Denver experienced a big spike in hotel revenue when the state of Colorado legalized adult-use marijuana.
When a state legalizes marijuana, it impacts people and industry in both subtle and surprising ways. It can discourage teenage cannabis use, and sometimes lead to small decreases in crime. On the flip side, marijuana legalization increases sexual activity among state residents.
According to Penn State researcher John O’Neill, the hotel industry also benefits from adult-use marijuana legalization. Data shows that Denver increased hotel revenue by $130 million following Colorado changing the legal status of the plant in 2014. Using hotel data from data and analytics company STR, in addition to geocoordinates and opening dates for recreational cannabis stores, O’Neill found how the hospitality industry benefited.
“We found that Denver hotels were able to charge and receive higher prices for hotel rooms following recreational marijuana legalization, and also found increased visitation to the Denver […] resulting in positive economic impact,” O’Neill said in a statement.
The biggest increase happened immediately following legalization in 2014, as occupied hotel rooms grew by 9% in Denver. Distance between hotels and marijuana shops didn’t factor significantly, according to the study. Instead the hotels that benefited the most were oriented toward tourists and were on the cheaper side. Commercial travel hotels and luxury choices didn’t experience as pronounced bumps in revenue.
“It could be that guests visit dispensaries only once or twice during any trip, and that proximity to other support amenities, such as restaurants, lounges and conventional retail establishments, as well as hotel attributes, such as brand and price, are more important considerations in their hotel selection,” O’Neill said.
This revenue spike only lasted about a year, however, as other states began legalizing marijuana in different capacities. But the growth seen in Denver was greater than comparable cities, such as Austin and Albuquerque, and was also higher than national averages.
O’Neill started the research after hoteliers asked what effect legalization could have on their establishments. But he also believes these “findings could be useful to government officials and business owners in states that are considering legalization.”