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The Brewing Storm

Hospitality industry professional examines the impacts of liquor laws on businesses

Long-time hospitality professional David Branigan, says a storm is brewing in the industry as it grapples with the new drunk driving laws (BAC down to .05, Immediate Roadside Prohibitions), a global recession and the HST.

What we are witnessing - the complete decoupling of alcohol and automobiles -while needed, is impacting restaurants and pubs around the province, he says.

Added to that is the impact of HST and a travelling public that books at the last minute, stays close to home and spends less. As the hospitality business struggles to keep afloat and relevant in these challenging timse Branigan investigates these issues.

 

The B.C. Government is the first to admit the implementation of two critical pieces of legislation were bungled. The first was the sneak-attack HST, which came on the heels of an election campaign where it said it wasn't being contemplated in the BC Liberal platform. The second was the new impaired driving laws - commonly known as BAC .05 - which in one stroke have taken over a billion dollars in sales across the province, creating what the Alliance of B.C. Beverage Alcohol Licenses (ABLE BC) calls "de facto prohibition."

The impaired law came in with no industry consultation and a lack of foresight of how it would play out on Main Street. It has brought pubs and restaurants to their knees.

It's a hot-button issue. No one wants impaired drivers on the road. It seems that you can't go a week without another headline about a horrific death on the roads due to a drunk driver.

Discussing how the new impaired driving laws, which are saving lives, are impacting business is unpalatable to many.

 

Middelaer's Law

The final catalyst to change the impaired laws came three years ago as B.C. took a collective gasp of horror as three-year-old Alexa Middelaer was cut down by a drunk driver. She was feeding some horses on the side of the road with her aunt when they were struck by a vehicle.

While tougher drunk driving laws had long been discussed, that event galvanized lawmakers and the result was Middelaer's Law.

The driver Carol Berner later confessed to undercover police she'd had three glasses of wine. She blew .04 and .06 milligrams/per cent blood alcohol content hours later at the police station.

At the time, government trumpeted the laws, the most aggressive in the nation, as a means of affecting a behavioural change across society. Then Solicitor General Mike DeJong was aiming to reduce the number of drunk driving fatalities by a third in the next three years.

"We need penalties that are clear, swift and severe," Mr. DeJong said, flanked by a dozen uniformed police officers, top officials from MADD and Alexa's parents.

They are exceeding that worthy goal according to current Solicitor General Shirley Bond - the fourth solicitor general to work this file.

"I can tell you that between October 2010 and February 2011, there were 22 alcohol-related driving fatalities compared with an average of 45 fatalities during the same period over the past five years, representing a 51 per cent decrease," said Bond.

The minister also opined that: "Considering the current economic climate, it is very difficult to draw specific conclusions about the impact that the HST or impaired driving law has had on the food and beverage industry."

Her media relations team went on to confirm that, "between Sept. 20, 2010 and March 31, 2011, police issued 3,549 immediate roadside prohibitions (IRPs) to drivers who blew in the warn range and 6,813 immediate roadside prohibitions to drivers who blew in the fail range."

The warn range is between 0.05 and 0.08 per cent BAC (although it's really 0.06 because of the natural margin of error of testing devices). The impaired range is over 0.08 per cent.

 

Hospitality Fear Factor

The Whistler hospitality industry defines the resort experience and directly employs 36 per cent of the tiny town's employees when you add in retail. There are close to 100 licensed establishments in Whistler, which has a permanent population of close to 10,000. That population jumps to averages of 25,000 daily when tourists, seasonal workers, high season and low season are factored in.

Provincial government statistics show the hospitality industry as averaging a 4.4 per cent margin of profit. Independent operators fail at a faster rate than any other business sector. Banks laugh when restaurateurs ask for a business loan.

The corporate upscale casual crowd, including Milestones, White Spot and Cactus Club, with their cost control spreadsheets, real time budgets and digitized performance, clock between 10 and 13 per cent return on average and fail about as often as Viagra. Look north of that margin again for the lions like Earl's, the Longhorn, Buffalo Bill's or the Roxy, but even those elite outfits are being caught in the maelstrom.

Talk to the industry associations these days and they'll say that all we're missing is the locusts.

It's a conspiratorial aggregation of punishing circumstances, according to Ian Tostenson, president of the B.C. Food and Restaurant Association.

"Recession, HST, draconian drinking and driving laws, rising fuel and food prices, rising minimum wage and the sky-high Canadian dollar - can it get any worse?" asks Tostenson.

There is far more at play than just the drinking and driving. The pedestrian village's alliance of beds and bars actually shelters Whistler from the worst of the storm.

If the hotels surrounding the pedestrian village are the tourist antidote to drinking and driving, then the reverse is true of pay parking, which is pure Kryptonite to locals judging by the outrage in recent media headlines.

When you total up the additional expense of the HST, the cost of pay parking and the declining fiscal fortunes of the tip-based service sector, the argument for partying on Whistler's patios is increasingly a losing one. The destination luxury market got walloped in the great recession and that big money tip-flow from those well-manicured hands has been cut back drastically.

Layer in the fear that a second drink can cost you your vehicle and reputation and you have a recipe for permanent behavioural change that, left unchecked, will see a return to high-season business with shoulder season closures if locals decide to simply stop going out.

The facts are simple: a 4.4 per cent margin cannot withstand an industry-wide drop ranging between 10 per cent in restaurants and 20 per cent in pubs. Even the big fish are getting close to the bone.

 

Government response

Sea to Sky MLA Joan McIntyre is aware of the debate on the issues facing hospitality.

"Several people have approached me on the BAC .05 (Blood Alcohol Content) issue, both individuals and industry associations," she admitted.

"I understand that they are hurting and that was not our intention. Let there be no doubt that the message has reached Victoria.

"It is such a difficult issue when you are talking about death and tragedy. I don't know how you balance the two."

Solicitor General Rich Coleman took over the Middelaer Law file from Mike DeJong in October when DeJong resigned to run for the Liberal leadership. Up to that point there was a real disconnect between the expressed intent of government and the policing interpretation.

The Vancouver Sun reported in November that Coleman relaxed his position, suggesting people could have a drink or two with dinner and drive.

He also pulled the police Approved Screening Devices (Breath-Alyzers), which he ordered recalibrated to .06 per cent after losing a legal challenge on the veracity of the Blood Alcohol Readers at .05, when the presumption of innocence had been lost.

The reduction of enforcement that followed those public statements pulled hospitality out of its death dive and may ironically have slowed the behaviour change that remains the ultimate goal.

When asked to explain, Joan McIntyre answered: "The government under Minister Coleman has indeed been alive to the pain this has caused the hospitality sector. While a degree of this may have been unavoidable, as part of changing behaviour, we knew there would be a period of adjustment when pubs and restaurants would be affected. But the expectation is that once people get used to the new reality that the business will come back.

"We didn't anticipate the degree to which the police took this legislation to heart. They enforced to the letter of the law and the unintended consequence was that people became afraid to have a drink or perhaps two with a dinner and that was never our intention.

"I can tell you however that government has been listening and that we are sorry that the implementation has caused so much pain."

Sales remain suppressed over the seven months since the legislation was enacted.

When the smoking ban legislation hit there was some truth to the "market will get over it" argument over the long run, but 5 to 10 per cent never came back, according to industry statistics.

Said McIntyre: "You must understand that these laws were pre-existing, the warn range of .05 to .08 already could result in a 24-hour roadside suspension. We certainly didn't foresee that people would react the way that they did when the basis of the criminal law hadn't changed. Only the penalties were strengthened to get the message across."

But the strengthening of those penalties and the weakening of the rights of drivers to respond legally is part of what is resulting in a far more drastic change than originally anticipated and that has some civil rights groups asking questions.

David Eby, former executive director of the B.C. Civil Liberties Association - who just missed upsetting Premier Christy Clark in a recent by-election - questions whether the new strategy will survive a court challenge under the Charter of Rights.

"You need to give people a chance to challenge the charges to make sure there's not an abuse of the process by police, for example, to make sure the charge is firmly grounded. That's why we have trials," he said.

"Without a trial, drivers slapped with the fines, suspensions and vehicle impoundments would have little opportunity to plead their case."

This is where we get into positions as entrenched as American politics. Middelaer's Law was drafted by former West Vancouver Police Chief Kash Heed, from a policing vantage point with legitimate concerns about the cottage industry of impaired-defense lawyers who were eating up too much court and police time. The restriction of challenge under Middelaer's Law is a big part of the fear factor that is drying up drink sales and dehydrating profit.

Karen Roland bought Hoz's Pub in 2008 and was doing quite well with it until the recession, Olympics, HST and BAC .05 all came in fairly quick succession. She has some difficulties with the current flip of the "rights" pendulum over to the policing side.

"The problem most people have with this besides thinking .05 is too low is that the police are judge, jury and prosecutor now," she said.

"Citizen rights have been seriously eroded. That is a big part of the fear reaction to the new laws."

It is not just Middelaer's Law that has made her question her businesses future, it's everything.

"There are so many factors at play," said Roland.

"The Olympics were so big but the rest of that season had big holes in it with Olympic aversion and afterwards so many budgets and markets were tapped out. The world came, just all at once.

"The Olympic hangover was huge. The HST hit in July. Now with the Canadian dollar so strong not only is it keeping U.S. visitors from coming here, but also Whistlerites and regional traffic from the Lower Mainland are heading the wrong direction - across the border to get the full bang from our strong buck. Even I do it.

"But on the HST at least we can vote. Diamond Doug (Ryan) was involved in getting the original anti-HST petitions signed right here in the pub and I will do what I can so that people vote to kill this tax. That would be a start down the road to recovery."

Clearly there are still bright spots. This year's World Ski and Snowboard Festival jump-started the cash registers with the big-event vitality that takes on an even more important role in trying times.

The Vancouver Canucks, led until injury by Ryan Kesler, packed rooms from Cranbrook to Prince Rupert, including Roland's Pub in Creekside, on their inspiring Stanley Cup run. But when that balloon burst into riotous flames the spring sales spike that may have saved 500 businesses, inverted. Take away the big days of the coldest spring in 55 years and the future fades into a chilling uncertainty.

 

 

The boys in blue

Talk to the Whistler RCMP and the opposite and equally entrenched and heartfelt position is taken on BAC .05.

Both Staff Sergeant Steve LeClair and Sergeant Shawn LeMay take the time to consult with the hospitality industry regularly. But this law is what they are sworn to enforce and both are certain that this change in societal behaviour is the right thing to do, regardless of the commercial consequence.

Staff Sergeant LeClair of the Whistler RCMP feels that the law is improving public safety.

"The new law is saving lives, and from our perspective it is pretty cut and dried," he said.

"When people drink more than is allowed they have to find a new way home."

Sergeant LeMay stated that past perceptions about what amount of alcohol in the system is acceptable before driving doesn't change the fact that impairment begins immediately and every additional drink slows your reaction time, impairs your peripheral vision and increases the chance of an accident.

"I have talked to professional race drivers who feel safer on the track, at the incredible speeds that they drive, than they do on our public highways," said LeMay.

"On the alcohol issue there are so many factors involved from gender, weight, whether you have eaten, duration of consumption. So the safest approach is simply don't drink and drive.

"In this village we have a wonderful opportunity not to drive if we want to enjoy some drinks - extensive transit, ample taxicabs, a beautiful trail connecting the valley. People need to take advantage of that."

 

Last word

Marco Fanzone knows about the pain of fighting to keep his business going as it faces these challenges.

While the conditions are as cold as the spring storms that have washed over Whistler recently, most hospitality operators on the Village Stroll are thankful they are not as hard hit by the brewing storm as, say, the Shady Tree, a previously popular operation in the north end of Squamish - driving distance for the majority of Squamolians.

Its experience defines how this harsh hospitality climate has pushed even very strong operators to the brink.

"The biggest issue by far is the fear people have of BAC .05," said Fanzone.

"It's a big unknown. They don't have a clear understanding of what they can do, what that is, and so they err on the side of caution when the legislation itself errs on the side of caution (from the other side) and the result is brutal.

"People just don't want the hassle, the downtime of being pulled over, the embarrassment in a small community, and then factor in the chance your life could be turned upside down, your car impounded and your license pulled, the fines over what, .05, from as little as two beers for a smallish woman.

"Our sales went down about 39 per cent in October. It was like the rug got pulled out from under our feet. As a small business we had to react very fast, we cut our man-hours almost in half. We laid off eight full-time employees. That was the dramatic effect that it had right away."

Fanzone said about 10 per cent has come back and the business has changed as well. More food is being served but there is a lower profit margin on that so the business is still hurting.

"There are places closing now," said Fanzone.

"There are so many restaurants up for sale because you can't make it in this business under these conditions.

"The penalties for .05 are so severe. I agree, get drunks off the road, but I don't believe you are drunk at .05. What is dying with the new laws is not on the highway, it is my business."

Ian Tostenson from the BCRFA is a pragmatist on these matters who firmly believes that politicizing the issues affecting hospitality is integral to affecting change.

"The provincial restaurant business is a $10 billion dollar industry and the immediate impact of this law was to strike $1 billion dollars off of the greater industry - 10 per cent, and that is just restaurants, many of whom do not hold liquor licenses," he said.

"Our statistics suggest up to a 30 per cent hit on beverage alcohol sales in B.C. restaurants. For a lot of operators that is the difference between profit and loss, so then it becomes a matter of time.

"We took an eight to nine per cent hit on the HST, which mirrored the GST introduction in 1991. Our position here is clearly 'don't tax food in restaurants if not taxing food as a whole.' This is discretionary expenditure and the consumer can't ignore the seven per cent gap between grocery and restaurant which then incentifies home dining. (And) in places like Whistler you may have to eat out as a basic necessity."

The industry expert echoes the methodology question raised by other operators on the summer HST referendum.

"This HST mail-in vote is a concern," said Tostenson.

"It is a softball method with government vested in a positive outcome. Either way we need certainty but most votes play out where the day we vote is the same day we get the result. I think the government is counting on people not participating in a mail-in vote but they should vote because this is a bad tax, especially for restaurant staff and ownership."

But he is bullish on industry efforts on BAC .05.

"This law was drawn from a policing perspective with no industry consultation," said Tostenson.

"After the disastrous implementation the government did scramble to control the damage and we continue to press our case in direct conjunction with ABLE BC.

"New Solicitor General Shirley Bond and Tourism Minister Pat Bell are both good ministers who get it. They understand the impact of BAC .05 and we are hopeful they will lighten up the penalties or perhaps move to a straight up ticket mechanism in the warn range.

"But nothing may happen until after the fall provincial election because of the optics and the politics. (Premier) Christy Clark does not want to be the one who rolls back the tough drinking and driving law early in her tenure.

"What politicians need is to hear from the 173,000 restaurant workers, and half that again on the pub side, who are faced with a significant drop in shifts and tips which hurt more than the increase in pay the government just gave minimum wage servers - another hit on owners.

"The government did give industry a concession on the smaller minimum wage increase for liquor servers. The increased wage hurt, but it's probably the right thing to do."

 

 



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