by Buddy Frank
CDC Gaming Reports Frank Floor Talk August 2022
Some things are nearly certain. Hell is not going to freeze over. U.S. Senators will never agree on anything. And Nevada casinos will not ban smoking (Park MGM and the Fernley Nugget are the very lonely outliers).
Yet, the pandemic has caused a fundamental reversal in some other casino topics that were once considered “certainty:”
Buffets are mandatory
More slots are the only way to increase revenues
While turnover is always high, there will be lots of job candidates
Electronic Table Games will never catch on
For years, studies and trials seemed to indicate that banning tobacco on slots or tables would hurt revenues. As recently as February of this year, an analysis done by the Spectrum Gaming Group for the Casino Association of New Jersey said, “Casino management has found – based on their trove of internal analytics – that smokers have a higher value than non-smokers.” They went on to say that gross gaming revenues (GGR) would decline between 4.2% and 10.9% if a smoking ban was enacted.
Based on our history, there was little reason to doubt their findings. Non-smoking areas in casinos always did worse than nearby smoking areas. Every time someone tried to go full Non-Smoking, it didn’t work (does the failed Revel Casino Resort in Atlantic City ring a bell?). Illinois saw nearly 20% decline in GGR when they went smoke free in 2008.
But maybe there were some fundamental flaws in our studies and those limited experiments. Non-smoking sections seldom offered the location, slot variety nor the amenities found in smoking areas. Likewise, smoke has a mind of its own and seldom heeded signage. Often, the air quality in these “non-smoking” sections was questionable due to drifting air and HVAC system’s wide distribution of unwanted smoke. It made evaluation of potential revenue gains from non-smokers difficult.
Studies, like the New Jersey effort, were certainly valid. But Spectrum admittedly noted that their work did not consider long-term results. Logically, an immediate cessation of smoking will take some time for adjustments. When the Ho-Chunk tribe banned smoking in 2015 at their casino in Madison, WI, there was an overnight revenue decline and ample customer outage. However, it didn’t take long for them to once again set positive new revenue records.
That double-digit decline noted in Illinois failed to consider the mortgage crisis induced recession which hit every casino almost as severe in that same ‘08/’09 period. And most experts agree that the failure of the Revel in Atlantic City was due to multiple design, marketing, and operational mistakes; not just their smoking ban.
While almost impossible to achieve, what we really needed was an “apples-to- apples” comparison. Following the nationwide pandemic re-openings, nearly 200 major casinos turned on their slots and started dealing cards with a No-Smoking policy. Most of that was due to mask mandates and continuing fear of COVID spread. The air was clear of smoke, yet casino revenues boomed and set records. Non-smoking advocates cheered and claimed victory.
However, those results were just as invalid as the earlier work from the other side. Pent up demand and accumulated recreational budgets drove much of the surge in revenues. Again, it was an apples-to-oranges comparison.
That’s where a new study from C3 Gaming, headed by Andrew Klebanow, found some surprising data coming from Pennsylvania. They first presented their findings at the IGA 2021 Conference in April. The Mohegan Pocono and Mount Airy casino properties are about 40 miles apart in the state’s northeast quadrant, but largely share the same market. Their pre-pandemic GGRs were less than 20 percent apart, with the edge to Mohegan. Their Pocono property chose to permit smoking once the state eased restrictions (Period 4 on the chart below). The Mount Airy property voluntarily opted to keep their smoking ban in place.
The Mohegan property saw a -1.0 percent decline from the booming period right after re-opening. However, the Mount Airy group had an increase of 1.6 percent from the re-opening with the ban in place. Apple-to-apples had finally scored a win for the smoking ban. While not as clean of a comparison, C3 found similar correlations in the competitive Philadelphia market with five casinos.
Historically, revenue declines from smoking bans tend to recover with time, so this data may continue to improve.
(NOTE: As we go to press, many were surprised to learn that Mount Airy confirmed that they have reversed their policy and now allow smoking again on the casino floor. This is despite earlier statements from their management that said “feedback has been overwhelmingly positive” to the ban. As one pundit said, “after getting badgered by some customers and hosts, they let the smoke bug back in. It will cost them.”)
David G. Schwartz, an author and gaming historian at the University of Nevada, Las Vegas, said: “I think that COVID-19 has accelerated an existing trend in the industry away from smoking.”
Much of that impetus has come from non-revenue factors. The Spectrum study commissioned by operators in New Jersey was intended to be ammunition against one union’s effort to eliminate smoking in the casino workplace. The United Auto Workers (UAW) is urging state lawmakers to institute a ban for employee health reasons (a vote could come next month).
Ironically, a competing union, Unite HERE, is opposing a ban, saying it would cost the casino jobs of their members due to lost revenue. The C3 data from nearby Philadelphia may also play a role here since that market is Atlantic City’s biggest true competitor. The smoking bans at casinos there have not hurt revenues (only two of five casinos still allow smoking there).
Likewise, many others across the country are prioritizing team member health benefits and the bottom-line financial impacts of a no smoking policy. Both Yaamava at San Manuel and Pechanga, California’s two largest casino resorts (each with gaming revenues greater than any Las Vegas strip property), have re-opened with smoking bans in place.
While Yaamava has yet to decide if their ban will become permanent, Pechanga is committed. “If there was a silver lining at all to the pandemic, one could say it gave us all the chance to take stock of so many things that took place in our daily lives, and in our workplace settings before COVID,” according to Andrew Masiel, Sr., president of the Pechanga Development Corporation.
“For us as leaders at Pechanga, we reassessed a lot of things that affected the resort/casino from the guest and team member standpoints. Sometimes you can’t give in to pressure and you have to make the choice you know is right, and that’s what it was for us not bringing back smoking indoors to Pechanga.”
They, and others (as of this writing there are over 1,000 gaming facilities that do not permit smoking), also are realizing the cost benefits of smoking bans:
Countless ashtrays are no longer required to be serviced
Slot machine maintenance is improved
Uniforms remain fresher with reduced cleaning expense
Costly HVAC filters require less frequent replacement
Interior surfaces are cleaner
Slot chairs, table game felt, and dice bumpers do not need to be replaced as often
There are fewer employee sick days
Long-term health care costs will be reduced
Those two latter points are the focus of the UAW effort in New Jersey. Likewise in California, Masiel added, “When we announced our position on not allowing smoking indoors anymore to our team, they were ecstatic. That’s exactly who we wanted to please in making this decision. We knew for ourselves it would be the right one. Our team members have told us how much they appreciate it, and so have our guests.”
Importantly, most casinos have softened the impact of the bans by providing new and upgraded areas for smokers to take their breaks. Rather than the zoo-like glass enclosures that most airports implemented; attractive new and comfortable outdoor areas have been provided. Many casinos have also joined re-cycling programs to collect and dispose of discarded cigarette butts as part of their environmental efforts.
While you can always generate an argument from some about the health impacts of second-hand smoke, the Center for Disease Control thinks the evidence is clear:
Secondhand smoke causes nearly 34,000 premature deaths from heart disease each year in the United States among nonsmokers
Nonsmokers who are exposed to secondhand smoke at home or at work increase their risk of developing heart disease by 25–30%
Secondhand smoke increases the risk for stroke by 20−30%
Secondhand smoke exposure causes more than 8,000 deaths from stroke annually
Perhaps the American Nonsmoker’s Rights Foundation provides the best advice for casino operators when they argue, “It is time to achieve equity in smokefree protections for all, regardless of their geographic region, race/ethnicity, occupation, or economic status.” Just don’t count on winning a prop bet on Nevada doing that anytime soon.
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The full C3 Gaming report on smoking can be found here.
For a current list of non-smoking casinos, this website is updated frequently.