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KPMG Conflicting Reports

James Middleton – CTA – 21 June 09

KPMG Hong Kong discounted the ‘once a week pub brigade’ in their survey produced to Legco which was considering the anti smoking legislation

Legislative Council

LC Paper No. CB(2)491/02-03

18. Mr Thomas Stanley of KPMG replied that he could not give an answer to Ms HO’s first question, as the customers who indicated that they would eat and drink out less often when the smoking ban was in place were not asked whether they intended to do so on a short-term or long-term basis. As regards Ms HO’s second question, Mr Stanley said that including people who never set foot in restaurants, cafes, bars and food and beverage outlets in hotels in the survey would not significantly alter the existing findings, as the number of people from this group who would patronise catering venues when the smoking ban was in place would be a very negligible number. Ms HO queried the validity of Mr Stanley’s reply to her second question, as it could not be assumed that people who presently did not dine and drink out would continue to do so after the implementation of the smoking ban if no studies had been made to find out the reasons why they presently did not set foot in catering venues.
Whereas KPMG UK found they were the most significant factor set to make the difference
“The key group of people within the survey is the ‘once a week brigade’.

KPMG: Smoking ban to boost pub company profits
Industries 10 November 2004

Increased custom from the ‘once a week’ pub-goer looks set to make the difference
Despite fears to the contrary, pub landlords seem set to profit from a smoking ban being introduced into pubs, according to new survey data released today.

The survey, undertaken by YouGov on behalf of professional services firm KPMG, shows that people who normally visit pubs infrequently will visit more often with a ban in place, while more regular pub-goers are unlikely to be discouraged from going as a result of a ban.

Over 2100 people took part in the on-line YouGov survey, of whom a quarter were smokers. Sixty-four percent of respondents were in favour of a ban with only 26% firmly against. Of those survey respondents who do visit pubs, 27% believe they will go more often with a ban in place, 19% would visit less often with 54% unconcerned by the issue.

Commenting on the results, David Matthews, Head of Drinks at KPMG, said: “The key group of people within the survey is the ‘once a week brigade’. Representing 56% of the survey base, they are the single largest group within the survey and thus have the most clout. Sixty-five percent of them are in favour of a smoking ban and 29% believe they would visit pubs more often if a ban was introduced. Even when balanced against an anticipated small loss of trade amongst more regular pub-goers, this indicates that landlords and pub companies will benefit from a net increase in trade.”

“The net increase in profits may not be a huge amount but it will come as an unexpected bonus for those involved in the pub trade who may have thought that a smoking ban could only have a detrimental effect on their business.”

Amongst those people who visit pubs two or three times a week, 25% are likely to visit less often with a ban in place yet 22% would visit more often. As for the true pub regulars (more than three visits per week) 24% would visit less often with a ban in place but 20% would step up their attendance even further. This represents a small net trading deficit in both instances but as these two groups only make up 20% of the total survey database, that deficit is easily off-set by the increased custom amongst those who visit just once a week.

The survey also highlights how a smoking ban would even be sufficient to convince habitual non-pub goers into visiting at some point. Around a quarter of the people surveyed claim they never visit pubs yet 40% of that same group would be more inclined to visit if a ban was in place.

Further good news for pub landlords comes in the results of whether people would be inclined to spend longer in a pub, on average, per visit if a ban was in place. Twenty-seven percent of people believe they would stay in the pub longer, compared to 20% who believe their visits would be shorter because of a ban.

David Matthews continued: “The stats on increasing average visit times may not come as a real surprise as a smoking ban is always going to make a pub a more attractive venue to many people. However, combined with the efforts which some pub companies are making to encourage responsible drinking and to eliminate binge drinking, a ban should be sufficient to see a whole new wave of customers coming through pub doors – and staying for longer.”
“Pub companies may not be the only ones to benefit. Of those people who believe they would spend less time in pubs due to a ban, just over half of them believe that their alcoholic consumption levels would not fall as a result. Assuming they’re not simply spending the same amount of money in a pub – just in shorter visits – then their custom will be transferred to off-licenses and supermarkets. The purchases may subsequently be consumed at home but at least these people’s spending power is not being lost to the drinks industry as a whole.”

Other findings of the survey include:
§ Only 59% of smokers were against a smoking ban. Twenty-five percent were actually in favour;
§ Forty-nine percent of people visiting pubs more than once a week are in favour of a ban, compared to 65% amongst the ‘once a week’ group and 70% of those who don’t visit pubs;
§ You can’t please all of the people all of the time: 49% of non-smokers who never go to pubs would still not be enticed in by the prospect of a ban.

Media enquiries: Please contact Simon Griffiths (KPMG Corporate Communications) on 0121 232 3760 or 07887 657919 or at

Notes to Editors:
KPMG is the global network of professional services firms who provide audit, tax and advisory services.
KPMG LLP operates from 22 offices across the UK with 9,000 partners and staff.
KPMG recorded a UK fee income of £1,008 million in the year ended September 2003.
KPMG LLP, a UK limited liability partnership, is the UK member firm of KPMG International, a Swiss cooperative.

In 2001 KPMG Hong Kong was engaged by the Hong Kong Catering Industry Association to report on how a proposed smoking ban in Hong Kong restaurants would affect business. The report predicted multi billion dollar losses and loss of jobs in the Hong Kong catering industry. This has been proven to be completely wrong (by a massive margin of +40%) by HK Government Census and Statistics department data. However an exemption period was granted to the bars, mahjong parlours, nightclubs and karaoke establishments until July 01 2009.

Public money paid for this KPMG Hong Kong report.

The Government must investigate why the consultants got it so wrong and whether tobacco money was paid through the HK Catering Industry Association to fund this report.
Whereas when the KPMG client was the City of Ottawa in the same timeframe it found completely differently:
KPMG LLP was engaged by the City of Ottawa to provide assistance in the ongoing
monitoring of the economic and health impacts of the smoke free by laws covering public places and places of work that went into effect August 01, 2001
December 2001 KPMG report
The first KPMG report, The Economic Impact Analysis of the No-Smoking Bylaw on the Hospitality Industry in Ottawa was released December 2001. It discussed factors taken into considering when trying to gauge the exact economic impact of the smoking bylaws, which included September 11/01, tourism trends, and the general economic climate. The first report found no evidence that the bylaws had a negative economic impact on the hospitality sector. Some other findings were:

Employment in the Ottawa accommodation and food service sector rose 6.5 percent from June to October (from 22,800 to 24,300) despite the decline in total employment from 585,500 to 566,900 (a decline of 18,600 or 3.1 percent).

Employment Insurance claims in the accommodation and food service industries declined by 5 percent in August 2001 compared to August 2000 and by 9 percent in October over a year previous. Claims increased by 1 percent in September 2001 relative to a year earlier.
Bankruptcy and insolvency statistics for restaurants were lower for the period August to November than they had been the last 2 years (7 versus 12 last year and 8 in 1999). Two tavern, bar or nightclub operations underwent insolvency procedures this year, versus 1 last year and 2 in 1999.

The number of bars and taverns by the end of 2000 was 122. By June 2001, the number had climbed to 130, a 6.5% increase over six months

November 2002 KPMG report
As a follow-up to its December 2001 report, KPMG was asked by the City of Ottawa to conduct a second study, focused exclusively on Ottawa bars and pubs, in order to determine if they were adversely affected as a sub-sector. The decision to proceed with the second study followed allegations by PUBCO (an association of pubs and bars opposed to Ottawa ‘s smoking bylaws) that the impact on bars and pubs is much greater than the impact on restaurants, and would be hidden in sector-wide examinations of economic impacts.

After consultation and developing the study methodology with PUBCO and the Ottawa chapter of the Ontario Restaurant, Hotel and Motel Association (ORHMA), KPMG attempted to carry out this survey in March-May 2002, but was unable to obtain responses from a sufficient number of identified bars and pubs in order to produce statistically valid results. ( Click here to access the letter from KPMG to Ottawa ‘s Medical Officer of Health which describes the methodology and lack of cooperation by bar and pubs). The high refusal rate raised the question of why bars and pubs allegedly losing money as a result of Ottawa ‘s bylaws would not wish to provide economic data proving the allegation, and called into question PUBCO’s assertions of economic loss in this sector.

Despite the low number of survey responses, the second KPMG report, Economic Impact Analysis of the Smoke-Free Bylaws on the Hospitality Industry in Ottawa, (“This suggests the smoke free by law has had little or no negative impact on the industry as a whole”)
was made public on November 2002. Because only 51 bars and pubs out of the 150 sample submitted sales tax receipts and some bars with increased sales did not respond to the survey, no conclusion could be drawn regarding whether or not the smoking bylaws have had any economic impact on bars and pubs in Ottawa .

Instead, the second KPMG report discussed the many factors that have affected the Ottawa business climate over the year prior to the release of the November 2002 report. Factors such as the high-tech industry crash and corresponding layoffs, decreased tourism and business travel following September 11/01, increased consumption of liquor and decreased consumption of beer, and changing customer preferences are factors when taken together or separately, have had more impact on the hospitality industry than the smoking bylaws in isolation.

However, KPMG noted that overall, the hospitality sector in Ottawa continued to grow, with 90 establishments closing since the bylaws were implemented and 123 establishments opening, resulting in approximately 1,600 licensed establishments, and an increase in 33 new restaurants and bars opening over the last year. The growth in numbers of new establishments indicates a healthy hospitality sector, despite changes in consumer preferences and normal turnover fluctuations. Furthermore, Employment Insurance applications significantly decreased since May 2002.

KPMG finally concluded: “in the overall economic context, the food and beverage industry appears to be stronger than one would expect. This suggests the smoke-free bylaw has had little or no negative impact on the industry as a whole.”

As of March 2003, 181 new bars and restaurants have opened in Ottawa since August 2001. For a list of establishments, and the accompanying press release from the office of Ottawa City Councillor Dwight Eastman, contact OCAT.

In June 2003, the Ontario Tobacco Research Unit released a study that showed Smoking Ban Has No Impact on Food, Drink Sales: U of T Research

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