January 18, 2018

Presidential visits: Good for politics, bad for business

“Small businesses are the backbone of our communities. Small business owners don’t just employ our neighbors; more often than not, they live alongside us, too. They support our Little League teams, our schools, our houses of worship, and our charities. And they provide the essential character of towns and cities across America.” – President Barack Obama (source)

 

“Small businesses are a primary driver of the American economy and when they succeed so does the country.” – President Donald J. Trump (source)

 

The impact of presidential visits on small businesses

Over the past two years, Presidents Obama and Trump have visited 123 cities. Both talked about the importance of small, local businesses, and rightly so. Small businesses represent 3 out of 5 new jobs, and they employ about half of the American workforce.

So, with all this talk, we were curious as to how much of an impact does a presidential visit have on small, local businesses—especially as presidential visits to American towns are likely to ramp up ahead of high-stakes midterm elections this year. Do red cities see a surge when President Trump visits or drop when President Obama comes to town?

Let’s start by taking a look at the types cities Obama and Trump visited in their last and first years in office, respectively. 

Not overly surprising, there was a bit of partisanship in the types of cities each President visited. Both favored cities that voted for their respective parties. President Obama [D] visited more democratic cities. President Trump [R] visited more Republican cities. President Obama visited 58 cities in 2016 and President Trump visited 65 in 2017.

While it’s interesting to note that President Obama was visiting these cities during an election year (2016) and President Trump was visiting during his first year in office (2017), it doesn’t seem to factor into the outcomes. Even with the variety of city sizes—and despite the president’s political party affiliation—the results we found don’t fluctuate much. You’ll see a pretty clear and surprisingly bipartisan response among consumers. (Don’t worry, we are about to dig in. Hold tight).

To put it plainly: it doesn’t matter who the President is. It doesn’t matter if your city voted for or against them in the last election. The study we are about to look at shows us that presidential visits negatively affect sales and the number of transactions at small businesses on the day of their visit.

 

Zero-revenue days, or “business shut down”

To understand the impact of presidential visits, we needed to establish a baseline of average sales and transactions for the cities and towns they visited. First, we looked at the number of transactions, paying particular attention to stores reporting no transactions. To accurately benchmark the impact, we needed to know, on average, how many businesses were literally or effectively shut down in the days before a visit.

Next, we looked at the day of the visit and noted how many stores reported zero transactions, and it was here that we found our first interesting trend:

These three graphs compare the impact of Presidential visits. The first pillar represents the two days prior to a visit. The second pillar is on the day of the visit. The third column is the average of the two days after they visit.

 

The second and more interesting trend (we already let the cat out of the bag above) is that this trend is essentially the same no matter how you look at the data. We filtered the data by political party, city voting preference, city size, etc., and all returned roughly the same results for small businesses. With only a few degrees of difference, the most surprising fact is that POTUS visits hurt small businesses.

On the day of a presidential visit, nearly triple (2.6 times to be exact) the number of business reported no sales compared to the days before and after the visit.

Lastly, we wanted to know how long the impact lasted. We found things return to normal almost immediately (with a few rather insignificant and anecdotal oddities). When you look at the graph above, you can see that in all three instances–the combined as well as the individual visits–that the number of businesses with no sales transactions on the day of the visit was more than double the days prior, and it returned to normal in the days following.

To put it plainly: when the President is in town, more than twice as many small businesses will report zero card transactions. This makes sense when you consider the impact of motorcades, blocked streets, Secret Service and increased security, and the general distraction caused by the event.

 

Revenue impact on open businesses

To this point, we’ve described the impact of presidential visits in terms of business shutdowns—the increase of days with zero transactions. What about the revenue impact on businesses that continue to transact when the president is in town?  Since business income and personal income are one in the same for small business owners, how hard does a presidential visit hit their wallets?

Again, this news isn’t great for small businesses.

The graph above places the businesses we studied in four main groups: businesses reporting below-average sales by 10%, 15%, 20%, and 30%, respectively. It follows the same format as the previous graph with a two day before and after average, with the day of the visit in the middle.

 

The trend for lost sales mirrors the trend for lost transactions. All things considered, that’s not very remarkable. But when you look at the trend we see on the day of the visit, things get more interesting.

When the president visits, more businesses see reduced revenue, and more businesses see bigger losses. You can see this trend in the rising number of additional businesses who saw losses of 10% all the way through 30%.

For example, look at the far-left part of the chart, which outlines the number of small businesses experiencing revenues 10% below average in the two days leading up to a presidential visit. You can see that when the president is in town, 18% more businesses experience 10% revenue loss. 

That’s bad, but twice as many businesses experience 30% revenue loss. Look at the far-right part of the chart. We see that 35% more businesses experience 30% sales depression when the president is in town compared to the two days prior to the visit. So, more businesses experience revenue loss during a presidential visit, and the percentage of businesses experiencing those losses grows in direct proportion to the size of the loss.

To put it plainly: If businesses were already experiencing below-average sales before the motorcade came to town, the president’s visit probably made it worse.

 

What does it all mean?

Unfortunately, there isn’t much you can do as a business owner to keep the president from visiting. But this isn’t bad news. This report shows the impact they have on the cities and towns they visit; it does not factor the number of owners who close shop to listen, or to protest, or to volunteer. Nor does this mean that presidential visits are bad, unwanted, or that they should stop. What this means is that small businesses lose money on the day the President is in town. 

Small, local businesses have always been resilient—not even a hurricane knocks them out of the game very long. This report shows us more of the same: the effects of the president’s visit don’t last long. Things return to normal within a couple of days. That said, revenue is king for small businesses, so even a few days of lagging or missing sales can really hurt if your business has been struggling. 

 

NOTE ON METHODOLOGY: This report analyzed revenue at more than 87,000 small business across American cities visited by President Obama in 2016 and President Trump in 2017. We tracked the average number of transactions in the two days leading up to the visit, during the visits, and in the two days after the visit to contextualize the impact of a presidential visit has on revenue at businesses in those cities and towns.

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