Results were released today from a study to examine any changes in business revenues before and after the Minneapolis smoking ban went into effect, and it’s good news for both establishments and those who enjoy a smoke-free environment.
The study compares sales revenue of establishments licensed to serve alcohol from April to September of 2005, 2004 and 2003. The analysis of combined alcohol and food sales for these establishments found that:
This study was planned as one way to evaluate any changes in business revenue before and after the Minneapolis Indoor Smoking Ordinance went into effect on March 31, 2005, and was conducted at the request of local hospitality industry representatives.
To examine business revenue changes for establishments with on-sale liquor licenses, the City requested taxable sales data from the Minnesota Department of Revenue for the period immediately after enactment of the City’s Indoor Smoking Ordinance (April – September, 2005) and comparable periods for the two preceding years. A total of 353 businesses licensed to serve alcoholic beverages on their premises reported sales revenues in all three study years.
City staff who presented the report noted that these findings do not directly address the question of whether the Indoor Smoking Ordinance had a beneficial or adverse economic impact on the local hospitality industry. Many factors affect alcohol and food sales, including the local economy, the weather, and the attractions offered by entertainment venues. The study also does not take inflation into account. In addition, staff pointed out that revenues do not constitute profits, and profitability is a better gauge of business success than gross revenues.
Nonetheless, these findings counter anecdotal reports of a wide-ranging negative impact of the Indoor Smoking Ordinance on liquor licensees, or a deep reduction in revenues for neighborhood bars. The industry as a whole experienced a higher rate of revenue increases post-ordinance than in a comparable period in the previous year. All major commercial areas experienced increased revenues in 2005. And while two types of businesses did experience decreases in revenue, they were either almost negligible (less than 1 percent for downtown clubs) or relatively modest (4.15 percent for neighborhood bars).
The City plans to conduct an analysis based on complete 2005 revenue data in the future. This study would include revenue data for a longer time span pre-ordinance to more accurately measure revenue trends. The data analyses would also take into account economic factors such as inflation, employment rates, and local retail sales to better assess changes in hospitality revenues within the larger context of economic change. Conducting future analyses will depend on the availability of Minnesota Department of Revenue staff to extract and analyze City data.
March 20, 2006