Study: Hotels Benefit From Cannabis Legalization

Cannabis isn’t just for stoners: The legalization of recreational marijuana may mean a boon for the hospitality industry.

Researcher John O’Neill found that, after legalizing pot, Denver, Colo., saw roughly $130 million new hotel revenues.

A Schedule 1 drug at the U.S. federal level, cannabis is prohibited even in medical use.

But no such protections exist for recreation: The production, sale, and consumption of pot is allowed in 11 states, two territories, and the District of Columbia; it has been decriminalized in another 15 states and one territory.

And with more states mulling approval, O’Neill believes his findings “could be useful to government officials and business owners” considering changing the legislation.

O’Neill, a professor of hospitality management at Penn State, chose to focus his work on Denver, where recreational marijuana use was legalized in 2014. No other area provides a longer study period, he said, praising the capital city’s substantial, possibly generalizable, sample from which to draw results.

A Penn State researcher found that recreational marijuana legalization positively affected hotel revenues in Denver (via Alex Person/Unsplash)

Using hotel data from STR (formerly Smith Travel Research) combined with geo-coordinates and opening dates of recreational marijuana dispensaries in the area, O’Neill examined the drug’s effects on hotel performance.

“I found that recreational marijuana legalization positively affected hotel revenues in Denver, totaling approximately $130 million in new hotel revenues,” he said.

Unsurprisingly, visitation to Denver increased in 2014, boasting 9 percent growth in occupied hotel rooms—higher than any other year O’Neill studied.

The sudden influx of marijuana tourism meant area hotels could charge higher prices for rooms, resulting in a positive economic impact. Notably, pay-offs were more pronounced in cheaper accommodations than upmarket lodging.

Those benefits, however, were short-lived: After about a year, revenue rates returned to normal.

“[Denver’s] growth after legalizing recreational marijuana was above and beyond what would have been otherwise expected,” O’Neill explained.

“Its growth was greater than comparable cities, such as Albuquerque, Austin, and Salt Lake City [and] was greater than national averages,” he continued. “I believe the difference in hotel revenues was due to the legalization of recreational marijuana in Denver.”

O’Neill’s findings appeared in the latest issue of the Journal of Real Estate Literature.

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