Hotels See Significant Boost In Revenue Following Marijuana Legalization, New Study Shows

A new study exploring the impacts of adult-use marijuana legalization on
the hospitality industry finds that “hotel revenue increases by 25.2% (or
$63,671 monthly) due to dispensary legalization, with the effect continuing
to grow even six years after legalization.”

The research article, published in the journal Production Operations and
Management (POMS), draws its inferences from a review of data from
Colorado, which authors say saw “a 7.9% increase in room night bookings and
a 16.0% rise in daily room rates,” though impacts varied based on a number
of factors.

“These findings are relevant for professionals in marketing, operations
management, hospitality, tourism, and public policy,” the study says,
noting that the “rapid expansion of the marijuana business presents both
opportunities and challenges for the hotel industry.”

“On the one hand, recreational marijuana dispensaries could become
attractions that entice travelers to visit places they might not otherwise
explore. For instance, around 12% of US tourists have reported positive
experiences with marijuana-related travel… On the other hand, the lingering
social stigma surrounding marijuana could negatively affect businesses,
including hotels, located near these dispensaries. This concern is
underscored by a Colorado Office of Economic Development and International
Trade (OEDIT 2019) report, which found that about 10% of US leisure
travelers view Colorado as a less desirable destination because of
recreational marijuana.”

Despite the apparently polarized feelings around traveling to jurisdictions
where marijuana is legal, the study found that hotels seemed to perform
better following the policy change.

Comparing hotels in Colorado to hotels in New Mexico, where cannabis was
illegal during the study period, the team’s analysis found that “on
average, monthly hotel revenue increases by 25.2% upon the legalization of
recreational marijuana dispensaries, which is equivalent to a substantial
increase of $63,671 per hotel.”

“However, hotels do not benefit equally,” the report notes. “Hotels that
are closer to retail dispensaries, have been operating for shorter periods,
and belong to a higher class obtain more positive effects. The type of
location also plays a crucial role, with hotels in resort areas benefiting
the most from retail dispensary legalization, followed by those in urban,
airport, suburban, interstate, and small-town locations.”

What’s more, “chain hotels operated by corporate entities experience more
positive treatment effects than franchised chain hotels and independently
operated ones,” the paper adds.

Researchers—from the University of Central Florida, Virginia Tech and the
University of North Carolina at Chapel Hill—also concluded that “the
positive effect on hotel revenue strengthens over time, showing no signs of
slowing down six years after the statewide recreational marijuana
legalization.”

For hoteliers, the report says, “the positive and growing treatment effects
on hotel revenue highlight the potential long-term economic advantages of
recreational marijuana,” though it cautions that “legalization does not
guarantee financial gains.”

For policymakers, the study continues, the findings underscore the economic
benefits and “positive spillover effects on hotels when crafting
regulations, ensuring that zoning laws promote synergy between dispensaries
and hotels.”

“City planners could strategically place dispensaries in resort, urban, and
airport areas, where their presence provides the greatest benefits to
hospitality businesses,” the study suggests. “They might also consider tax
incentives or support programs to help lower-class and independent hotels
capitalize on marijuana tourism opportunities.”

A separate 2020 study also found that Colorado hotel room rentals increased
considerably after the state began legal marijuana sales. Washington State
also saw increases in tourism after legalization, that study found, though
the effect there was more modest.

By comparing hotel room rentals in Colorado and Washington to states that
did not change their legal status of marijuana from 2011 through 2015,
researchers found that legalization coincided with a significant influx of
tourists and a rise in hotel revenue. The impact was even more pronounced
after the start of retail sales.

Last year, meanwhile, the governor of Illinois noted that travelers from
nearby states were visiting specifically to buy legal cannabis.

“People from Indiana, people from Iowa, people from Wisconsin, Kentucky,
drive across the border and buy something in a dispensary in Illinois. Now,
they’re not supposed to drive back over the border to their home states, so
I assume they’re just staying in Illinois,” Gov. J.B. Pritzker (D) said at
the time.

Last September, however, a report by Colorado legislative analysts said
that part of the reason the state is seeing declining cannabis tax revenue
is due to “falling demand as other states across the country legalize
marijuana,” making sales from cannabis tourism “less pronounced.”

“Prices for marijuana fell as pandemic-induced demand waned, marijuana
tourism became less pronounced, and as the market matured,” that report
said. “Tax revenue from marijuana is falling across most states where
recreational marijuana is legal due to declining demand after the pandemic,
but states that legalized marijuana early—like Colorado, Washington, and
Oregon—are seeing the biggest declines in sales.”

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The post Hotels See Significant Boost In Revenue Following Marijuana
Legalization, New Study Shows appeared first on Marijuana Moment.