Tales From The Road: Are Small Towns The Answer?
Small Town America economies remain resilient despite significant problems in globalization dependent large cities where large corporations are the lifeblood of the economy. Just look at Wal-Mart (NYSE: WMT), Target (NYSE: TGT), and Brinker International (NYSE: EAT).
Since we started this series, it's become clear that although the job losses are hurting large cities, small towns are weathering the storm much better. We have chronicled our observations on trips to Waco and Austin, Texas, where the former was holding up in December, and the latter was starting to show signs of a significant slowing.
The pattern is obvious, with three factors being critical to the success of the small town, location, the presence of a college level institution, and its function as a regional health care hub. In other words, the service economy, where local and regional needs are stable are the key to success.
Another important cog in the machinery is the American phenomenon known as elite sports, where "junior" quasi-professional players hone their craft in search of a college scholarship or a pro career. This group is good for at least two to four people or more, per group, coming into town on any given weekend, or as it is with Dothan, Alabama this week, the USTA National Open's 14 Tennis Championship for boys and girls.
That means that the regional economy, Western Florida and Southern Alabama got a boost, with airlines, hotels, restaurants, rental car agencies, gas stations, restaurants, and retail stores getting a much needed boost. And it's not just junior tennis, it's baseball, basketball, also, and a the college level as well, giving the small town with the facilities and the national connections a fairly reliable income stream.
Here's an example, the local Hampton Inn (a Hilton property), according to the manager we spoke to, is full most of the time from Monday to Thursday, with business travelers, and on weekends, the traffic comes from sporting events, church gatherings and the like.
We visited the usual gaggle of familiar corporate destinations, and found some familiar and not so familiar things. Wal-Mart was of course packed, while Target was less full, but still had more traffic than some we've seen in larger cities. Brinker International's Chili's was also full, and had a waiting time of about 15 minutes for a table. In contrast, our neighborhood Chili's in Dallas, hasn't had a line in months, at least not when we've been there, which is less than we used to, since the economy in Dallas, is starting to slow, and we're eating at home more often.
Other notable activity was at Dick's Sporting Goods (NYSE: DKS) and Barnes and Noble (NYSE: BKS). Something fairly interesting was the action at the Starbucks (Nasdaq: SBUX) in the Barnes and Noble and Target. Both had fairly brisk traffic. What makes this interesting is that the stores were in the same shopping center, and within 200 feet of each other.
To be sure, small towns are places where there aren't a whole lot of things to do. But in Dothan, there are plenty of restaurants, local, as well as chain stores. Most of the local restaurants were full, while the corporate shops, especially the sit down places, such as Logan's Roadhouse, which is not to be confused with the publicly traded Texas Roadhouse (Nasdaq: TXRH) was also full. Mexican restaurants in the area, either locally or regionally owned are also doing well, as we've seen in other places we've visited.
The pattern of leisure related service businesses in small towns doing well during this recession, seems to be well entrenched, at least based on our own travel related observations. This is useful for many reasons, not the least of which is that if and when this pattern changes, it could be a useful clue to what's next for the economy.
There are plenty of reasons that make this a sensible pattern. First, small towns are still places where family values are dominant. Folks still go to church and have Sunday dinner with the family. And small businesses tend to live as much on relationships and tradition as marketing. Any big corporate entity that can deliver the same kind of homespun atmosphere tends to be successful.
Yet, jobs are still the key to survival. And since small towns tend to be fueled by travel, especially business and sporting related travel, as long as companies need to look for sales, keep an eye on their customers, and parents are looking toward getting their child's college education paid by someone elses, this trend is likely to remain in place. This translates itself to service related jobs.
Finally, education and health care tend to be at least partially funded by the government, and since small towns with colleges and universities, often tend to be regional health care hubs, that also gives them an edge, which is even more safeguarded by the geographically influenced exclusivity of the town, as we've noted on most of our recent travels.
It's ironic that the government chooses to bail out the weak large city corporations and ignores the smaller population centers that have clearly proven to be more successful in surviving hard times. Oh, yeah, they're the government.
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