They must be mad.
The real business issue here is displacement. The SU at Leeds Uni had a one month trial last year it cost them over £20,000 bottom line compared with the same month the previous year purely because people can (and do) go elsewhere to smoke. That was why there was a real push for a level playing field across different outlets. It will certainly cost the council bookings until the policy is everywhere and it may cost you some punters mate. But surely you will have gained a discount on the hire of theroom to compensate
Good luck in the meantime anyways