Taverns Hurt by Smoking Ban

Revenue has dropped at many taverns - as much as 30 percent in some locations - because of a decline in customers, shooed away by the state smoking ban in establishments that serve food.

The prohibition against smoking, which took effect in January, sent gamblers who want to light up while playing slot machines to traditional casinos or one of the few taverns built before 1992 that have 35 slot machines and are exempt because the businesses were classified as casinos.

"There are a lot more challenges for an operator than ever before," said Joseph Wilcock, president of the Nevada Tavern Owners Association.

Wilcock estimates that 75 of the association's roughly 300 members gave up food service to keep their gambling and smoking patrons. Most of the membership, he said, is complying with the smoking ban "but are losing their shirts."

None, Wilcock said, wanted to give up the moneymaking slot machines.

Roger Sachs, co-owner of the three Las Vegas-area Steiner's taverns, said friendly service, good food and a lively atmosphere help keep customers from taking their business to a more traditional restaurant.

Sachs said the gambling devices made Steiner's three locations profitable.

Since January, however, revenues from the slot machines are off
29 percent to 35 percent at each location.

"We probably do as well on food as anybody because that's
something we wanted to establish," Sachs said. "But other places
might take a monthly loss of $10,000 on food, but made it up with
the gaming. That's not the case now because the business is not
there."

Herbst Gaming is Nevada's largest slot route operator with approximately 7,200 slot machines in 700 locations throughout the
state.

In the third quarter, Herbst said revenues from the company's route operations were $66.1 million in the three months ended Sept. 30, a 21 percent drop over the same period in 2006.

For the first nine months of 2007, Herbst's slot route operations generated $212.5 million, 19 percent less than the same nine-month period in 2006.

"There is no question the smoking ban had a dramatic impact on our route operations and has fundamentally changed the slot route industry," Herbst Gaming President Ed Herbst told gaming analysts
following the earnings release.

United Coin Machine, which operates about 6,000 machines in more
than 400 locations statewide, is experiencing similar losses in revenue.

United Coin President Grant Lincoln said the smoking ban created an uneven playing field for the tavern operators, who don't have the promotional budgets to match the customer incentives offered by the large casinos.

"There's not a lot we can do," Lincoln said. "As their volume suffers, our volume suffers. The question is, have we truly bottomed out? The smoking issue has been a fairly crushing blow for the average tavern operator."

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Information from: Las Vegas Review-Journal, http://www.lvrj.com

(Copyright 2007 by The Associated Press. All Rights Reserved.)


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