Studies in the USA have shown that banning smoking in restaurants has either a neutral or beneficial effect and may increase tourist business.   A recent review of studies examining the economic effects of smoke-free policies found that those studies claiming a negative economic impact were backed by the tobacco industry and that most were subjective and of poor quality. 
For further information detailing the economic advantages of smoke-free policies see the ASH briefing:
Long-term exposure to second-hand smoke causes lung cancer, heart disease, asthma and strokes. Not only do by-laws which restrict smoking in public places help non-smokers breathe easier, they have added benefits of reducing overall smoking behaviour, generating increased public awareness about tobacco issues and helping to change social norms related to smoking.
The fact that second-hand smoke - also known as passive smoke or environmental tobacco smoke (ETS) - is too damaging to ignore.
The harmful health effects of secondhand smoke are now well known, and yet exposure to the dangers is still common in many public places and workplaces. Exposure to second-hand smoke causes at least 1,000 deaths per year in Canada from lung cancer and heart disease alone. Second-hand smoke is the single largest source of indoor air pollution and contains a mixture of nearly 4000 chemicals - more than 50 of which are carcinogens (cancer-causing agents).
Many Canadian service industry employees are exposed to second-hand smoke in their workplaces. Chemical concentration of second-hand smoke is, on average, four to six times higher in bars and 1.6 to two times higher in restaurants than offices where smoking is allowed. Restaurant, bar and casino workers are therefore especially at risk from workplace exposure to second-hand smoke. It has been demonstrated that the long-term, regular exposure of food service workers...