A study conducted by Florian Zach, an associate professor in the Howard Feiertag Department of Hospitality and Tourism Management at the Pamplin College of Business, has revealed a striking correlation between marijuana legalisation and increased hotel revenue in Colorado. According to the research, average monthly hotel revenue rose by 25 per cent between 2014—the year recreational marijuana was legalised—and 2019, the final year in the study’s data set. This substantial increase in income was primarily attributed to a surge in room bookings and higher daily room rates, both of which were influenced by the influx of marijuana tourism during that period.
Zach, who is also affiliated with the Global Change Center, noted that the revenue growth was not uniform across all properties. Instead, the most significant gains were observed in hotels with specific attributes. These included newer constructions, more upscale classifications, corporate management structures, and advantageous locations such as urban centres, high-demand tourist areas, and especially sites near dispensaries. While there was no indication that hotels or dispensaries deliberately coordinated their locations, the study emphasised that the distance between the two played a meaningful role in revenue outcomes.
Published in Production and Operations Management, the research drew from a comprehensive dataset of nearly 1,300 hotels across Colorado and New Mexico between 2010 and 2019. New Mexico served as a control group, as it had not legalised marijuana during this timeframe. The study also incorporated qualitative data from interviews with hotel managers in three Colorado cities. One particularly notable trend was the response of hotels to increased revenue: many began upgrading their properties from three-star to four-star status, investing in improved amenities and enhanced guest experiences that could justify a higher price point.
The data further indicated that hotels in resort destinations, bustling urban environments, and near airports reaped the most benefit from the rise in marijuana tourism, mainly due to the higher population density and visitor traffic in these areas. Zach suggested that high-end, corporately managed hotels could maximise their advantage by leveraging their brand strength and marketing resources to attract cannabis-friendly guests. Some hoteliers were already taking active steps in this direction—for example, one property included a list of local dispensaries in its in-room guest guide. Conversely, older hotels or those located far from urban centres might need to consider renovation or strategic rebranding to stay competitive in this evolving market.
Yet despite the promising financial implications, not all hotel operators expressed enthusiasm about marijuana legalisation. During interviews, some managers voiced reservations, especially those catering to clientele less likely to appreciate a cannabis-oriented atmosphere, such as airline crews or families. Zach cautioned against uncritical celebration of the revenue surge, stating, “It would be naive to think marijuana is the greatest thing available,” echoing the concerns raised by several general managers. These perspectives highlight the nuanced realities that hotel operators face as they balance revenue opportunities with the diverse needs and expectations of various guest segments.
As marijuana legalisation continues to spread across the United States, the findings from this study offer valuable insights for a range of stakeholders. For policymakers and city planners, the results may inform zoning decisions—strategically situating dispensaries near tourist-heavy areas could amplify economic gains. Investors and developers might also find the data helpful when evaluating the potential returns of upgrading hotels in high-demand locations. Ultimately, the research suggests new avenues for collaboration between the hospitality and cannabis industries, ranging from co-branded experiences to customised guest services. In sum, the legalisation of recreational marijuana is not just a cultural shift—it is actively transforming how hotels operate, compete, and engage with guests in a rapidly changing landscape.
More information: Florian Zach et al, Impact of Recreational Marijuana Legalization on Hotel Performance and Operations: A Bayesian Causal Inference Approach, Production and Operations Management. DOI: 10.1177/10591478251345522
Journal information: Production and Operations Management Provided by Virginia Tech