"We’re expecting a revenue impact of 6 to 10 per cent, with some (venues) doing better and others doing worse," said Brian Kearney, chief executive of the Australian Hotels Association Victoria.
Eldred Hospitality director Tony Eldred, who sells hospitality businesses, said hotels that relied on gaming revenue would be hardest hit. "There is a strong link between smokers and those that gamble on poker machines," he said.
Under the new rules to be imposed on July 1, smoking will be allowed only in outdoor premises or licensed kerbside areas, provided food is not served.
Mr Kearney said about 20 per cent of venues in the state would have "invested heavily" in creating special smoking zones such as alcoves, balconies and rooftop gardens in anticipation of the July 1 ban.
"You don’t do major extensions like this on substantial properties without incurring a bit of cost," Mr Kearney said.
"But some operators have been encountering difficulties with councils, who want to restrict access to outdoor facilities after a certain time of night."
Peter Burnett, owner of the Lord of the Isles Tavern in Geelong, and national president of the AHA, said he was planning to spend $1.5 million on two outdoor smoking areas for his gaming venue and bistro, but council rules might require them to close at midnight.
"We want to give patrons the option of a place to smoke that doesn’t include forcing them to stand in the street," Mr Burnett said.
Prominent hotelier Peter Rush argued the controversy was all smoke and mirrors. "We went non-smoking at our QPO hotel in Kew four years ago," he said. "We took a dip in trade for about two weeks, but this was followed by an increase in turnover, which has continued."
Acting director of Quit Victoria Suzie Stillman agrees. "More smokers approve of the bans than disapprove of them, which is truly indicative of the widespread community support for smoke-free pubs and clubs."