Trump’s Political Success Comes With a Cost for His Business
(Bloomberg) -- When President Donald Trump took office, his critics feared that he would exploit his new position for the benefit of his family business. And while some properties of the Trump Organization -- most notably its hotel in Washington -- have prospered, other enterprises have languished or failed.
On Thursday the company, announced that it had scrapped ambitious plans to expand its hotel business, the latest disappointment for a company that has experienced numerous setbacks since Donald Trump moved into the White House.
Executives blamed politics.
The hotel division of the Trump Organization canceled the development of four new mid-tier hotels in the Mississippi Delta. They were to be the first in a string of two new hotel chains -- the four-star Scion and three-star American Idea -- that would rise in parts of the country that support the president. The new chains were billed as the only significant source of growth for the organization, now run by his two eldest sons, Eric and Donald Jr.
The president stepped away from the Trump Organization when he took office, and the company took pains to insulate itself from the highly charged political atmosphere that ushered in his 2016 victory. It said it would subject new domestic ventures to stiff scrutiny, donate all profits from foreign governments to the U.S. Treasury, and not initiate new projects overseas.
But Trump’s sons said politics still got in the way.
“We live in a climate where everything will be used against us, whether by the fake news or by Democrats who are only interested in presidential harassment and wasting everyone’s time, barraging us with nonsense letters,” Eric Trump said in a statement.
He was referring to Democrats in Congress who have vowed to undertake broad investigations into the president’s businesses now that they control the U.S. House. Special Counsel Robert Mueller as well as prosecutors in New York have been looking at some of the organization’s activities as part of their inquiries.
Trump’s name, which in 2015 he considered the company’s most valuable asset, has in some ways become a liability. It’s been removed from buildings in New York, where the company began; Toronto, and Panama City -- a crowbar was used in there -- and there’s plenty of vacant space in Trump’s namesake towers in New York and Chicago.
The closely-held Trump Organization doesn’t disclose its financial performance. Company executives have said that business is robust, but there are some signs that it has slipped. For example, Trump’s net worth has fallen some 7 percent over the past two years to $2.8 billion, according to figures compiled by the Bloomberg Billionaires Index.
More pain could be on the way in the form of the high-profile investigations that could well generate headlines for years to come. Lawsuits challenging the president’s ability to maintain vast business interests while in public office continue to unfold, and some Democrats in Congress have demanded that the FBI look into the Trump Organization’s employment of undocumented immigrants. The company has said it was duped by fake papers.
The organization’s hotel ventures were meant to be a bright spot, following the successful opening of the Trump hotel on Pennsylvania Avenue near the White House. Since the 2016 election, it has become a magnet for high-powered Republicans in Washington, as well as representatives of foreign governments and others.
The company saw opportunity in parts of the country that voted for the president, with company executives talking up the possibility of new hotels in cities like Dallas. The four hotels that had been announced were to be developed by a pair of Indian-American brothers in Cleveland, Clarksdale and Greenville, Mississippi.
At one point, a Trump Organization executive said the company had 39 signed letters of intent and was considering two dozen U.S. cities for new locations.
That project was meant to offset the lack of new business elsewhere. The Trump Organization has said it won’t pursue new foreign deals while Donald Trump is in public office, and the company’s other sources of business -- such as licensing its name for various buildings -- haven’t been particularly successful in recent years.
“When my father took office, we made countless voluntarily sacrifices as a family and as a company, turning down hotels and projects from almost every corner of the globe. We walked away from billions of dollars’ worth of deals and ceased virtually all expansion,” Eric Trump said in the statement. “If we have to slow down our growth for the time being, we are happy to do it.”
His brother, Donald Trump Jr., suggested the company will return to growth once their father returns to private life. “When politics are over, we will resume doing what we do best which is building the best and most luxurious properties in the world.”
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