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.”
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