Battle over smoking in New Jersey casinos pits workers' health against profits

Legislation pending in New Jersey's statehouse would end the exemption Atlantic City casinos have long enjoyed from a statewide ban on indoor smoking in public places. About 2,500 casino workers have united to push for the ban. And the state's governor supports it, as well.

"If a bill came to my desk, I would sign it," Gov. Phil Murphy, a Democrat, said in December.

The casino industry is fighting the effort, saying it's worried about a ban's potential impact on jobs and profits.

The move could cost about 2,500 jobs, said a February study by Spectrum Gaming Group, commissioned by the Casino Association of New Jersey. A complete smoking ban could cause gaming revenue to tumble between 20% to 25%, according to an analysis John DeCree, gaming equities analyst for CBRE. Smokers account for 21% of Atlantic City gamblers and traditionally produce higher profits as smokers sit longer and spend more money, according to the Spectrum report.

"My roulette and blackjack and slot machine in smoking sections make 50% more money than my non smoking games," Joe Lupo, president of Hard Rock Atlantic City and president of the Casino Association of New Jersey, told CNBC. "That's a fact."

Lupo said many Hard Rock employees do not support a change to smoking restrictions because they worry about their livelihoods, and he insisted opponents of casino smoking are in the minority but are getting all the attention. Nearly 22,000 full-time and part-time workers are employed by the casinos in Atlantic City, according to the New Jersey Division of Gaming Enforcement.

"The dogs who bark the loudest are heard," he said.

Tammy Brady is speaking up, and she's hoping to get the attention of state legislators.

Brady, a dealer supervisor at Borgata, has worked in casinos for 37 years, since she was 18. She said she's desperate to work in a smoke-free environment.

"That's the worst part of my job. I would enjoy my job if it wasn't for the smoke," Brady said. Customers blow smoke directly in her face, she added. "It's horrible. It's just you have to sit there and just take it."

Brady is on medical leave, getting treatment for breast cancer. "I'm worried about going back to my job in a smoking environment," she told CNBC, tears streaming down her face.

There is no safe level of second hand-smoke, the Office of the U.S. Surgeon General has concluded. The Centers for Disease Control and Prevention has cited a study that says 50% of the casinos sampled had air pollution levels known to cause cardiovascular disease after only two hours of exposure. The National Institute of Occupational Safety and Health recommends a completely smoke-free environment. "Casino workers are at great risk to the health hazards caused by secondhand smoke, including heart disease, lung cancer, and acute and chronic respiratory illnesses," the federal agency said.

"When you're on a smoking game. It's torture," said Pete Naccarelli, a longtime dealer at Borgata, which is owned by MGM Resorts.

The company declined to comment for this story.

This isn't the first challenge to New Jersey's casino exemption for indoor smoking. In 2008, Atlantic City banned it and gaming revenue dropped 20% in just the first week. Citing economic challenges and a worsening economy, the city reversed the smoking ban and Atlantic City casinos were once again permitted to offer smoking on 25% of the casino floor.

Unite Here, the union representing casino employees who aren't dealers, opposes any effort to reinstitute a ban, worried about declining revenue and job cuts.

But the United Auto Workers Union, which represents dealers at three Atlantic City casinos, and the United Food and Commercial Workers, have since joined the effort to eliminate the casino smoking exemption.

"Our members include dealers who sit inches away from patrons who blow smoke directly into their face for eight hours a day, every single day," said UAW. "It is simply unacceptable knowing what we know about the dangers of secondhand smoke."

Last month, hundreds of casino workers held a rally in Atlantic City to push for the legislation to completely ban smoking, which is pending in the Assembly and Senate. The legislation has 43 co-sponsors, including legislators from Atlantic City. The rally also marked the 16th anniversary of a New Jersey law banning smoking indoors. The Smoke Free Air Act took effect on April 15, 2006, and prohibited smoking in almost every workplace and place open to the public – except casinos.

While casinos worry their smoking patrons would stay away, some Atlantic City visitors they'd like to enjoy clean air.

Princess Foster, a tourist from Pennsylvania, said she would welcome a smoking ban in casinos. "The first thing that confronts me is cigarette smoke. We try to scurry through because we don't want to inhale," she said.

Smoking is only permitted on 10% of the gaming floor at Hard Rock Atlantic City, according to Lupo, with much more non-gaming space where smoking is prohibited. "Through Covid, we've done air filtration studies that validate that our air filtration is much much better than any of the other buildings throughout the states."

The American Society of Heating Refrigerating and Air-Conditioning Engineers recently sent a letter to the Casino Association of New Jersey, insisting there are no current ventilation systems that are effective against secondhand smoke and that they can only reduce odor and discomfort.

Hard Rock International Chairman Jim Allen met last week with Murphy, the governor, about the pending legislation. Allen told CNBC the industry needs to work with regulators to find middle ground, but he is worried about a complete about-face in New Jersey.

"The majority of our employees do not want to see a complete smoking ban because, unfortunately, they know it's going to have a direct impact on the gratuities," he said.

Hard Rock owns and operates casinos in other states that prohibit smoking indoors, though Native American tribes set the rules in casinos on sovereign tribal land. But Allen says in Ohio, the heated outdoor gaming patio has been very popular with patrons who smoke.

Where nearby casinos permit smoking, they might gain a competitive edge, according to DeCree of CBRE. "In markets like Chicagoland, New Orleans, and at Mountaineer in West Virginia, where customers had conveniently-located smoking alternatives, gaming revenue declined 20%+ in the first year after smoking was banned," he wrote.

But DeCree's analysis and Spectrum Gaming's report are based on pre-pandemic results. Andrew Klebanow, a senior partner at C3 Gaming, said Covid caused a major shift in attitudes regarding smoking.

"Basically what happened was smoking prohibitions were implemented at no economic cost. Consumers didn't react negatively, they kept coming in because they enjoy gambling," he said. "Not what we expected to see, based on all the historical data we had prior to the pandemic."

He predicts casinos that don't go smoke-free are putting themselves at a competitive disadvantage. His assessment is based on results in Pennsylvania, where Mount Airy Casino Resort stayed smoke free and saw revenues rise slightly – while its competitor Mohegan Sun Pocono which allows smoking saw revenues slightly decline.

The Parx Casino in Bensalem, Pennsylvania, which is two hours from Atlantic City, opted to remain smoke free as well, even when the state lifted restrictions. Spokesman Marc Oppenheimer said there's been no noticeable impact to revenue and that Parx continues to gain market share. Surveys show their guests prefer a smoke-free environment, he added.

Casinos in surrounding states like New York, Connecticut, Delaware and Maryland do not allow indoor smoking.

But, Hard Rock's Lupo insists, Atlantic City's economy is in a precarious recovery from Covid closures in 2020. "For us to have layoffs at a time at this time is dangerous and negatively impactful to the casino."

Nicole Vitola, a table games dealer at Borgata, said she doesn't buy the threat about jobs.

"They're adding virtual dealers; they're not worried about the job losses there," she said. "When they went to online gaming, they weren't worried about the job losses there. But when it comes for us saving our lives, they're worried about the job loss. It doesn't make sense."