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Macau Smoking Ban Clouds Casinos’ Future

Macau Smoking Ban Clouds Casinos’ Future

by Warwick Bartlett

Standing on the gaming floors of Macau’s casinos looking at crowded gaming tables stretching as far as the eye can see it is hard to envisage a slowdown in the casinos’ gaming revenues. But on 1 January 2013 the government of Macau is to introduce a partial smoking ban in its casinos. When introduced in other countries total smoking bans have led to a fall in gambling revenues of between 15% and 20% over a full year. For the casino operators the situation is even worse because a 1% fall in revenue can equate to a 4% fall in net profits.

In Macau the smoking ban will require 50% of a casino property’s total public area to be smoke free. This percentage incorporates the gaming floor but also lobby areas and restaurants within the property. Existing casinos will not be required to have a physical partition separating smoking and non-smoking areas of the gaming floor but air quality in the non-smoking area must meet certain standards. Future casinos will be required to have a physical partition on the gaming floor.

With around 80% of government revenue coming from gambling in Macau the smoking ban may prove to be a risky strategy. In France Groupe Partouche saw its full year pre-tax profits halved in 2007 after the French Government introduced a total ban on smoking in casinos.

From the Government’s perspective its citizens’ health is paramount and smoking (or inhalation of other’s smoke) can cause up to 40 known diseases in people. In Macau where most gamblers visit up to three times a year and only stay one or two nights the risk is low. It is the casino croupiers that are most at risk.

Macau’s main catchment area for smokers is mainland China where the prevalence of smoking is very high. According to a World Health Organisation survey 63% of men aged 45 to 64 years of age are smokers. Research in the West suggests that smoking amongst gamblers is higher than non-gamblers.

The urge to smoke is far greater than the urge to gamble so as the gambler leaves the tables to go outside and smoke a break in play occurs and the gambler is taken away from the ‘trance’ of gambling and is given time to re-consider their situation. If their gambling has been profitable they may decide to call it a day, if they are losing they may decide that they have lost enough.

In Australia the National Institute of Economic and Industry Research revealed smokers spent AUS $30.29 per capita compared to AUS $13.93 for non-smokers. In Victoria the Casino and Gaming Authority found gaming machine players were almost twice more likely to be smokers than non smokers.

The fact that the ban in Macau is a partial one will help mitigate the potential loss in revenue to the casinos.

In Atlantic City the smoking ban extends to 25% of the casino floor. The city briefly banned smoking in casinos in 2008 but this led to protests from the casino owners who complained their customers were leaving them in droves to gamble elsewhere. The ability to go elsewhere to gamble for most mainland Chinese is not an option.

An interesting development is that the new Revel Casino which opened on the Boardwalk of Atlantic City this year is completely smoke free from the management’s choice.

For the time being it would seem Macau’s gaming revenues may be spared. But the march towards a total ban will be relentless. SJM Holdings’ managing director Angela Leong has already indicated her support for a full smoking ban in casinos.

 

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