Casino revenue, smoking ban / Hazy connection? - Monday 17th of September 2007

Harrahs Entertainment Inc.s four Atlantic City casinos are going to have entirely smoke-free casino floors. Tropicana Casino and Resort and Trump Plaza Hotel and Casino plan to have the same thing. All three companies will build nongambling smoking lounges for customers who want to light up.

Thats pretty dramatic news about how these Atlantic City casinos plan to comply with a city ordinance limiting smoking to no more than 25 percent of the casino floor. Other casinos, including the other Trump properties, are building enclosed gambling areas where smoking will be permitted.

The plans for how the casinos will comply with the new law come at a time when gaming revenues are down 4 percent from last year, and the industry is facing its first annual revenue decline in the history of casino gambling in Atlantic City.

Of course, theres one less casino - the Sands Casino Hotel closed in November. But the partial smoking ban and new competition from slot parlors in Pennsylvania and Delaware are being blamed for the bad news. Donald Trump has even called for repeal of the citys smoking ordinance. But heres what J. Carlos Tolosa, president of Harrahs eastern division, said the other day:

"Harrahs Entertainment fully supports the Atlantic City Councils approved ordinance designating smoke-free zones within our resorts. We are committed to improving the work environment for our employees as the City Council contemplated in the ordinance, and we thank the council for working with us on this important issue."

So what gives? Is Harrahs, the worlds largest gaming company, run by a bunch of softies? Unlikely. What the company is doing is acting in its self-interest - its enlightened self-interest - which indicates that the smoking-ban/revenue-decline story line is more nuanced than Trump and others suggest.

Consider the August casino-revenue figures, which were down nearly 6 percent from that month a year ago. The news wasnt all bad. Slot revenue may have been down 11 percent - but table-game revenue was up 8.2 percent. And while the industry was down overall, Caesars Atlantic City (owned by Harrahs) was up 10.8 percent and had its second-highest month of gross revenue ever. Its highest grossing month? This July. And Harrahs Atlantic City was up 7.1 percent in August - its highest grossing month ever. Both casinos, it is worth noting, have new nongaming attractions (The Pool at Harrahs and The Pier at Caesars).

If Atlantic Citys partial smoking ban was the primary reason for the industrys overall revenue decline, wouldnt table games be down along with slots? Wouldnt all the citys casinos be affected roughly equally? And would Harrahs and the others be so willing to make their casino floors entirely smoke-free?

We dont think so.

Tony Rodio, who heads both Resorts Atlantic City and the Atlantic City Hilton Casino Resort, which plan to allow smoking in part of their gambling areas, understands the subtleties of the issue.

"A number of customers are very frustrated, who say that if they cant smoke, they wont come here. I also have customers who tell me if it was 100 percent smoke-free, Id come here all the time," Rodio said.

Banning smoking on casino floors, just as it is banned in every other workplace in the state, was and is the right thing to do. And blaming Atlantic Citys ordinance for current revenue declines is shortsighted and, quite possibly, inaccurate.

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