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Butt Out: How Much Will Illinois’ Impending Smoking Ban Hurt Business? PDF Print E-mail
News/Features - Feature Stories
Wednesday, 20 June 2007 02:38

Reader issue #638 When Front Street Brewery became a smoke-free establishment in November, general manager and owner Jennie Ash wasn't sure how the business' revenues would be affected.

The decision to go smoke-free was based on "the health of our employees and our customers," Ash said, but that doesn't mean the brewpub was convinced it was a good business decision.

Some people told her to expect a lull at the outset, but that business would return to previous levels quickly. Lobbying groups that fight smoking bans tell bar owners to expect a 40-percent drop in business.

"That first month or two, we were holding our breath," Ash said. "We were very concerned about business."

Any fears turned out to be unfounded. In its first month as a smoke-free bar/restaurant, Ash said, business was up 20 percent. And except for February - when bad weather and a downtown water-main break hurt business - Front Street sales have been up at least 20 percent every month compared to the same month the previous year.

This is not meant as evidence that bars and clubs in Illinois will see a similar boost in revenues if, as expected, the state goes smoke-free in public buildings on January 1. But Front Street's case illustrates that dramatic change makes business owners uneasy, even when the change is voluntary.

The anxiety is sharper when the change is mandated, as is likely to happen at Illinois bars and restaurants next year. Unless something dramatic happens legislatively in Illinois, that's the date the Smoke Free Illinois Act will take effect, requiring all workplaces in the state - including bars, restaurants, and private clubs - to become smoke-free.

And that leads Ash to wonder again what will happen to her Davenport business. "People are going to have a lot more choices" for smoke-free socializing, Ash said.

"Choice" is the key word in the Quad Cities. Because Iowa allows smoking in bars and restaurants - state law, in fact, presently forbids local governments from passing smoke-free ordinances - bar owners in Illinois worry that smoking patrons will cross the river when the ban goes into effect. As Terry Tilka, the owner of the RIBCO and Second Ave. clubs, said, "It scares the heck out of me."

"We expect to lose a bit of business," said Dave Loete, general manager of Bent River Brewing Company.

But Loete also conceded that people sensitive to secondhand smoke who are avoiding bars now might patronize them when the ban goes into effect. "We might gain some customers, too," he said.

And that touches on the good-for-business argument for smoking bans. With nonsmokers outnumbering smokers four to one, bars and restaurants could be helped more than they're hurt by the public-smoking law. "We'd rather have 80 percent of the population here than 20 percent," Front Street's Ash said.

What nobody can predict right now is how all this will shake out in terms of individual businesses. Front Street, which gained business by banning smoking, is likely to lose some of those customers to newly smoke-free businesses. RIBCO and Bent River might lose smokers and their friends as customers but gain some new nonsmoking patrons. And Iowa bars and restaurants might lose the business of people who don't smoke while gaining the loyalty of smokers.

 

"No Effect on Revenues"?

Research on the economic effects of smoking bans sounds different depending on who's spinning it. As with most contentious topics with deeply entrenched antagonists, you'll be able to find a study supporting virtually any point of view.

What's not much in dispute is that smoking bans have a negligible effect on the hospitality industry overall. And these are the studies touted by groups in favor of smoking bans.

The Centers for Disease Control & Prevention's 2004 study of the impact of a 2002 ban on smoking in El Paso, Texas, included the following conclusions:

"Restaurant and bar revenues account for approximately 10 percent of total retail revenues in El Paso, Texas, and this percentage showed that no statistically significant changes in restaurant and bar revenues occurred after the smoking ban was implemented on January 2, 2002.

"These findings are consistent with the results of studies in other municipalities that determined smoke-free indoor air ordinances had no effect on restaurant revenues.

"Despite claims that these laws might reduce alcoholic beverage revenues, mixed-beverage revenue analyses also indicate that sales of alcoholic beverages were not affected by the El Paso smoking ban."

A 2004 study of Florida's smoke-free workplace law flatly concluded: "We could not find a significant negative effect of the smoke-free law on sales and employment in the leisure and hospitality industry in Florida." It further claimed that there was no evident net migration of sales from restaurants (where smoking was banned) to bars (where smoking was still allowed).

A 2003 review of 97 studies reported: "All of the best designed studies report no impact or a positive impact of smoke-free restaurant and bar laws on sales or employment. Policymakers can act to protect workers and patrons from the toxins in secondhand smoke confident in rejecting industry claims that there will be an adverse economic impact."

But there is a problem with many of these studies that do not differentiate between restaurants and bars. Steve Riedl, executive director of the Illinois Licensed Beverage Association, didn't dispute that the hospital industry overall doesn't suffer from smoking bans. (His organization represents businesses with liquor licenses and fought the Illinois legislation.) But he said that these studies are often so broad that they "water down" the negative effect on bars by grouping them with restaurants. "Quit using the macro data method," he said.

The argument that bars suffer under smoking bans - and that restaurants' gains in business might offset those losses - is supported by some research. A 2000 study published in Contemporary Economic Policy claimed that "bars are predicted to be more than twice as likely to experience losses as restaurants. An important implication is that the increasing level of governmental restrictions on smoking in the hospitality sector could gradually impact the types of service available to the public." In other words, restaurants could thrive while bars close.

Yet getting a definitive answer on the economic impact of smoking bans on bars is difficult.

Opponents of smoking bans cite lots of anecdotal evidence and fault other studies but haven't yet conducted compelling research on the negative effects of smoking bans on businesses whose primary income comes from booze.

The Smokers Club interest group lists businesses (http://www.smokersclub.com/banloss3.htm) that have closed after smoking bans were enacted. That organization's director of research, David W. Kuneman, claims that bars and restaurants in smoker-unfriendly states grow less quickly than those in smoker-friendly states. But that's different from claiming that bars are hurt by bans.

Riedl said his organization has surveyed bars in Springfield, Illinois - where a ban went into effect in September 2006 - and found that their gross receipts in late 2006 and early 2007 were 40 percent lower than 12 months earlier. He chafed at the assertion that the study was unscientific - "It's not anecdotal," he said, "it's pure numbers" - but admitted it wasn't comprehensive or random.

The question of economic impact is complicated in border communities such as the Quad Cities. It's one thing for a bar in central Illinois to be faced with a smoking ban when all its competitors are dealing with the same law. "Then people don't have a choice," said RIBCO's Tilka.

But bar owners in the Illinois Quad Cities fret that their smoking customers and their friends will patronize Iowa bars.

"If we were not in a border community, I don't think it would be that bad," said Tilka, who has been an anticipating a smoking ban for years.

The alternative would be for Iowa to pass a similar law, but that's not likely to happen for a few years, at least.

 

Paving the Way for Bans

The Smoke Free Illinois Act, although it passed both chambers of the General Assembly, is not yet law. Governor Rod Blagojevich has yet to sign it.

People on both sides of the issue expect that he will. The governor's office has "indicated that he's going to sign the bill," said Kathy Drea, director of public policy for the American Lung Association of Illinois.

"Realistically, the governor's going to sign the this thing," said the Illinois Licensed Beverage Association's Riedl.

Gerardo Cardenas, a Blagojevich spokesperson, said the governor is reviewing the legislation but added that he supports it in principle. "This is legislation he would sign," Cardenas said.

But that doesn't mean the fight on this issue is over. The Illinois Senate defeated an amendment that would have exempted casinos, but Riedl said his organization is working on legislation that would exempt bars, fraternal organizations, casinos, and possibly horse-racing tracks and bingo halls. The bill could still come up during the spring session, Riedl said.

Riedl's organization is making a public-health appeal for the exemptions, claiming that if part of the impetus for the legislation is to protect the health of children, the General Assembly ought to allow smoking in adult venues. Otherwise, he said, people will smoke around their children in their homes. "You've got to provide some venue for them [smokers] to do that in," he said.

The American Lung Association's Drea said her organization will oppose any exemption legislation. Her rationale is also health. "People, no matter where they work, deserve a safe workplace," she said. "It's just a fairness issue. ... We will fight every exemption."

And the health argument shouldn't be discounted or overshadowed by the business debate. "Public-health in general is very happy abut this," said Theresa Foes, director of health promotion for the Rock Island County Health Department, about the Smoke Free Illinois Act. "I think it's wonderful." Her organization has, with the Scott County Health Department, led the Tobacco Free QCs effort. Since 1998, Tobacco Free QCs has encouraged restaurants to ban smoking, and its Web site (http://www.tobaccofreeqc.org) lists more than 100 local smoke-free restaurants.

She noted that by making it difficult to smoke in public, smoke-free laws encourage smokers to quit. "It's an incentive to quit smoking," she said. "Many smokers do want to quit."

If the governor signs the Smoke Free Illinois Act, the state will be the 21st to have such a law. Many people believe that smoke-free laws are all but inevitable, but don't expect one in Iowa next year, Drea said.

The American Lung Association believes that the road needs to be paved for statewide smoking bans, and that means the organization's first priority in Iowa is removing the prohibition against local smoking bans.

In Illinois, she said, 26 communities passed smoking bans after the state repealed its preemption law in 2006. That helped legislators see the effects of smoking bans firsthand, she said. "The sky did not fall in Springfield, Illinois, and Sangamon County," she said, adding that she didn't think the statewide ban would have passed without a public-smoking ban in the state capital.

An attempt to repeal Iowa's preemption law passed the Senate this past legislative session, Drea said, but not the House. If it passes that chamber next year, then activists can begin the process of building local coalitions against smoking in public buildings. That, in turn, could push the General Assembly toward statewide legislation.

In the meantime, local bars and clubs are left to prepare for Illinois' smoking ban.

Tilka said that he's been told by the Illinois Licensed Beverage Association to expect sales to drop 40 percent, and he thinks the situation could actually be worse because Iowa hasn't enacted a similar law.

He said that if that drop happens, he expects he'll keep his businesses open, but he said he'd have to cut his staff - presently 10 people full-time and 18 part-time. "We will remain open, yes," he said. "We'll try to survive it and see how it goes."


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