Global Hospitality Advisor: Smoking Regulation

Jumping on the “ban” wagon

Smoking has long presented a challenge to the hospitality industry. Perhaps unique among all industries, hotels, restaurants and bars are in the position of catering (or trying to cater) to two opposing groups simultaneously — smokers and non-smokers. The industry has worked to address the desires of these two groups for years, creating smoking and non-smoking sections in restaurants, non-smoking rooms and floors in hotels, and taking other steps to allow smokers to smoke, and non-smokers to avoid it.

Over the past decade, a number of developments have further changed the playing field. Some of the changes are the result of legislation, while others reflect decisions within the hospitality industry to seek out niche opportunities and enhance profitability.

Almost since the introduction of tobacco into Europe, the argument of whether it should be allowed or banned has raged. Pope Urban VII’s thirteen day papal reign in 1590 included the world’s first known public smoking ban, threatening to excommunicate anyone who “took tobacco in the porchway of or inside a church, whether it be by chewing it, smoking it with a pipe or sniffing it in powdered form through the nose.” Since that time, private companies, municipalities, states and entire countries have adopted restrictions on smoking, presenting new challenges to all industries that cater to a diverse public.

Most smoking bans are designed to create smoke-free workplaces and to reduce preventable deaths, diseases and disabilities caused by passive smoking. In addition, positive economic benefits are being cited as rationale for the laws. For example, Indiana’s economic development agency cited accelerated growth in its encouragement of cities and towns to adopt local smoke-free zones as a means of promoting job growth.

While California was the first state to impose a broad, state-wide ban against smoking in most public places, one of the latest bans might signal that smoking bans are destined to be a permanent fixture — on January 15, 2007, a Nevada judge signed an order allowing enforcement of the Nevada Clean Indoor Air Act with civil penalties. Now even Nevada prohibits smoking off the casino floor.

Outside the United States, two countries strongly associated with a smoking “culture” have adopted smoking restrictions: a city-wide smoking ban has been introduced in Hong Kong, effective January 1, in an effort to address its notorious air quality and improve the health of the population, and in France a ban on smoking in offices and other public buildings begins in February and will expand to include bars, cafes, restaurants, hotels and casinos starting in 2008.

The hospitality industry has been particularly impacted by broad smoking restrictions. Hotels, restaurants, and particularly bars and taverns have argued that smoking restrictions hurt their business, especially since most smoking bans are adopted by cities, towns and other local jurisdictions and not by states. As of now, 15 states have comprehensive bans, with most of the regulation imposed by cities and counties. Consequently, hospitality businesses argue that smokers will choose venues based on whether smoking is allowed, and where smoking is banned broadly, may not go out at all. At the same time, studies have been published showing that smoking bans do not have a broad economic impact (See, for example, a Centers for Disease Control Report, “Impact of a Smoking Ban on Restaurant and Bar Revenues — El Paso, Texas, 2002,” http://www.cdc.gov/mmwR/preview/mmwrhtml/mm5307a2.htm).

Because most of the laws prohibit smoking only in public areas and workplaces, the impact on hotels has been generally limited to restaurants and hotel bars. However, many hotels have chosen to designate a portion of their rooms as “non-smoking” to cater to an increasing number of guests, including smokers who, for personal reasons, prefer not to rent a “smoking” room. There have been two significant developments in smoking bans which further affect hospitality firms. First, while most smoking bans have addressed indoor smoking, a number of states and localities have, in the past two years, adopted smoking bans near entrances to buildings. This development prevents restaurants, bars and hotels from accommodating smokers by creating outdoor smoking areas adjacent to their businesses.

The second important development has been the adoption by hotel companies of broad smoking restrictions, making entire hotels smoke-free. Before 2005, a number of hotels and hotel chains created non-smoking hotels, including the Woodside Hotels & Resorts Group, and most of the Joie de Vivre chain. This trend accelerated when Westin and Marriott banned smoking and created smoke-free hotels chain-wide in 2006. Westin’s move became effective on January 1, 2006, and on July 19, 2006, Marriott announced that all of its properties — 2,300 hotels and corporate apartments with over 400,000 rooms — would be smoke-free. Marriott’s press release cited increasing concern over health issues, the fact that over 90% of its guest rooms were already smoke-free, and anticipated positive customer feedback, while Westin noted demand for non-smoking rooms, even by smokers.

There could be an additional motivation — cost and customer satisfaction. David Hill, general manager of the Topaz Hotel in Washington D.C., part of the Kimpton chain and one of the first hotels to convert to a non-smoking format, was quoted by USA Today as saying that the number of smokers who gripe when put in a non-smoking room is “small compared to the number of people who were complaining about being put in a smoking room” when the hotel was fully booked. “It’s a huge weight off the shoulders of our (customer) service staff. I will never go back.”

While it seems likely that hotels will continue to cater to a large minority of smoking guests, it also appears that the trend in law and business will narrow the opportunities.

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Robert Braun is a senior member of the Global Hospitality Group® and partner in the Firm’s Corporate Group, Mr. Braun has represented clients in successfully negotiating hundreds of hotel management agreements. He advises hospitality clients with respect to business formation, financing, mergers and acquisitions, venture capital financing and joint ventures. He also represents clients in the negotiation of hotel and spa management and franchise agreements, as well as telecommunications, software, Internet, e-commerce, data processing and outsourcing agreements for the hospitality industry. Contact him at 310.785.5331 or rbraun@jmbm.com.