THE CANNABIS CHAMBER OF CANNABIS

HOSPITALITY: Events, Travel & Consumption Venues

With US cannabis sales reaching all-time monthly highs [1] and the industry preparing to launch 5,000+ dispensaries in the next 12-24 months, the race to the BOGO bottom continues, simply on a grander scale. Meanwhile in Nevada, after a few years of legislative and regulatory processes, an innovative piece of cannabis hospitality legislation, AB341 [2], was signed into law on June 4, 2021. Coffee shops and tasting rooms aren’t an original idea, however lawmakers, with the cooperation of local community, business, and educational leaders would present entrepreneurs the opportunity to open cannabis consumption lounges in Nevada. The first license issued by the Cannabis Compliance Board went to Thrive Cannabis Marketplace and their Smoke & Mirrors lounge with doors opening in Las Vegas on February 23, 2024 [3]. Their success presents an opportunity to accelerate industry growth through cannabis hospitality and tourism with the implementation of on-premise cannabis venues.

As of 2023, cannabis travel and tourism has already developed into a $57B industry with the Cannabis Travel Association International projecting $444B by 2030 [4]. The opportunity for on-premise venues to amplify these numbers begins with state regulations. We’ve seen markets like California limit food and beverage sales within cannabis lounges, resulting in creative business structuring to include the obvious advantage of food service in a venue selling cannabis. Nevada’s AB341 gave the license holders freedom to incorporate all aspects of hospitality, food & beverage, ticketed entertainment, retail, and guest services to their cannabis business model. Whether you want to open a comedy club, indie theater, hair salon, or driving range, if you can add cannabis products to it, you’re better equipped to succeed than simply providing a smoking room. By combining high-quality services, you create opportunities for premium pricing on cannabis products and additional revenue streams through activities, exclusive events, personalized experiences, and upscale amenities. This is no longer traditional retail cannabis. Sell the experience plus the service and the cannabis hospitality business model becomes a complementary asset to the cannabis industry at large. 

While comparing cannabis to alcohol raises a fair share of concerns, certain business elements make it the perfect correlation, especially around sales growth. On-premise alcohol sales refers to the sale of alcohol in establishments where it is intended to be consumed on-site, such as bars, restaurants, hotels, and wineries. Whereas off-premise sales include alcohol sold for consumption away from the establishment. According to CGA by NielsenIQ, the average consumer drinks half of their alcohol on-premise [5]. Additionally, on-premise visits can be important for driving brand awareness, trial, and spending for both at-home and out-of-home consumption. Today dispensaries sell their retail cannabis for off-premise use with a few exceptions in states that have legalized “tasting-room” style businesses. Expanding the market through on-premise hospitality venues that follow the Nevada regulatory model seems obvious. In 2022 retail sales of alcoholic beverages in the United States saw $147B in off-premise sales and $111B in on-premise sales, or 43% of the total market [6]. With cannabis retail sales currently projected at $49.7B by 2026 [7], the implementation of on-premise venues in legal jurisdictions could net an additional $22B if following a similar formula.

During the regulatory process of AB341, there was significant dialogue around indoor air quality and HVAC system requirements. While the importance of air quality for guests and staff alike continues to be high priority, trends in non-alcoholic beverages showcased an over-reliance on combustibles in cannabis lounges and a new opportunity to provide a more welcoming environment to our guests [8]. By focusing on a sophisticated cannabis-infused beverage program utilizing only high-quality ingredients, it was believed that half of lounge customers would partake in drinking cannabis versus smoking. After 6 months of operations we can report the assumption was correct with over 60% of revenues coming from infused drinks versus combustible flower options in lounges currently open in Las Vegas. 

There are also important lessons to be learned from the success of hemp-derived THC beverages across the US, with and specifically in markets like Minnesota [9]. The explosive expansion to new markets through national chains like Total Wine & More, as well as direct to consumer online sales further prove the budding trend is one that state marijuana retailers, product developers, and regulators should pay close attention to. Providing a greater selection of low-dose cannabis infused drinks ranging from 1mg to 5mg per serving will continue to attract new consumers outside the traditional cannabis demographic.

We can’t be satisfied with the continued success of cannabis beverages alone. Cannabis-infused dining offers a unique and sophisticated twist on traditional culinary experiences, blending the artistry of cooking with the nuanced effects of cannabis. Chefs skilled in cannabis cuisine are holding private events where a multi-course meal sells for hundreds of dollars competing with some of the best restaurant experiences in Las Vegas. But we have to take things slow. As regulators look for more assurances in the operations of these venues, the first step should be single-use cannabis-infused accoutrements. Kiva Brand collaborating with Fatburger with their cannabis-infused ketchup packets are a great example of  product innovation [10] and mainstream marketability. With proper regulatory support, we can pair a variety of single-serve sauces and dressings with  food menus and create unique dining experiences at on-premise cannabis venues.

History proves that as legal cannabis markets mature, the industry is challenged to find more revenue streams to compensate for declining sales growth [11]. In Nevada we enjoyed sales of $1B in Fiscal Year 2021 only to see annual sales drop to $965M in 2022 and $848M in 2023 with early estimates suggesting we’ll see that downward trend continue in 2024 [12]. In an effort to shift public perceptions around public cannabis consumption, on-premise cannabis venues can showcase the opulent and professional standards associated with Las Vegas hospitality and shift the narrative to a more mainstream, socially accepted activity. Combined with regulatory knowhow and an extensive understanding of cannabis products, these venues offer guests a guided journey satisfying both legacy consumers and newcomers alike. Should this strategy be adopted by multiple cannabis venues, the industry will attract a broader customer base, including individuals who might otherwise be hesitant to visit a cannabis dispensary. Rather than dispensaries focusing on a market where daily users represent 42% of that demographic [13], we will see that trend reverse by reaching mainstream audiences through on-premise cannabis venues that offer more than the airport smoking lounge.