Consumption Lounges: The Next Frontier in Cannabis

A new category of licenses — which enables the opening of cannabis consumption lounges — is increasingly becoming available in states with operational adult use programs. Long established in cities like Amsterdam and Barcelona, cannabis consumption lounges are now a thing in California and Nevada with numbers varying by town in the Golden State and 20 licenses to be issued by June 2022 in Nevada.  Consumption lounges are soon to be present in places like Michigan, New York and New Jersey. 

Cannabis consumption lounges are exactly what they sound like. These are locations licensed by state authorities where consumers over the age of 21 may go to consume marijuana. Think of these like bars and lounges where instead of alcohol mainly being consumed, it’s now marijuana. Depending on each state’s regulations, some consumption lounges may not sell marijuana and instead patrons are either allowed to bring their own marijuana to be consumed on the property or they may purchase it from a retail dispensary affiliated with the lounge. For instance, New Jersey does not allow standalone consumption establishments. Rather, dispensary owners are required to obtain an endorsement or permit for their consumption areas which must be located on the same property as the dispensary. In Las Vegas, a major tourist hub where marijuana is still illegal inside of casinos and hotels and where  guests have hardly any options to consume in a designated area, consumption lounges are set to open at the end of 2022. NuWu Cannabis Marketplace, currently the state’s only consumption lounge that is owned and operated by the Paiute Tribe, offers guests 16,000 square feet of various cannabis products complete with a tasting room that includes VIP table packages priced from $400 to $1,100, and a 24-hour drive through.  

What consumption lounges mean for your financial institution is a new source of steady cash flow for your customers due to the scale of these operations. Membership fees that a consumption lounge may charge range from $100 to $200 annually, and additionally, products offered like food, non-alcoholic beverages, alcohol and marijuana (where permitted), paraphernalia (i.e. rolling papers, tobacco leaf, vaporizers, etc.) outweigh the overhead costs associated with operating the establishment. While consumption lounges are a relatively new concept on this side of the Atlantic and many have not been open for long, we can estimate the volume of sales based on the parent operating company. Planet 13, which has the largest dispensary in Las Vegas, plans to open a 8,500 sqft consumption lounge in 2022.   In 2021, the company boasted $33 million in sales at the end of Q3. This amount is only projected to increase exponentially once Planet 13’s consumption lounge actually opens. 

Consumption lounges represent a large lane that the cannabis industry is moving towards — hospitality. The bigger picture that your financial institution should consider includes bed and breakfasts along with hotels that allow cannabis consumption in designated areas and offer guests unique cannabis experiences. There are also restaurants and bars offering THC and CBD infused cocktails given the increasing popularity of cannabis-infused beverages among the general public ($95.2 million in sales in 2020). There are even entire localities zoned for cannabis consumption such as West Hollywood’s Emerald Village.  It’s a completely new area of the cannabis industry as more cannabis companies are truly honing in on consumer and guest experience to build a long lasting customer base. Offering financial services to clients involved in the cannabis hospitality industry will not only increase your financial institution’s overall clientele base and cannabis banking portfolio, but it will also keep your financial institution ahead of the curve on what’s to come in the cannabis industry.