No Butts About It: tough Times Ahead | PricewaterhouseCoopers

The scale of the impact will vary for different types of businesses but for the companies most affected, such as bingo halls, a revenue decline of up to 15 percent is possible with many taking more than three years to recover to pre-ban revenue levels.

In its briefing paper ‘Preparing for the impact of the smoking ban,’ PricewaterhouseCoopers indicated that businesses need to assess the smoking prevalence amongst customers and how smokers might modify their behaviour following the ban to build a picture of how they might be impacted.

David Trunkfield, head of leisure, PricewaterhouseCoopers LLP Strategy commented: “We have seen smoking prevalence ranging from 20 percent of customers to over 50 percent. But the big issue is how those smokers might alter their behaviour after the ban and the knock-on effect that might have on revenues and profit.”

Gauging the true impact of the smoking ban on businesses is difficult. Family-oriented businesses like ten-pin bowling are likely to see only a minor impact as the activity is refined to short sessions, while other businesses like traditional wet-led pubs, where smoking is often inextricably linked to the leisure activity, are likely to be hit harder.

Trunkfield added: “The experience of existing smoking bans in other countries shows that some industries have seen revenues drop dramatically and have taken several years to recover to pre-ban levels. In fact, some individual businesses may never recover and may face closure.”

This long-term impact demonstrates that leisure businesses need to think in terms of a 12 to 36 month recovery period and in particular ensure that they are able to manage costs effectively during that time to compensate for lost revenues.

Adjusting to the new smoke-free environment will also require a focus on innovation with regard to substituting lost revenues with new products and services.

As part of their planning for the smoking ban, businesses need to consider:

• Activity structure – what is the average duration of a leisure session? Is alcohol served as part of the activity?
• Outside access – Are smokers able to easily move outside for a cigarette?
• Substitution – What substitutes are there for the leisure activity (e.g. bingo players and gamblers could switch to online alternatives in order to continue smoking)?
• Importance of ancillary spend – for many leisure activities, spending that takes place during breaks and at the conclusion of the main leisure event can account for a significant proportion of revenue or profits.

The smoking ban will be implemented in Wales on 2 April, Northern Ireland on 30 April and England on 1 July.

1. Hospitality Directions – ‘Preparing for the impact of the smoking ban’ Briefing Paper is available electronically. Copies for the media are available from Rohan Hutchings, PricewaterhouseCoopers on +44 (0) 20 7804 7509 or [email protected]
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