The legalization of marijuana in many states is becoming an increasingly perplexing challenge for one key part of the travel industry: hotels.
They’re confronted with figuring out how to let guests partake in it on-property, training and drug testing employees, and dealing with confusing and ever-changing laws. In short, hotels have much to figure out.
“This is an emerging trend that’s not going away,” said Michael Blank, principal of Woodmont Lodging. “In many ways, it’s akin to the casinos when they were trying to make their push nationally.”
Marijuana is now legal for medical use in 33 states. It is legal in 11 states for both medical and recreational use for adults over 21. Illinois became the 11th state to legalize recreational marijuana as of Jan. 1.
Yet under federal law, it’s still a drug listed on Schedule 1 of the Controlled Substances Act, which makes it a federal crime to own, sell, or possess it. Other drugs listed on Schedule 1 include heroin, LSD, peyote, and ecstasy.
Under President Barack Obama’s administration, then-Deputy Attorney General Jim Cole issued a directive to federal prosecutors in 2013 that effectively told them not to interfere with marijuana-friendly state laws. Former Attorney General Jeff Sessions under President Donald Trump attempted to reverse that decision before his ouster in November 2018.
Trump has given conflicting statements on what he plans to do about state marijuana laws. He said last August that he would let states decide whether or not to legalize cannabis. Then he said in December that he has the power to ignore Cole’s directive not to interfere with state marijuana laws.
“Although there has been some tendency for federal officials to look the other way when activities violate federal law but comply with relevant state law, this is not a very reliable protection,” said Jim Butler, hotel lawyer and chairman of the global hospitality group of Jeffer Mangels Butler & Mitchell LLP, which represents hotel owners and developers.
Running afoul of the federal law could have implications, Butler said. The hotel’s reputation could be tarnished if charged with breaking federal law, it could lose its liquor license, or it could lose its banking relationships because federally insured banks are likely not to want to work with businesses dealing with Schedule 1 substances, Butler said.
Yet, the confusion is not stopping guests from using marijuana when traveling around states where it’s legal. While most hotels have no-smoking policies, marijuana can also be ingested as edibles that don’t give off an odor.
Then there is the issue of CBD, or cannabidiol, a chemical component of the cannabis plant, that is increasingly being used in food, oils, body lotions, body scrubs, and more. The difference is that CBD-infused products don’t have or have trace amounts of THC, the mind-altering chemical found in marijuana. CBD has grown into a big business, with studies showing that they can help people who suffer from anxiety, insomnia, chronic pain, and seizures.
Some hotels have experimented with CBD-infused food, beverages, and other products. The James New York NoMad tried out CBD-infused items on its room service menu for a short time in 2018, said James La Russo, a public relations executive at the hotel’s parent company Denihan.
The Standard, also in 2018, stocked its minibars with CBD-infused products by distributor Lord Jones, known for its gumdrops. The Los Angeles properties no longer offer the products, but properties in New York and Miami sell Lord Jones CBD lotion, said Jennifer Foley, executive vice president of communications of Standard International, parent company of The Standard hotels.
Whether or not CBD is or should be legal has also been hotly contested. A federal farm bill passed in 2018 said that CBD is legal as long has it has no more than 0.3 percent of THC. The Food and Drug Administration, however, has warned of health risks and that the quality of some CBD products may be questionable.
“The Food & Drug Administration and equivalent state agencies have asserted that even though cannabis products (like CBD) may be legal under state law or under the Farm Law, their use may violate pure food and drug standards,” Butler said. “This is particularly problematic in food products and drinks.”
Major hotel chains were reluctant to elaborate on their plans for dealing with any form of cannabis.
“As a franchise business, all hotels in our system are independently owned and operated; therefore, we cannot comment on specific property-level rules and procedures,” a Choice Hotels spokesperson said in response to questions. “However, all franchised hotels are required to comply with all national, state, and local laws.”
“We expect guests staying at IHG-branded hotels to be aware of and adhere to all applicable laws and regulations related to cannabis and related products,” an InterContinental Hotels Group spokesperson said. “All IHG-branded hotels across the U.S. prohibit smoking of any kind — including cannabis — in hotel rooms and public spaces, with smoking in designated areas determined at the local level based on local laws.”
Still, some hotel experts say there could be lucrative opportunities for hotels that are cannabis-friendly.
More and more people think there shouldn’t be such a stigma against marijuana. A survey by the Pew Research Center’s American Trends panel found that the number of U.S. adults who oppose the legalization of marijuana dropped from 52 percent in 2010 to 32 percent in 2019.
Blank, of Woodmont Lodging, said the company explored ways to invest in cannabis-friendly hotel projects. But it’s now taking a pause on that.
“It wasn’t for a lack of interest,” he said. “It was identifying the best capital partner we want to work with to invest in this kind of project.”
Blank still sees opportunity in this nascent market. His idea was to provide hotel guests, especially those with medicinal reasons, a place where they could consume cannabis in a comfortable and safe environment.
“It’s really creating a destination for both a casual and medicinal user without judgment,” he said.
What Are the Risks?
Butler said hoteliers have been asking many questions about what products or services they can offer. They want to know if it will attract more guests and give them a competitive edge.
Can they provide dispensaries for the sale of cannabis products or lounges for consumption? Or do they allow guests to bring their own cannabis with them?
“State laws vary significantly in complexity and difficulty,” Butler said. “Compliance with state law can involve great delay, expense, and regulatory oversight.”
Louis Terminello, partner and chair of the Hospitality, Alcohol and Leisure Industry Group at Greenspoon Marder LLP, said that as of now there are few cannabis-friendly hotels in states with recreational marijuana.
“That said, there are hotels that turn a blind eye to guests who partake,” he said. “As the issue evolves, hotels will need to decide if they will have areas where guests may partake and other areas where they cannot so all guests feel comfortable.”
He said that the concept of vaping rooms is gaining in popularity, especially in small hotels in California. And he could possibly see a scenario in which marijuana smoking guest rooms are created for overnight stays, much like cigarette smoking rooms back when that was more acceptable, or even smoking wings.
Even if hotels don’t sponsor cannabis consumption, they could face day-to-day issues that their employees may not have been trained to handle. Blank spoke to a hotel owner in Colorado who has run into some hurdles.
“What if a guest is eating an edible and things go badly?” Blank said. “The person tries one and it doesn’t take, they take five more and next thing they know, they can’t feel their limbs and the hotel wants to call the doctor.”
He’s also heard of cases of people leaving behind edibles and hotel employees eating them, not knowing what they are.
“These are real case scenarios that hotels have to grapple with,” he said.
So many issues
Hoteliers are asking themselves many other questions.
“It’s still highly uncharted waters,” Blank said. “There’s still a lot of regulatory hurdles. Whether it’s monetary in terms of banking (how can you process currency that is derived from cannabis sales?) to insurance.”
“A bank follows federal laws, and a title company is going to follow the federal law,” he said. “The real estate component of this industry is still very complicated.”
Even getting a liquor license could be difficult.
“Think about liquor laws, some of the great historic types of bureaucracy,” he said. “How are liquor laws enforced at a location that also permits cannabis usage? If I have a cannabis-focused hotel, can I get a liquor license? Can a hotel with F&B succeed without a liquor license?”
And then there are the labor issues, especially in states where it’s legal to use marijuana for medical purposes.
“In medical states the core concern is how hotels deal with employees who use marijuana for medical conditions,” Terminello said. “Clear and articulated policies need to be in place and conveyed to the employee. Consumption while on the job should not be permitted for a variety of obvious reasons. An employee on hotel property under the influence can lead to all sorts of troubling issues.”
Christine Samsel, a labor attorney at Brownstein Hyatt Farber Schreck in Denver, said retaining employees would be a challenge.
“Do they retain or relax zero-tolerance drug policies? Particularly in locations with low unemployment, maintaining a zero-tolerance drug policy can make it difficult to attract and retain talent,” she said.