Casinos in Germany have always faced difficult times, thanks to punishing tax rates that can reach 92 percent of gross gaming revenue. Now, thanks to a smoking ban that has been gradually introduced state by state since January, revenues are down sharply and jobs are under threat.

The biggest problem for casinos is with their slot players, who have a ready alternative in Germany’s huge slot arcade industry. There are around 200,000 machines operating in arcades, where smoking is still allowed. These machines, which mimic regular casino slots in almost every way, are limited by law to payouts averaging no more than €500 per hour. In 2006 they grossed €2.75 billion, compared to about €930 million for casinos.

Another advantage for the arcades is that they require no identification check, whereas casinos—and since January, even the separate slot rooms attached to casinos, where entry used to be unchecked—mandate the presentation of ID and a small entrance fee.

Matthias Hein, a spokesman for the German Casino Federation, DeSIA, believes that up to five casinos might have to shut their doors in the next few years.

“Four of five casino customers smoke,” said Hein in an article in the German magazine Focus.

“Smoking and gambling are inseparable.”

In the first quarter of 2008 there was a 17.7 percent drop in the number of casino visits nationwide.

The decline in visits is hitting casinos in the state of Lower Saxony particularly hard. According to reports, the 10 casino operations belonging to the Spielbanken Niedersachsen group there are experiencing a decline in revenues averaging between 25 percent and 30 percent since January.