than not playing for me, so I'm happy to take all the "weird" gigs that come my way. If my duo guy came to me tomorrow and said we were gonna start using backing tracks to fill out the sound, I'd oblige and be thankful I'm still playing.