Hotels See Significant Revenue Boost Following Marijuana Legalization, Study Finds
A recent study published in the journal Production Operations and Management (POMS) has found that hotels in states where adult-use marijuana has been legalized have experienced a significant increase in revenue. According to the study, hotel revenue increased by 25.2% (or $63,671 monthly) following the legalization of recreational marijuana dispensaries.
The study, which analyzed data from Colorado, found that hotel room night bookings increased by 7.9% and daily room rates rose by 16.0%. The researchers also discovered that hotels located near retail dispensaries, those that have been operating for shorter periods, and those that belong to a higher class tend to benefit more from the legalization.
The study’s findings suggest that the rapid expansion of the marijuana industry presents both opportunities and challenges for the hotel industry. On the one hand, recreational marijuana dispensaries could attract tourists to areas they may not have otherwise visited. On the other hand, the lingering social stigma surrounding marijuana could negatively impact businesses, including hotels, located near these dispensaries.
Despite these concerns, the study found that hotels in Colorado performed better following the policy change. Comparing hotels in Colorado to those in New Mexico, where cannabis was illegal during the study period, the team’s analysis found that hotels in Colorado experienced an average monthly revenue increase of $63,671.
The researchers 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 suggests that the positive and growing treatment effects on hotel revenue highlight the potential long-term economic advantages of recreational marijuana.
For policymakers, the study’s 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’s findings are consistent with previous research, which has shown that states that have legalized marijuana have seen increases in tourism and hotel revenue. For example, a 2020 study found that Colorado hotel room rentals increased significantly after the state began legal marijuana sales, and Washington State also saw increases in tourism after legalization.
The study’s authors suggest that policymakers should consider tax incentives or support programs to help lower-class and independent hotels capitalize on marijuana tourism opportunities. They also recommend that city planners strategically place dispensaries in areas that will benefit the hospitality industry.
