The bans on smoking introduced in Germany’s federal states have resulted in short-term revenue losses for the restaurant and bar industry. Yet the decreases have been smaller than many proprietors feared. In addition to the smoking ban, the electronic age identification requirements in effect since 2007 have been the main reason for the drop in sales at cigarette machines. Those are the results of three RWI studies, based on varying data, of issues related to smoking.

The bans on smoking in restaurants and bars that were introduced by the federal states between August 2007 and July 2008 have resulted in an average revenue decrease of about two percent for that industry. The drops in revenue largely occurred shortly after the smoking bans went into effect. The losses appear to have leveled out in time, however. No revenue decrease was observed in the states of Bavaria and North Rhine Westphalia, where the smoking ban could be circumvented by establishing “smokers’ clubs”. Analyses of business licenses surrendered by restaurant and bar operators provided no conclusive indication that an increased number of businesses had closed down as a result of the smoking bans.

For the study, business registration activity in the German states was analyzed along with monthly revenue statistics from about 10,000 businesses in the restaurant and bar industry, compiled at the federal level between January 2006 and September 2008.

Economic impact of the smoking ban was overestimated

A survey of over 600 food and beverage businesses in North Rhine Westphalia, Bavaria and Berlin, which was carried out in June 2008 by the RWI in cooperation with the IHK (Chamber of Commerce and Industry) in Essen and the IHK Nuremberg, revealed that the impact of smoking bans had been systematically overestimated beforehand. In Bavaria, where the smoking ban was already in effect at the time of the survey, about 70% of the proprietors interviewed reported suffering revenue drops. In North Rhine Westphalia, in contrast, where the ban went into effect after the survey was done, almost 80% of proprietors anticipated a decrease in revenue. Similarly, 63% of customers in North Rhine Westphalia rejected the smoking ban, which was more than in Bavaria at 54%, where customers had already actually experienced a smoking ban.

The results of the survey are put into perspective when it is considered that the sample included an above-average number of bars and taverns, i.e. businesses harder hit by the smoking ban than restaurants. When the results are adjusted accordingly, 44% in Bavaria reported falling revenues, while 55% in North Rhine Westphalia expected drops.

From the perspective of restaurant and bar operators, the best solution, by far, for protecting non-smokers would be to allow freedom of choice between smoking and smoke-free establishments, followed by a smoking ban without exception and then existing non-smoker protection legislation.

Revenue from cigarette machines decreased mainly due to age identification

A third RWI study on the impact of the smoking bans among the German states revealed that the bans also resulted in decreased sales at cigarette machines. Yet the introduction of electronic age identification in January 2007 resulted in a much more considerable drop in revenue from cigarette dispensers. The identification system apparently inhibits not only youth but also adults from buying cigarettes at vending machines. The greatest drops in revenue were seen among dispensers located in open areas. Cigarette consumption in Germany decreased less strongly during the same period, so that purchases were apparently diverted to other points of sale. Increasing the minimum age for purchasing and consuming cigarettes from 16 to 18 as well as the national ban on smoking in federal government facilities, introduced in September 2007, resulted in changes in revenue that were only minor or not even able to be verified.

The study was based on an analysis of the monthly revenue statistics of a leading cigarette machine operator in Germany by federal state between January 2006 and August 2008. Thus, for the first time, comprehensive revenue statistics for cigarette machines were evaluated scientifically. This data allowed an initial analysis of the effect of several factors, including age identification at vending machines, the national ban on smoking in federal government facilities and the recent increase in the minimum age for purchasing and consuming cigarettes in Germany. .

For further information, please contact:
Sabine Weiler (Press Office) Tel.: (0201) 8149-213
Dr. Michael Kvasnicka (RWI, Berlin Office) Tel.: (030) 20 21 598-14
Dr. Harald Tauchmann Tel.: (0201) 8149-259

This press release is based on the Ruhr Economic Papers #172 „Much Ado About Nothing? – Smoking Bans and Germany’s Hospitality Industry“ and #173 „Public Smoking Bans, Youth Access Laws, and Cigarette Sales at Vending Machines“ as well as RWI : Materialien, Heft 58 “Eine Befragung von Gastronomiebetrieben zur Einführung von Rauchverboten im Gastgewerbe: deskriptive Ergebnisse” (available only in German). They are available from www.rwi-essen.de/publikationen/ as pdf-files.