The major challenge to the implementation of smoke-free policies is the fear of negative economic impact from such policies. This is inevitably the first and most frequent argument of both hospitality proprietors and many municipal politicians.
While there is some indication in the literature of short-term, transitional fluctuations in restaurant sales immediately following implementation of smoke-free policies, there is no objective, independent evidence of long-term net negative impacts of smoke-free policies, in restaurants or other hospitality venues. There is polling evidence, as well as data from the state of California and a few other jurisdictions, that point to an increase in attendance at smoke-free hospitality premises as a result of smoke-free implementation. The consensus of studies available to date seem to be that, following a brief transition period where a minority of facilities experience both upward and downward fluctuations in business, any fall-off in business from smokers ceasing to patronize certain establishments is offset by increased patronage from non-smokers, with a neutral impact on revenue as the general result.
The large majority of studies on this topic originated in the United States, while a smaller number of studies have come out of Canada. One study by the Conference Board of Canada, entitled "The Economics of Smoke-Free Restaurants" (March 1996) deals with the subject in various Canadian jurisdictions, and data is increasingly becoming more available from smoke-free municipalities.
The City of Ottawa has released reports examining the economic effects of its 100% smoking ban which was implemented August 1, 2001. A KPMG LLB report "The Economic Impact Analysis of the No-Smoking Bylaw on the Hospitality Industry in Ottawa" released December 2001 shows that there is no net negative economic impact due to the smoking ban. It further notes that several studies using official sales tax receipts show in some cases an increase in profits, suggesting that smoking bans may attract business.
As part of its project to assess the economic impact of the smoke-free by-laws in Ottawa, KPMG LLB attempted to complete a survey of bar and pub owners to determine the exact extent of the economic impact of the bylaws. To prepare for this survey, KPMG consulted directly with PUBCO and the Ottawa chapter of the Ontario Restaurant, Hotel and Motel Association(ORHMA), and the survey project received the approval and assistance of these two organizations. KPMG made repeated requests to the participating bars (from a sample of 150) to submit sales tax returns to be used as the only objective source of economic data in study, however most of these bars either refused or gave no response.
While PUBCO demanded the results to be released, KPMG maintained that in order for the conclusions to be statistically significant and representative, at least 60% of the sample would had to have submitted sales tax returns. Only 40% of the establishments contacted had cooperated. Readers are referred to the KPMG letter to Ottawa Medical Officer of Health Dr. Robert Cushman, which extensively describes the methodology and process KPMG followed in order to try to successfully complete the survey.
The result of the lack of cooperation by the bars and biased self-selection (some bars with increased sales did not respond to the survey), was that no conclusion could be drawn regarding whether or not the smoking bylaws caused the overall downturn in the bar industry in Ottawa. More likely causes of revenue loss cited by KPMG in the report are: September 11/01, the high-tech industry crash, decreased tourism and business travel, increased consumption of liquor and decreased consumption of beer. In fact, according to the study, the food and beverage industry as a whole (including restaurants) continues to grow. According to the report, this suggests that the smoke-free bylaws have had little or no negative impact on the food and beverage industry. These findings were presented in the final KPMG report, released in November 2002 entitled, Economic Impact Analysis of the Smoke-Free Bylaws on the Hospitality Industry in Ottawa.
In addition to the KPMG study, on May 5, 2002, the City of Ottawa released data showing that 82 new bars and restaurants have opened in Ottawa since the implementation of the smoke-free bylaws in August 2001. As noted in the November 2002 Final KPMG report, this number grew to 123 in November 2002. To obtain the list of new bars and restaurants, please contact OCAT. Furthermore, results of a June 2002 poll by Decima Research show solid support for the smoking bylaws and that the number of Ottawa residents visiting hospitality establishments has grown by 17% while the vast majority have not reduced the number of visits to such establishments since the bylaws took effect.
In the Region of Waterloo, a group of bar and restaurant proprietors sued the Regional government for damages it alleged had been caused to their businesses from the January 2000 implementation of the Region's 100% smoke-free by-law. When the matter came before the courts, the plaintiffs did not produce any accounting or other financial data to prove their claims of lost business. The judge in the case was moved to order one of the lead plaintiffs to produce his accounting statements for 1999 and 2000, in order to have at least some evidence before him. When the individual did so, the record showed that the establishment in question had lost money in 1999, but had made money in 2000. For this and other reasons, the lawsuit was thrown out.
There has not been a better opportunity in Waterloo Region than this lawsuit for those alleging economic losses to prove their case. Yet, again, the plaintiffs were unable to prove any economic loss.